Photo: Needpix.com

September 10, 2020

USDCAD open (6:00 am ET) 1.3158-62, Overnight Range 1.3133-1.3167

  • ECB leaves policy unchanged, EURUSD rallies
  • GBPUSD sinks as EU/UK war of words heats up
  • US weekly jobless claims disappoint
  • US dollar opens higher against commodity currency bloc

Source: Saxo Bank/IFXA Ltd

FX Recap and Outlook  The ECB delivered as most expected.  They left interest rates, and the PEPP program unchanged.  That contrasted concerns in some camps that policy makers would reference a “high EUR exchange rate.”

EURUSD firmed gently in Asia rising from 1.1803 at yesterday’s close to 1.1839 by today’s NY open. Prices accelerated higher after the ECB statement, reaching 1.1891 as the press conference began. EURUSD technicals are bullish following yesterday’s failure to break below support in the 1.1760 area. The uptrend from May is intact above 1.1770, and looking for a break of 1.1900 to extend gains to 1.2000.

GBPUSD sank like a rock after NY opened, falling from 1.3030 to 1.2925.  Prices have since bounced to 1.2960 but sentiment is bearish. The catalyst was the EU threat of a trade war if Great Britain left without a trade deal.  If that occurred, EU Chief Trade Negotiator Michel Barnier reportedly threatened to disrupt exports of food between Great Britain and Northern Ireland.  That report is said to be the reason why the UK changed the withdrawal agreement. Trade war worries and the rising risk of a second wave COVID-19 outbreak across the UK are weighing on the currency.   Things are likely to get testier before they get better.

Today’s weekly jobless claims were a tad higher than expected, but little changed from last weeks results, but not enough to turn US equity futures negative. (8:55 am ET)

The run-up to this morning’s ECB meeting sidelined FX traders overnight.  Asia equities closed with small gains, while European indexes are flitting between positive and negative.  US equity futures are doing the same, and are currently modestly in the red.  US dollar weakness underpinned gold prices, while demand concerns weigh on crude prices.

USDJPY continues to drift inside the well-defined 105.00-107.00 range.  The intraday technicals are bearish below 106.30 looking for a break below 105.70 to extend losses to 105.00.

AUDUSD and NZDUSD were steady and hung on to most of Wednesday’s gains.    Weaker than expected Inflation Expectations data capped AUDUSD gains while NZDUSD continues to benefit from improved Business confidence data.

USDCAD price action continues to mirror that of EURUSD.  USDCAD’s fall from Wednesday’s 1.3255 peak, coincided with the single currency’s bounce off support. The Bank of Canada policy statement was a non-event, as expected.

Traders hope that Governor Tiff Macklem will shed some light on the BoC outlook in today’s speech.  However, that doesn’t look promising as the title is “The uneven effects of COVID-19 on different sectors and people in the economy.”

USDCAD Technicals: The USDCAD technicals are bullish above  1.3120 but the jury is still out as to whether the breach of the downtrend line from May snapped the long term downtrend.  A move above 1.3180 would suggest it did and target further gains to 1.3270. For today, USDCAD support is at 1.320 and 1.3080.  Resistance is at 1.3180 and 1.3240. Today’s Range 1.3120-1.3220

Chart: USDCAD 4 hour

Source:  Saxo Bank

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

Source:  Saxo Bank