March 17, 2020

USDCAD open (6:00 am EST) 1.4061-65    Overnight Range 1.3963-1.4162

 Chart: Currency gain/loss (%) against the US dollar from NY close March 6 to March 13 NY open (6:00 EST)

Source: Saxo Bank/IFXA

FX Recap and outlook:  The Battle of the Banks.   “The central banks fired their guns, and the market kept a-running, they fired once more, and their ammo was a-done-in.” (apologies to Johnny Horton).

 Interest rates have been slashed around the world, but panic selling of equities and demand for US dollars has not abated.  EURUSD traded quietly in Asia but dropped from 1.1184 to 1.1026 in Europe and early New York trading.  News that confirmed coronavirus cases in Spain, jumped 35% in a day and the EU plan to close borders to non-essential travel, sent traders scrambling for US dollars.

The German ZEW Survey was ugly, and the UK employment report was close to expectations.

The story for FX is the story of COVID-19 and equity markets. Domestic economic data is ignored as most of it is re-coronavirus panic.

The following chart shows the price action of EURUSD, GBPUSD and USDCAD, in 5-minute intervals since yesterday at 4:00 pm (as of 5:30 am PDT)

USDCAD soared, touching, 1.4113 in early New York trading, fueled by broad US dollar demand and falling oil prices.  WTI oil touched $28.63 and with the $12.30/b discount applied to Canada’s Western Canada Select crude, the impact on the Federal finances due to low royalties will be huge.  The Federal government gets a failing grade for its coronavirus-fueled economic support package, as “too little-too late.”

USDCAD Technical Outlook

The USDCAD technicals are bullish following the break of resistance at 1.4050, which sets the stage for additional gains to 1.4660, the January 2016 peak.  However, short term momentum indicators are at extreme over-bought levels.  In this environment, technicals are mostly useless.  However, USDCAD support is at 1.4050 and 1.3980.  Resistance is at 1.4150 and 1.4350.  Today’s Range 1.4050-1.4150

Chart: USDCAD daily

Source: Saxo Bank