January 27, 2021
- FOMC to remain on hold, awaiting signs of economic rebound
- More ECB verbal intervention for Euro
- US dollar traded in narrow ranges overnight and rallies in NY
USDCAD open (6:00 am ET) 1.2719-23, Overnight Range 1.2688-1.2766, Previous Close 1.2697
FX Ranges at a Glance:
Source: IFXA Ltd/RP
FX Recap and Outlook: US Durable Goods Orders rose 0.2% in December compared to a 1.2% increase in November. The results were ignored by FX traders who are biding their time until the FOMC meeting.
The first FOMC policy statement of 2021 is released at 2:00 pm (ET). It’s a new year, and a new government. That was all the reason needed for FX traders to stay on the sidelines overnight and they did. The FOMC is widely expected to leave policy unchanged, but the Q&A session may be interesting. Analysts will be curious to discover how the January resurgence of coronavirus cases and the prospect of $1.9 trillion in fiscal stimulus impact the Fed’s outlook.
The major Asia equity indexes closed on a mixed note. Japan’s Nikkei gained 0.31% while Australia’s ASX 200 lost 0.65%. Hong Kong Hang Seng gains and Shanghai Shenzhen CSI 300 offset.
European bourses and Wall Street equity futures are down. Gold prices eased while oil prices inched higher. US 10-year Treasury yields were steady around 1.045%. The US dollar extended its overnight gains in NY trading.
EURUSD suffered from a bout of verbal diarrhea. ECB Governing Council member Klaas Knot yammered on about the ECB tools available to prevent further strengthening of the Euro if it was deemed to be hampering inflation gains. Italian political uncertainty is also weighing on prices. Germany’s Consumer Confidence Survey dropped to -15.6, which was blamed on the strict lockdown measures. The short term EURUSD technicals are bearish, looking for a test of support in the 1.2080 area.
GBPUSD traded with a modest mid in a 1.3723-1.3757 range and is the only major currency to post a gain against the US dollar since Tuesday’s NY close. Analysts suggest that the currency is underpinned by pent-up demand for UK assets, which had been on hold during the Brexit process. GBPUSD could slump into month-end from portfolio rebalancing flows, if the S&P 500 remains at current levels.
USDJPY traded quietly in a 103.60-103.82 range. The technicals are bearish while prices are below 104.00, looking for a test of 103.00.
AUDUSD traded lower, falling from 0.7763 in Asia to 0.7710 in NY, despite Q4 CPI rising 0.9% q/q compared to forecast for 0.7% q/q increase. The gain was attributed to the easing of lockdown restrictions. NZDUSD followed AUDUSD lower.
USDCAD continues to bounce between 1.2690 and 1.2790, with direction determined by the prevailing US dollar sentiment. Higher crude prices act as a drag on gains. USDCAD downside may be limited due to concerns that domestic economic growth may lag that of other G-10 nations, in part because Canada is behind the COVID-19 vaccination curve.
USDCAD Technicals: The intraday USDCAD technicals are bullish while prices are above 1.2710, looking for a break above 1.2760 to test 1.2795-1.2805. However, the downtrend channel from November is intact below 1.2805. For today, USDCAD support is at 1.2690 and 1.2650. Resistance is at 1.2770 and 1.2805. Today’s Range 1.2710-1.2805
Chart: USDCAD daily
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank