January 28, 2020

USDCAD open (6:00 am EST) 1.3199-03   Overnight Range 1.3182-1.3203

FX markets largely ignored today’s better than expected print of December US Durable Goods Orders, which rose 2.4% compared to the forecast of a 0.5% increase.  The gains were due to defence spending, which if excluded meant Orders fell 2.5%.

FX action wasn’t much more encouraging overnight.  Forty-five years ago, Foghat sang “slow ride, take it easy.” That tune may have been playing in Asia and European FX markets, as the greenback managed a slow grind higher, in a slightly risk-averse market.

China upped the count of confirmed coronavirus cases to 4,515 with 102 deaths as of yesterday. That was enough to drive Asia equity markets lower, but not enough to spook European equity bourses, which are mixed to flat in early New York trading.

GBP is the worst performing G-10 currency compared to yesterday’s close while the traditional safe-haven currencies, JPY and CHF are marginally higher.

Chart: Currency gain/loss(%) against the US dollar from NY open Jan.20 to NY open Jan 24.

Source: Saxo Bank/ IFXA Ltd

EURUSD is trading in a narrow 1.1003-24 band, albeit with a negative bias. Bearish technicals and the dovish ECB monetary policy outlook are weighing on the currency pair. There is a whiff of support from the belief that the coronavirus outbreak could lead to a dovish FOMC outlook, raising the risk of a Fed rate cut. The EURUSD technicals are bearish below 1.1060, looking for a break of support at 1.0960 to accelerate losses to 1.0880.

GBPUSD continues its week-long drift downwards. Weaker than expected Distributive Trades survey results knocked GBPUSD from 1.3057 to 1.3008 just before the New York open. Prices have drifted in a 1.3004-19 range since.  Traders are cautious ahead of Thursday’s Bank of England policy meeting where the odds are 50/50 for a rate cut. The GBPUSD technicals are bearish below 1.3060 with a move below 1.2960, targeting 1.2830.

USDJPY continues to be weighed down by safe-haven demand for yen as well as the steep plunge in US Treasury yields. USDJPY is in a downtrend below 109.15 with a break below 108.70 pointing to a test of support at 108.30.

AUDUSD continued to suffer from economic slowdown concerns due to the China virus. That suffering was exacerbated when the NAB Business Confidence survey shrunk to -2 from and expected 1.0. AUDUSD dropped to 0.6739 from 0.6764. The AUDUSD technicals turned bearish with the January 23 break of 0.6840, the uptrend line from October 2019. A decisive break below 0.6740 opens the door to a drop to 0.6670.

Coronavirus updates, Trump’s impeachment circus and equity market price action will keep FX price action subdued. There are no Canadian economic reports due today.

USDCAD Technical Outlook

The USDCAD technicals are bullish while trading above 1.3080, and targeting the November 20 peak of 1.3320. The break above the 1.3180 area, representing the 61.8% Fibonacci retracement of the November 20-January 6 range, suggests further gains to the 76.4% are which is at 1.3235. For today, USDCAD support is at 1.3160 and 1.3130.  Resistance is at 1.3230 and 1.3270.  Today’s Range 1.3170-1.3220

Chart: USDCAD daily

Source: Saxo Bank