Photo: wikimedia

July 14, 2020

USDCAD Open (6:00 am) 1.3626-30, Overnight Range: 1.3601-1.3644

  • Resurgent Covid-19, data dump, and equity retreat, spook markets
  • Improving German and Eurozone data underwhelm
  • US June CPI rises 0.6% m/m on higher gasoline and food
  • US dollar catches a safe-haven bid
A screenshot of a cell phone

Description automatically generated

Source: Saxo Bank/IFXA

FX Recap and outlook: The US Bureau of Labor Statistics said “the Consumer Price Index for All Urban Consumers rose 0.6 percent on a seasonally adjusted basis; rising 0.6 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy rose 0.2 percent in June (SA); up 1.2 percent over the year.” FX markets barely budged on the news.

Asia and European equity markets followed Wall Street and recorded small losses. Tesla’s $300 price swing sparked talk of a tech bubble and still left Elon Musk’s company worth more than Volkswagen, Daimler, Honda, Ferrari, BMW, and General Motors combined. Those six manufactures sold a total of 28.5 million cars in 2019. Tesla can’t even deliver 400,000, yet traders lifted the stock 5.50% in pre-market trading today. Soon reality will intrude and Tesla will soon be to autos what Blackberry is to smartphones.

If you are not sick of hearing about COVID-19, you are probably sick with COVID-19. Some American states, including California, are walking back measures that reopened the economy. Businesses that had been allowed to open are being ordered to close.

The UK is making face masks mandatory as of July 24. Canada and the US are expected to announce an extension of border closures to no-essential travel. Somehow, hockey and baseball players, most of which are coming from the coronavirus petri-dish called America, are exempt.

US/China tensions continue to escalate, with the American’s rejecting China’s claim to the South China Sea.

US equity futures are flirting with negative territory due to mixed earnings reports.

EURUSD climbed on mixed to positive economic reports, rising from 1.1326 to 1.1367 in early NY trading. German June CPI at 0.6% m/m was as expected and unchanged from May. The German and Eurozone ZEW Surveys were in line with expectations. Traders are cautious and waiting for the ECB on Thursday.

GBPUSD extended yesterday’s fall, dropping from 1.2560 at the close to 1.2508. UK GDP rose 1.8% in May, well below the 5.0% forecast, crushing hopes for a more robust post- COVID-19 economic rebound. The intraday technicals are bearish below 1.2560, looking for a move below 1.2490 to extend losses to 1.2460

USDJPY traded sideways in a 107.13-107.40 range and is back at the top in NY. Safe-haven demand for yen and soft US Treasury yields are weighing on the currency pair.

AUDUSD and NZDUSD traded higher on the back of improving China trade data. Both currency pairs remain in their well-defined ranges.

USDCAD tracked EURUSD and S&P 500 moves, and it is trading in the middle of its 1.3601-1.3644 overnight range. Modestly lower oil prices and the current whiff of risk aversion sentiment are underpinning prices.

US equity futures are flirting with negative territory due to mixed earnings reports. JPMorgan announced a more than 50% drop in Q2 profit, but that item was ignored due to forecast beating increases in bond and equity trading revenue. CITI Group trading revenues were also higher. Wells Fargo reported a net loss of $2.4 billion.

USDCAD Technicals: The short term technicals are unchanged. They are bullish above 1.3505 looking for a break above 1.3650 to extend gains to 1.3700. A break below 1.3505 targets 1.3270. For today, USDCAD support is at 1.3580 and 1.3530. Resistance is at 1.3660 and 1.3710 Today’s Range 1.3580-1.3660

Chart: USDCAD daily

Source: Saxo Bank