April 18, 2020

USDCAD open (6:00 am EST) 1.4098-02    Overnight Range 1.4007-1.4116

  • Risk-on in Asia, risk-off in Europe, confused in NY
  • Trump’s US re-opening plan sparks demand for “risk” assets
  • China 2020 Q1 GDP drops 6.8%, first negative quarter in 50 years
  • US dollar opens flat to slightly firmer compared to yesterday’s close

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

Source: Saxo Bank/IFXA

FX Recap and outlook:  President Trump released the guidelines for “Opening up America,” late Thursday, that sent hearts a flutter in Asia. Reports of successful COVID-19 treatments using an antiviral medicine by doctors at a Chicago hospital helped sentiment.

Asia traders sold US dollars aggressively. Treasury yields spiked higher, and S&P futures surged. 

Sentiment soured a tad after China reported 2020 Q1 GDP fell 6.8%, and the US dollar started clawing back losses.

The guidelines avoid the nasty business of a fixed date open but rather suggest a three-phase strategy based on 14-day measured, declining, trajectories of COVID-19 symptoms and cases. 

European traders were not as impressed and, for the most part, fully reversed the Asia moves.

EURUSD traded in a 1.0813-1.0878 range and is trading just above the low in NY. Eurozone March CPI was 0.7% as expected, and a non-event. 

Prices continue to be directionless inside the 1.0750-1.1050 range that has been intact since the beginning of the month.

GBPUSD has a bullish bias while above 1.2305 while consolidating gains from March 18 which took prices from 1.1480 to 1.2630. Traders are looking ahead to details from next week’s UK/EU trade talks.

USDJPY traded sideways in a 107.64-108.08 range. USDJPY selling following the China GDP data was offset by US re-opening plans and a rally in Treasury yields.

AUDUSD and NZDUSD slumped in Asia, rallied in Europe and extended those gains in NY. There is a trickle of positive risk sentiment due to higher S&P futures and the US economy re-opening chatter.

USDCAD is on a bit of a roller-coaster ride. Prices dropped from the closing level of 1.4092 to 1.4007 in Asia, bounced in Europe, touched 1.4116 in early NY trading and then started sliding anew. The rally is occurring even as WTI oil prices trade at $18.75/b. BoC Governor Stephen Poloz didn’t say anything different to the House of Commons Finance Committee than he did at his press conference on Wednesday. Ted Carmichael of TC Global Macro points out that the BoC’s latest projections for domestic growth are a lot worse than private sector forecasts. Mr Carmichael suggests that the BoC’s worst-case scenario equates to a 19% contraction in 2020.

There isn’t any data of note today leaving FX direction to be dictated by equity market moves and headlines about the US re-opening their economy. Large USDCAD option expiries (reportedly around $1.9 billion) with strikes in the 1.4000-05 area could lead to added volatility around the 10:00 am cut.

USDCAD technical outlook:

 The intraday USDCAD technicals have flipped to bearish while prices are below 1.4180, look for a break of support in the 1.4000-05 area today, to extend losses to 1.3920.  The uptrend line from March 4 is intact above 1.3840.   For today, USDCAD support is at 1.4010 and 1.3920.   Resistance is at 1.4120 and 1.4180. Today’s Range 1.3990-1.4090

Chart: USDCAD 1 hour

Source: Saxo Bank