April 6, 2017
- Risk sentiment boosted by upbeat global recovery outlook
- Robust US data and tame Treasury yields undermine US dollar
- US Dollar opens modestly higher vs G-10 majors, EUR unchanged
USDCAD open 1.2553-1.2558, Overnight Range 1.2519-1.2555, close 1.2522
FX at a Glance
FX Recap and Outlook
Wall Street closed at another record high for the Dow Jones and S&P 500, but the major Asia equity indexes weren’t impressed. They finished on a mixed note. Japan’s Nikkei 225 index closed down 1.30%, and Hong’s Hang Seng closed with a 1.97% gain.
European equity traders are looking past Europe’s current COVID-19 issues. They have an upbeat global recovery outlook, in part due to the recent US employment and ISM data, which helped to lift the UK FTSE 100, 1.34%, so far today.
Traders are ignoring fresh geopolitical tensions. The EU and NATO are concerned with what they describe as a Russian military buildup near the eastern Ukraine and plan joint military exercises “in a few months.” Meanwhile, the US Theodore Roosevelt carrier strike group began a South China Sea cruise on April 4. China claims most of that sea as its own.
EURUSD dipped close to the bottom of its overnight 1.1797-1.1821 range in NY trading on the back of profit-taking after yesterday’s rally from 1.1737. FX traders are still concerned about the EU economic underperformance compared to the US as ongoing COVID-19 restrictions in some regions take a toll on economic growth. EU unemployment was worse than expected (actual 8.3%)in February, and January’s data was revised higher. The short term EURUSD technicals are bullish while prices are above 1.1765.
GBPUSD dropped from 1.3917 in Asia to 1.3824 in early NY trading, nearly fully erasing yesterday’s gains. The drop occurred despite UK Prime Minister Boris Johnson saying coronavirus restrictions will be eased on April 12. The intraday GBPUSD technicals are bullish above 1.3790.
USDJPY traded in a 110.14-110.54 range with US 10-year Treasury yields at 1.704% underpinning prices. The intraday technicals are bullish above 110.00, looking for a break of 110.90 to extend gains to the 112.00 area.
AUDUSD retreated to 0.7608 from 0.7660 on the back of broad US dollar strength. The RBA left monetary policy unchanged, as expected, and it wasn’t a factor for traders. NZDUSD dropped to 0.7010 from 0.7068.
USDCAD rejected an attempt to break below 1.2500 yesterday and climbed steadily overnight and in early NY trading. The price action is closely tracking broad US dollar moves vs the majors, with USDCAD underpinned by the drop in WTI oil from $61.40/barrel to $57.70/b yesterday. Economists expect a robust post-pandemic domestic economic recovery fueled by spill-over benefits from US stimulus plans which will weigh on USDCAD.
The economic calendar is empty except for the US JOLTS data, a non-issue for markets.
The intraday USDCAD technicals are bearish below 1.2580, looking for a break below 1.2510 to extend losses to 1.2460, and then 1.2380. A break above 1.2580 targets 1.2640. For today, USDCAD support is at 1.2510 and 1.2470. Resistance is 1.2580 and 1.2620 today’s Range 1.2510-1.2590.
Chart: USDCAD 4 hour.
FX open, high, low, and previous close