May 29, 2020
USDCAD open (6:00 am ET) 1.3750-54, Overnight Range 1.3716-1.3792
- Canada March GDP beasts forecast-falls 7.2%
- FX nervous ahead of Trump’s expected announcement against China today
- Today’s Eurozone data suggests more ECB easing next week
- Month end selling pressure keep US dollar on back foot
- AUD is best performing currency against USD in May (major G-10); GBP the worst
Percent change in currency value for May
FX Recap and outlook: Statistics Canada reported Canada Q1 GDP fell 8.2%, a tad worse than the 5.0% drop reported by the Americans. They said “the downturn in GDP—the sharpest since the first quarter of 2009—reflects measures imposed in March to contain the pandemic, such as school and non-essential business closures, border shutdowns, and travel restrictions, as well as events earlier in the quarter, mainly the Ontario teachers’ strike and rail blockades in February.”
USDCAD has been whippy. Prices opened in NY at 1.3754 then dropped to 1.3716 prior to the data release, the jumped to 1.3752, immediately afterwards. The currency pair is being bounced about by conflicting influences. Month-end portfolio rebalancing flows are undermining USDCAD, while rising risk aversion sentiment, and falling oil prices are supporting prices.
President Trump continues to poke China with a sharp stick. He railed at China for the COVID-19 outbreak, accusing them of deliberately hiding its severity, while labeling it the “China Virus.”
Today, Trump said he would announce new measures aimed at China in response to Beijing’s move on Hong Kong autonomy.
Equity traders were cautious but not spooked. The major Asia indexes dipped modestly. The Nikkei 225 lost 0.18% but still closed out May with a 10.66% gain. European bourses are trading down, but Germany’s DAX is enroute to a 5.0% gain for May. S&P Futures are also a touch lower, but the S&P 500’s 3.07% MTD gain, looks safe.
Oil traders seem to be worried about rising US/China tensions. WTI oil dropped $34.26/barrel yesterday to $32.38/b in Europe, just before NY opened. Prices are weighed down by fears that US/China tensions will jeopardize the global economic recovery. However, rising crude supply concerns, stemming from rumours Russia will increase production, and yesterday’s EIA report showing a 7.9 million barrel increase in US crude inventories, are likely having the most significant impact on prices. Nevertheless, prices bounced to $32.97/b since the open.
EURUSD is trading at the top of its overnight 1.1071-1.1140 range, supported by a mix of risk aversion demand, bullish intraday technicals on the break of 1.1070, and the ongoing short-squeeze following the EU €825 billion Covid-19 Relief fund proposal. A rash of week Eurozone economic data releases today raised expectations that the ECB will announce another round of monetary stimulus next week.
GBPUSD recovered its small overnight loss in early NY trading and is now unchanged compared to the close. Once again, month-end flows, are supporting prices while EU/UK trade talk concerns limit gains.
AUDUSD and NZDUSD are tracking broad US dollar moves and also supported by month-end US dollar selling pressures.
USDCAD Technicals: The intraday USDCAD technicals are bearish below 1.3860 looking for a decisive break of support in the 1.3700-10 area to extend losses to 1.3680. The longer-term uptrend from January’s low is intact while prices are above 1.3720. A decisive daily close below this level would suggest further losses to 1.3410. For today, USDCAD support is at 1.3720 and 1.3680. Resistance is at 1.3890 and 1.3960. Today’s Range 1.3710-1.3810
Chart: USDCAD daily
Source: Saxo Bank