Photo: IFXA Ltd

March 18, 2021

USDCAD open (6:00 am ET) 1.2402-06,  Overnight Range 1.2367-1.2433,  Close 1.2404

24 hour FX Ranges at a Glance 

Source: IFXA Ltd/RP

FX Recap and Outlook

US weekly jobless claims were 770,000, which is 45,000 higher than last week.  If there was any disappointment in the results it was erased by the surge in the Philadelphia Manufacturing Index to 51.8 from 23.1 in February, the highest level in 50 years.

The FOMC meeting and Fed Chair Powell’s press conference delivered as promised, leaving a weaker US dollar and soaring Treasury yields in its wake.

The Fed left the Fed Funds target,  the pace of asset purchases, and pretty much the entire monetary policy statement unchanged.  The Summary of Economic Projections upgraded GDP growth to 6.5% from 4.2%.  At first glance, it looks impressive but should be taken with a grain of sale.  The Fed blames higher inflation rates on “base effects” due to the COVID-19 impact a year ago.  The same should also be true for GDP growth.

The Fed did not mention the Supplementary Leverage Ratio (SLR) and deflected rising interest rate concerns as merely evidence of expectations for a robust economic recovery.

Wall Street closed with modest gains setting the stage for Asia markets.

They also closed with gains, except for Australia’s ASX 200.  Germany’s DAX index is leading European equity markets higher.  The UK FTSE 100 is flat ahead of today’s BoE meeting.  Wall Street futures are mixed, with DJIA a tad higher and the S&P 500 index down.

Cryptocurrency traders were happy with the FOMC.  Bitcoin (BTCUSD)  jumped 6.13% overnight and is trading at $58,509.40 as of 6:35 am ET).

EURUSD rallied after the FOMC, rising from 1.1904 to 1.1986.  Resistance in the 1.1990-1.2000 area proved too much, and the single currency traded down to 1.1940 in NY.   EURUSD is supported by the dovish Fed outlook, and modestly bullish technicals above 1.1900.  However, gains are capped because the ECB is even more dovish than the Fed, and the Eurozone is contending with a so-called “third-wave” COVID-19 outbreak and a slow vaccine roll-out.

GBPUSD rallied after the FOMC, climbing from  1.3850 to 1.4000 in Europe.  The Bank of England left interest rates and quantitative easing (QE) unchanged, as expected. The BoE said that the economy remains 10%  smaller than pre-pandemic levels.   Policy makers are concerned that consumers may be cautious and delay spending an investment decisions. They are optimistic about receding COVID-19 fears.  The BoE also expects that UK unemployment rate will not be as high as previously forecast.

USDJPY prices have been whipped around by US Treasury yield price action and position adjustment ahead of tomorrow’s Bank of Japan meeting.  USDJPY plunged from 109.30 to 108.70, then churned inside that range, opening in NY at 109.05.  Traders expect the BoJ to announce tweaks to monetary policy but continue with yield curve control.

AUDUSD soared from 0.7700 pre-FOMC to 0.7848 in Europe, with prices getting an added boost from the 88,700 rise in employment which was well-above the forecast of a 30,000 increase.  Australia employment is back above its pre-pandemic level.

NZDUSD was a tad sluggish, trading in a 0.7219-.0.7268 range.

Weaker than expected Q4 GDP (actual -1.0% vs forecast 0.1%) data was a drag on prices.

USDCAD dropped from 1.2491 ahead of the Fed to 1.2367 in Europe today.  Prices have recovered from the low and are trading at 1.3433 in NY on a broad resurgence of US dollar demand against the G-10 currencies.  The currency pair continues to be weighed down by hopes for collateral benefits from the US stimulus package, a sidelined Bank of Canada, steady to firm crude prices which have an upward bias, and bearish technicals.

USDCAD Technicals:  The intraday and short term technicals are bearish and unchanged from yesterday.  The downtrend from November is intact below 1.2650 and there is a minor intraday downtrend below 1.2480. A decisive break below 1.23600 targets 1.2270.  For today, support is at 1.2370 and 1.2340    Resistance is at 1.2440 and 1.2480. Todays Range 1.2370-1.2470

Chart: USDCAD 4 hour

Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank