April 26, 2022

  • Stocks rally as war rages and Russia talks nukes
  • US Durable Goods Orders, Consumer Confidence data ahead
  • US dollar retreats

FX change at a glance: 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2736-40, overnight range 1.2686-1.2746, previous close 1.2736

USDCAD retreated from yesterday’s peak of 1.2775 and traded in a 1.2686-1.2746 range, overnight, in a somewhat tepid response to rebounding stock prices. The S&P 500 climbed from 4,200.82 to 4,299.02 yesterday, which helped cap USDCAD gains.

BoC Governor Tiff Macklem regurgitated his MPR remarks in his opening statement to the House of Commons Finance Committee. Mr Macklem said a larger rate increase than 0.50% was possible but such a move would be “unusual.”  Not really. The Boc chopped rates by 1.50% in three moves in March 2020.

He didn’t say anything new, and traders ignored the speech. Nevertheless, Canadian rates increases will match or exceed those of the Fed which should limit USDCAD gains on Fed rate hike concerns.

Oil prices continue to be weighed down by broad US dollar strength and concerns China’s Covid outbreak will reduce global demand. In addition, Germany, India, and other countries are still buying Russian oil and gas, making a mockery of sanctions

The Canadian economic calendar is empty

USDCAD technical outlook  

The intraday and USDCAD technicals are bullish with former resistance at 1.2650 becoming support. A break above the 1.2790-1.2810 area suggests further gains to 1.2950.  A decisive break above 1.3030 on a weekly chart targets 1.3320, the 50% Fibonacci retracement level of the 2020-2021 range.

For today, USDCAD support is at 1.2680 and 1.2640.  Resistance is at 1.2760 and 1.2790.  Today’s Range 1.2690-1.2790

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

Something fishy is going on. Global stocks rallied despite the hawkish Fed outlook, concerns Beijing will become the next Covid hotspot, the Chinese yuan in freefall, and Russia and North Korea making tacit nuclear threats. In addition, Russia threatened Japan with retaliation over the size of US and Japan naval exercises. Back in the day, any of the above would have investors heading for the hills.

Durable Goods Orders increased 0.8% in March, a tad less than forecast but far better than the 1.7% decrease in February. The results had little to no impact on markets.

Asia equity markets closed mixed. Japan’s Nikkei 225 gained 0.41%, while Australia’s ASX 200 lost 2.08% as traders down-under returned from a long weekend. European traders are emboldened by Monday’s Wall Street recovery and the major bourses are in positive territory, led by the German Dax, which has gained 1.09%. S&P and DJIA futures are marginally lower while gold and oil prices inched higher. The 10-year US Treasury yield slipped to 2.797%.

EURUSD is trading at session lows, falling from 1.0738 in Asia, to 1.0674 in NY. The single currency is weighed down by Eurozone recession concerns and the US interest rate outlook. ECB policymaker and Martins Kazaks repeated hawkish comments saying, “A rate rise in July is possible and reasonable. Markets are pricing two or three 25 basis point steps by the end of the year. I have no reason to object to this, it’s quite a reasonable view to take.”

GBPUSD is also at its session low and trading with a negative bias in a 1.2678-1.2771 range. GBPUSD is weighed down by recession fears which may limit the BoE’s ability to raise rates.

USDJPY bounced around in a 127.36-128.22 band with the drop in the US 10-year Treasury yield and comments by officials about “rapid FX moves,” weighing on prices. The Japanese unemployment rate fell to 2.7% from 2.8%. The government is planning a US$48 billion support package to ease pain from high energy prices.

AUDUSD is giving back earlier gains and has slipped towards the bottom of its 0.7171-0.7228 overnight range.

US Consumer Confidence and March New Homes Sales data are ahead.

Chart: Gold 4 hour

r Confidence.

Source: Saxo Bank

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.5590 (Previous Fix 6.4909)

Shanghai Shenzhen CSI 300 fell 0.81% to 3,784.12

Yesterday, PBoC cut reserve requirement ration on bank FX reserves to 8.0% from 9.0%, effective May 15, which merely reverses half of the hike imposed in December 2021. By doing so, the PBoC hopes to give they yuan a bit of support.

Some analysts suggest the PBoC is signalling markets that CNY has fallen far enough. It doesn’t look like the market got the message.

Chart: China 1 month

Source: Yahoo Finance