April 7, 2020

USDCAD open (6:00 am EST) 1.4016-19    Overnight Range 1.3965-1.4114

  • Global equities rally, again.  S&P Futures suggest Wall Street will extend yesterday’s gains
  • Is optimism that spread of CVOID-19 has plateaued, misplaced?  UK PM Johnson probably agrees.
  • Japan declares State of Emergency; planning to announce $900 million stimulus plan
  • RBA leaves rates unchanged at 0.25%, says rates will stay low until employment and inflation rebound
  • The US dollar added to yesterday’s losses against the G-10 major currencies, led by a 1.4% jump in AUD.

Chart: Currency gain/loss (%) against the US dollar from NY close to NY open (6:00 EST)

Source: Saxo Bank/IFXA

FX Recap and outlook:   

USDCAD continued to slide in early NY trading, as part of a broad US dollar move lower.  It is a bit of a “risk-on” move, led by a surge in NY equity futures which bodes well for Wall Street today.

The Dow Jones Industrial Average (DJIA) finished with a 7.73% gain yesterday, sparking a “risk-on” rally in Europe and Asia.  NY Governor Andrew Cuomo’s remarks yesterday, suggesting that the “number of daily deaths from COVID-19 was “effectively flat over the past two days” fueled the gains and Asia traders picked up the baton. 

The Nikkei 225 rose 2.01% even though Prime Minister Shinto Abe declared a State of Emergency and said he would unveil the details of a $900 billion economic stimulus plan tomorrow.

USDJPY traded lower in Asia, dropping from 109.27 to 108.66. Prices recovered into the New York open, with the gains underpinned by rising 10-year Treasury yields, which climbed from 0.645% to 0.75%.

The Reserve Bank of Australia’s monetary policy meeting was anticlimactic for traders.  The RBA had already slashed its benchmark Overnight Cash Rate to 0.25%.

They re-affirmed their commitment to low rates saying: “The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.”  AUDUSD rose to 0.6192 from 0.6077, supported by broad US dollar weakness.

NZDUSD climbed alongside AUDUSD, but its gains were less pronounced.

EURUSD climbed steadily overnight, rising from 1.0785 to 1.0878 in early New York trading.  Prices are supported by hopes that the worst is over for the COVID-19 outbreak in Europe, despite warnings from the French Health Minister that France was in “a worsening phase of the pandemic.”

GBPUSD plunged to 1.2168 from its NY closing level of 1.2234 on news that UK Boris Johnson was moved to intensive care after his COVID-19 symptoms worsened. Prices quickly bounced back on broad US dollar weakness, and GBPUSD touched 1.2349 in Europe.

WTI oil prices traded sideways overnight, in a narrow $26.41-$27.14/barrel range.  Traders are hoping that Thursday’s planned phone meeting with Opec and Russia will end of the oil price war, and lead to production curbs.  Even so, additional gains above $30.00/b may be hard to achieve until the existing oil surplus subsides.

USDCAD technical outlook

The intraday USDCAD technicals turned bearish with the overnight break below 1.4080, which opened the door to further losses to 1.3920, especially after recent support at 1.3980 gave way in early NY trading today. The short term trend is lower while prices are below 1.4180. For today, USDCAD support is at 1.3960 and 1.3920.  Resistance is at 1.4040 and 1.4080.  Today’s Range 1.394080-1.4040

Chart: USDCAD daily

Source: Saxo Bank