March 21, 2022

  • Russia oil ban chatter lifts oil and CAD
  • Hawkish ECB talks underpins EUR
  • US dollar opens modestly lower, Powell speech ahead

FX at a Glance 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2607-11, overnight range-1.2592-1.2513, close 1.2604

USDCAD outperformed against the commodity currency block, thanks to surging oil prices, although it traded in a narrow range.

WTI rallied from $102.42 Friday to $109.73 in Europe, a 7.1% gain, following reports that EU officials will discuss a Russian oil embargo.  Russian officials were unhappy and warned that banning its oil “hurts everyone.”

Ongoing Middle East tensions contributed to the rally.  Yemen Houthi’s attacked a Saudi oil terminal, and Israel defence sources warn of possible attacks by Iran.  Comments from Aramco CEO Amin Nasser, who said that there is limited spare production capacity, which is declining every month, also supported prices.

Opportunistic railway workers at CP Rail went on strike Saturday.  They want to mitigate the impact of inflation.  A prolonged work stoppage will exacerbate supply chain disruptions and add to inflation concerns.

USDCAD largely ignored Friday’s better-than -expected Retail Sales data which suggests Q1 growth may be higher than the 3/.5% q/q forecasts.

USDCAD technical outlook

The USDCAD intraday technicals are bearish.  The break below support at 1.2680 triggered a downtrend which remains intact below 1.2630. Fibonacci retracement analysis of the Jan-Mar range suggest the break below 1.2622 (61.8%) targets 1.2557 (76.4%). USDCAD dropped below the 100 day moving average on March 17 and is see-sawing around the 200 day MA (1.2603)

For today, USDCAD support is at 1.2580 and 1.2550.  Resistance is at 1.2640 and 1.2680. Today’s Range 1.2550-1.2640

Chart USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

Spring has sprung, and robins have returned.  It’s the dawn of a new season.  But not so in financial markets.  It’s the same stuff, different day.

The ongoing Russian invasion of Ukraine is keeping traders on their toes but not enough to stop them from buying stocks.  Traders have gotten over their fears of Fed rate hikes, believing the Fed overnight rate will top out in the 2.5% area, and that is already reflected in prices.

Friday’s Biden/Xi Jinping call did not cause any market disruption, and traders are wondering if today’s Biden call with EU leaders will have the same result.

Fed Chair Jerome Powell delivers an “Economic Outlook” to the National Association for Business Economics today.

EURUSD climbed to 1.1069 from 1.1036 in Europe, then retreated to 1.1050 in early NY.  Trading is uninspired despite hawkish comments from some officials.  Austria’s central bank governor, Robert Holzmann, championed an ECB rate hike to send a message about fighting inflation, and the Dutch central bank chief advocated two rate hikes.  ECB President Christine Lagarde said that policymakers “do not see elements of stagflation.”  The intraday EURUSD technicals are bullish above 1.0980, looking for a break above 1.1150 to extend gains to 1.1240.

GBPUSD is trading at the bottom of its 1.3131-1.3174 overnight range.  Prices retreated after failing to break resistance in the 1.3180-1.3200 range as upside momentum stalled due to the somewhat dovish interest rate outlook from the Bank of England.

USDJPY traded quietly in a 119.12-119.3 range overnight.  Japanese markets were closed due to a holiday.  USDJPY is in a steep uptrend underpinned by the 10-year US Treasury yield, which climbed from 2.142% to 2.18% overnight.

AUDUSD and NZDUSD are trading defensively.  NZDUSD traders ignored the news that New Zealand’s trade deficit widened to $8.3 billion from $7.8 billion.

Chart of the Day  WTI oil

Chart: 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 6.3677, previous 6.3425

Shanghai Shenzhen CSI 300 fell 0.17% to 4,258.75

Chart: China 1 month

Source: Saxo Bank