Picture: Pixabay.com

October 19, 2020

USDCAD open (6:00 am ET) 1.3173-77, Overnight Range   1.3166-1.3192

  • US stimulus hopes rise (again)
  • China economic data boosts risk sentiment
  • Brexit rumours power GBPUSD higher

FX Ranges at a Glance

Source: IFXA Ltd/RP

FX Recap and Outlook:  FX traders are in a “risk-seeking” mood to start the week.  The seemingly never-ending US COVID-19 Relief saga took a turn for the better when Democrat House Leader Nancy Pelosi issued a 48-hour deadline to pass a stimulus bill before the election. Traders interpreted the deadline as a sign of progress.

Traders focused on relatively robust Chinese economic data while ignoring hostile rhetoric from Chinese officials.  Better than expected September industrial production and retail sales data fanned the embers of economic growth, which boosted the commodity bloc currencies. Traders ignored reports of Chinese threats to detain US nationals in response to US Justice Department actions aimed at Chinese students.

US equity futures are in positive territory even though some European bourses have pared earlier gains.

GBPUSD soared, rising from 1.2895 to 1.3013 on rumours that British officials are considering diluting Boris Johnson’s Internal Market Bill, as the bill makes its way through the House of Lords. The EU and UK Trade negotiators are talking today.  Trader’s ignored news that Moody’s downgraded UK debt from Aa2 to Aa3, citing weakened growth prospects from years of weak productivity, exacerbated by the coronavirus.

EURUSD had a delayed reaction to the GBPUSD rally, but prices finally traded higher, rising from 1.1704 to 1.1762.  ECB officials continued their non-stop prattle about the necessity of supportive monetary policy, due to the risk from a second-wave COVID-19 outbreak.

USDJPY slept through the overnight session, drifting in a 105.32-105.49 range.  BOJ Governor Kuroda reminded markets that the central bank would take further measures to support the economy, if necessary.

NZDUSD got a boost on better than expected Chinese GDP, Industrial Production and Retail Sales data News of incumbent Prime Minister Jacinda Ardern’s landslide victory, giving her Labour Party an outright majority didn’t hurt (yet). The currency rose from 0.6605 to 0.6642.

AUDUSD rallied but lagged NZDUSD gains.  The RBA minutes from the October 1 meeting is due tomorrow. The minutes may reinforce dovish comments by RBA Governor Philip Lowe, made last week.

USDCAD underperformed against the antipodean currencies.  The currency continues to be the ugly duckling of the major G-10 currencies, with direction determined by broad US dollar sentiment, and not domestic influences.  Oil prices are a distraction, but not much of a trading factor.

The Bank of Canada Business Outlook Survey is due today.  The report is already stale.  The results will be an improvement over last quarter, but the recent surge in CVOID-19 cases in Ontario, and Quebec, will put a damper on the outlook, and shouldn’t have an impact on USDCAD.

USDCAD Technicals: The intraday technicals are bearish below 1.3220, looking for a move below 1.3140 to extend losses to 1.3100.  A break of 1.3000 targets 1.2950.  A break above 1.3220 targets 1.3340.  For today,  USDCAD support is at 1.3140 and 1.3110.  Resistance is at 1.3240 and 1.3290.  Today’s Range 1.3140-1.3220

Chart: USDCAD 4 hour

Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank