January 29, 2020
USDCAD open (6:00 am EST) 1.3172-76 Overnight Range 1.3158-1.3181
FX traders continue to buy US dollars ahead of this afternoons FOMC meeting, although the gains are marginal. The Fed is expected to leave rates unchanged while issuing a benign statement. There is a risk they err on the side of caution due to the coronavirus, and deliver a dovish statement.
Yesterday, Apple (AAPL: Nasdaq) announced a new record revenue result after Wall Street finished the day with big gains. The results lifted Asia and European equity indices. Equity traders appear to be downplaying coronavirus concerns even though the number of cases in China rose to 5,974 and the death toll climbed to 132, as of January 28. The coronavirus complacency could change if the World Health Organisation declares a “World Pandemic.”
The US dollar opened with gains against the major G-10 currencies except JPY which was a tad higher.
Chart: Currency gain/loss(%) against the US dollar from NY close to NY open
Source: Saxo Bank/ IFXA Ltd
EURUSD drifted lower throughout the overnight session, falling from 1.1026 to 1.0995, and is trading around the 1.1000 area in New York. The German Gfk Consumer Confidence survey rose to 9.9 from 9.7, but the results were ignored ahead of the FOMC meeting. The intraday technicals are bearish.
GBPUSD traders are ignoring the Fed meeting and coronavirus fears, preferring to keep their powder dry until Thursday’s Bank of England policy meeting. Better than expected UK economic data, led to diminished rate cut fears in the past week. However, the coronavirus outbreak could give Governor Mark Carney the ammunition he needs to cut rates and end his BoE tenure with a “bang.”
USDJPY consolidated yesterday’s gain in a 109.02-109.25 range. Prices are at the bottom of that range in New York trading, weighed down by the retreat of US 10-year Treasury yields from 1.663% to 1.617%.
AUDUSD inched higher touching 0.6776 after Australia inflation data was better than forecast. Q4 CPI rose 0.7% q/q compared to 0.5% q/q previously. The results reduced the risk that the Reserve Bank of Australia would cut interest rates in the near term. However, prices were weighed down by China issues.
West Texas oil prices drifted higher yesterday, and then rallied further overnight. The American Petroleum Institute (API) said US crude stocks fell by 4.27 million barrels in the week ending January 24. Traders are hoping that today’s EIA Crude data supports the API results.
USDCAD bounced off resistance in the 1.3200 area yesterday morning and fell steadily throughout the session. A modestly improved risk tone undermined prices thanks to the rebound of equity markets on Wall Street and higher oil prices. A bit of profit-taking ahead of today’s Fed meeting was another factor. Prices are consolidating in a 1.3158-82 range, with a bullish bias
Today’s US economic reports are second-tier and will be ignored by FX traders.
USDCAD Technical Outlook
The USDCAD technicals are bullish. The uptrend channel, post Jan. 22 BoC meeting is intact between 1.3155 and 1.3220. In addition, the uptrend channel from the beginning of the month is in place above 1.3105. A break above 1.3230 suggests further gains to 1.3310 while a break below 1.3150 targets 1.3105. For today, USDCAD support is at 1.3150 and 1.3105. Resistance is at 1.3205 and 1.3230. Today’s Range 1.3130-1.3230
Chart: USDCAD 4 hour
Source: Saxo Bank