Source: IFXA Ltd/RP
FX Recap and Outlook: Asia equity markets ignored the NY sell-off, and a 2.70% rise in Hong Kong’s Hang Seng index led the major index gains at the close. European bourses and US equity futures are modestly higher but off their best levels. Positive risk sentiment is supported by Biden’s pledge to have enough vaccines for all American’s by the end of May.
US 10-year Treasury yields climbed to 1.443% after closing at 1.398%, which undermined gold prices. Oil is steady ahead of Thursday’s Opec meeting.
EURUSD traded sideways in Asia, then chopped about in a 1.2044-1.2113 range with the low reached during early NY trading. Higher US Treasury yields, and Eurozone data weighed on prices. Composite and Services PMI readings for February (48.8 and 45.7 respectively) suggest the Eurozone economy is vulnerable to a double-dip recession.
ECB Board Member and Bundesbank President said they must carefully analyse the increase in bond yields and could adjust the pace of PEPP purchases. The intraday technicals are bearish below 1.2120, looking for a test of support at 1.2030.
GBPUSD is choppy inside a 1.3939-1.4005 range. Details of the UK budget are emerging. Chancellor Rishi Sunak said COVID-19 support measures totaled £400 billion. He announced an increase in corporate taxes to 25% by 2023.
USDJPY rallied on the back of higher US treasury yields. The Japanese government extended Tokyo coronavirus measures until March 21.
AUDUSD traded in a 0.7809-0.7837 range overnight with prices underpinned by Q4 GDP, which rose a better than expected 3.1% (forecast 2.5%) The move didn’t last as broad US dollar strength drove prices back to 0.7782 in early NY trading. NZDUSD tracked AUDUSD moves.
WTI oil prices hit $59.20 just before the close and then climbed to 61.07 overnight. Traders ignored the API weekly report, which showed crude inventories rising 7.3 million barrels. Instead, they took heart from rumours that Opec and Russia may agree to extend existing production quotas until the beginning of May.
USDCAD is largely ignoring oil prices as the focus is on US dollar sentiment. That sentiment is bullish due to falling bond prices and broad demand for US dollars, in part because of the large gap between US vaccinations and those in Europe and Canada.
US ADP employment and ISM Services PMI are due today.
USDCAD Technicals: The USDCAD technicals are modestly bearish below 1.2660 on an hourly chart, looking for a break of support at 1.2590 to extend losses to 1.2510. A move above 1.2660 targets 1.2750. For today, USDCAD support is at 1.2590nd 1.2560. Resistance is at 1.2660 and 1.2690. Todays Range 1.2590-1.2680
Chart: USDCAD hourly
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank