March 23, 2022

  • President Biden to impose more Russia sanctions
  • JPY sinks as US 10-year Treasury yield touches 2.417%
  • US dollar fades as commodity bloc currencies rise

FX at a Glance 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2583-87, overnight range-1.2567-1.2604, close 1.2569

The USDCAD dropped in concert with the commodity currency bloc gains yesterday and consolidated the losses overnight. Prices drifted higher in NY trading when S&P 500 index futures traded lower.

USDCAD ignored political hijinks in Ottawa.  The perennial third-place NDP party joined forces with the Liberal party, guaranteeing their support until 2025.  NDP politicians are ecstatic as they appear relevant, although they really just bought the equivalent of a Madoff investment.

USDCAD gains were contained by WTI prices that are at $112.88/barrel in NY.  Oil prices are underpinned by 4.3 million barrel drop in US crude inventories as reported by API.  In addition, Russia exports have been disrupted by storm damage impacting the CPC (Caspian Pipeline Consortium).

USDCAD direction will continue to be determined by broad risk sentiment and S&P 500 index price action.

There are no Canadian economic reports today.

USDCAD technical outlook

The USDCAD technicals are bearish with prices consolidating losses in a 1.2550-1.2650 range.  The intraday downtrend is intact below 1.2620, looking for a break below 1.2550 to extend losses to 1.2500 then 1.2450. A break above 1.2650 suggests a retest of 1.2800.

For today, USDCAD support is at 1.2560 and 1.2540.  Resistance is at 1.2620 and 1.2650.  today’s Range 1.2560-1.2640

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

Fed officials have embraced the hawk with all the enthusiasm of Jagmeet Singh to the Liberal Party.  Fed Chair Powell wants to hike rates “expeditiously.” Cleveland Fed President Loretta Mester advocated front-loading rate hikes as it would provide policymakers with improved flexibility.  Even uber-dove Mary Daly, San Francisco Fed President, has seen the light.  She said “Even though we have these uncertainties around Ukraine, and we have the uncertainties around the pandemic, it’s still time to tighten policy in the United States.” 

The news did not dissuade Wall Street from buying stocks.  Or Asian traders.  Japan’s Nikkei 225 index soared 3.0%, fueled by a weaker yen.  Hong Kong’s Hang Seng rose 1.21%, and Australia’s ASX 200 closed 0.50% higher.  European bourses gave up opening gains and are trading in negative territory, except for the UK FTSE, which is up 0.22%.  WTI oil prices have gained 2.9%, and gold prices gained 0.5%.  The US 10-year Treasury yield peaked at 2.417% and is trading at 2.362%.

President Biden is in Europe, and he is reportedly planning to announce a slew of new sanctions against Russian policymakers.

EURUSD traded in a 1.0990-1.1043 range and has been on the defensive after failing to break above 1.1050 overnight.  The German IFO lowered their 2022 GDP forecast to 2.2-3.2% from 3.7% in December due to inflation and the Russian invasion of Ukraine.  The single currency is garnering modest support from a modestly weaker US dollar against the G-10 majors, but the Russia/Ukraine war and a dovish ECB are limiting gains.  A break below 1.0970 targets 1.0900, while a move above 1.1050 shifts the focus to 1.1150.

GBPUSD is trading at the bottom of its 1.3180-1.3297 range ahead of Chancellor Sunak’s budget today.    UK February inflation soared to 6.2% y/y compared to 5.5% in January, while the Retail Price Index rose 8.2% y/y compared to 7.8% previously.

USDJPY has retreated from the overnight peak of 121.41 to 120.60 coinciding with the drop in the US 10-year Treasury yield from 2.417% to 2.372%.

AUDUSD climbed to 0.7480 from 0.7452, extending the steep rally that started last week.  A break above 0.7580 opens the door to a retest of 0.8000.

AUDUSD is underpinned by rising commodity prices and by expectations that the RBA will need to soon shift from a dovish policy stance.

The US data calendar is empty.

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3558, previous 6.3664

Shanghai Shenzhen CSI 300 rose 0.50% to 4,276.52

Chart: China 1 month

Source: Saxo Bank