January 12, 2021
- Trump to be impeached Wednesday
- US Treasury yields soar
- US dollar opens with losses vs majors, -EURUSD unchanged
USDCAD open (6:00 am ET) 1.2749-53, Overnight Range 1.2735-1.2790
FX Ranges at a Glance:
Source: IFXA Ltd/RP
FX Recap and Outlook: FX traders didn’t have a lot of input to help determine direction thanks to a dearth of data overnight. Instead, they focused on the incoming Biden administration’s plans for “trillions and trillions’ of fiscal spending, which they hope will lead to a robust economic recovery. Atlanta Fed President Raphael Bostic seemed to echo that sentiment. He said his baseline outlook is for a robust recovery.
Asia equity indexes closed with solid gains, European bourses are mixed, and S&P 500 futures are modestly higher. US Treasury yields soared, rising from 1.102% to 1.162%
EURUSD was uneventful, trading in a 1.2140-1.2178 range. Analysts are suggesting the new Biden Administration has injected an element of two-way risk into the currency pair. They assume that plans for massive stimulus spending will fuel a strong economic boom, which may force the Fed to start tapering bond purchases sooner than previously expected. EURUSD is in an uptrend while trading above the 1.2120 area.
GBPUSD rallied from 1.3506 to 1.3605, climbing steadily in Asia and then accelerating in Europe. Prices got an added lift after Bank of England Governor Andrew Bailey appeared to push back on the possibility of negative rates in Britain. He said there “lots of issues” with negative rates. GBPUSD is trading just below the overnight peak, but the economic impact from ongoing COVID-19 lockdown measures may limit the topside.
USDJPY continues to be underpinned by rising US Treasury yields, with prices consolidating recent gains in a 104.11-104.32 range. Prime Minister Suga is planning to broaden the current State of Emergency to includes Osaka, Kyoto, and Hyogo.
AUDUSD and NZDUSD climbed on the back of broad US dollar selling pressure, and higher commodity prices.
Oil prices benefitted from expectations of a robust, global economic recovery, and the earlier decision by Saudi Arabia to reduce production. Goldman Sachs is forecasting Brent to average $60/barrel in Q2 2021, and reach $65.00/b by July.
USDCAD sank on the back of the improved risk tone, and the antipodean currency gains against the US dollar. The Bank of Canada Business Outlook Survey had little impact as it pre-dated the latest Canadian coronavirus outbreak. Prime Minister Trudeau is reportedly shuffling his cabinet today, which some pundits believe is a precursor to a Spring election.
The only economic data is the US JOLTS report.
USDCAD Technicals: The intraday USDCAD technicals are bearish below 1.2790, looking for a break of 1.2740 to extend losses to 1.2680. The mid-December downtrend is intact while prices are below 1.2830 with the move below 1.2760 suggesting further losses. For today, USDCAD support is at 1.2740 and 1.2680. Resistance is at 1.2790 and 1.2830. Today’s Range 1.2690-1.2790
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank