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August 17, 2020

USDCAD Open (6:00 am) 1.3225-29,  Overnight Range 1.3227-1.3262

  • China central bank pumps in Liquidity, China stocks soar
  • COVID cases rise in US-NZ extends lockdown
  • Weekend US/China Trade discussion delayed
  • US dollar opens on down note vs the G-10 majors

FX Recap and outlook: “Well, I’m gonna raise a fuss, I’m gonna raise a holler, about trading in August just to try and earn a dollar.  Sometimes I wonder what I am gonna do, ‘Cause their ain’t no cure for the August trading blues.” (apologies to Eddie Cochran)

The Peoples Bank of China injected liquidity into the system to help manage an upcoming bond auction, which boosted the Shanghai Shenzhen CSI 300 index 2.35%.  FX traders didn’t seem to care that the US and China Phase 1 trade review scheduled for Saturday was cancelled.

The US dollar was choppy.  It had a negative bias due to US political dysfunction, and the lack of a new COVID-19 relief plan.  Pundits will focus on the Democrat National Convention that starts today.

New York walked in to see Asia equities closed mixed with only the Chinese indexes gaining while  European indexes flirted around unchanged.  US equity futures are slightly positive, and  US Treasury yields area tad softer.  Ho-hum.

EURUSD traded sideways, content to consolidate recent gains, in a 1.1830-1.1867 range.  Speculative positions are at record-long levels which acted as a drag on further EURUSD upside.  The data calendar was empty, and traders were content to sit on the sidelines.

GBPUSD was a bit of a rollercoaster, trading up and down in a 1.3080-1.3120 range with prices supported by broad US dollar weakness, and a lack of news on the Brexit front.

USDJPY  opened at the bottom of its 106.32-106.64 range.

Prices were undermined by mild negative risk sentiment due to renewed COVID-19 outbreaks around the world, including south Korea, and New Zealand. Q2 GDP shrank 7.8% q/q compared to the forecast of -7.6%.

AUDUSD outperformed NZDUSD due to Kiwi’s OCID-19 issues and the RBNZ’s dovish monetary policy outlook.

USDCAD is tracking broad US dollar movements, and US dollar sentiment is bearish.  Domestic data has been steadily improving but largely ignored by traders.  Oil prices are steady with a positive bias which undermines USDCAD slightly.  The Commitment of Traders Report shows short CAD (long USD) positions increased in the week ending August 11 putting positions close to it one year peak, even though USDCAD traded lower.  It’s a battle between Bulls and Bears.  USDCAD is vulnerable a stop-loss sell-off on a break below 1.3190.

USDCAD Technicals:  USDCAD technicals are bearish.   The downtrend from March is intact while prices are  below 1.3370 (daily chart) and intraday downtrend from August 10 is intact below 1.3270. (4 hour chart)  IMM positioning is short CAD (long USD).  However, RSI studies indicate USDCAD is oversold.  For today, USDCAD support is between 1.3190- and 1.3220.  Resistance is at 1.3270 and 1.3330.  Today’s Range 1.3190-1.3270

Source:  Saxo Bank

Major FX Currencies -Open, High, Low and Close (6:00 am ET)

Source: Saxo Bank