June 9, 2020

USDCAD Open (6:00 am) 1.3474-79, Overnight Range: 1.3362-1.3486

  • Stocks drop in Europe, S&P Futures retreat
  • Oil prices drop on profit-taking, and US Shale
  • US dollar opens in NY with gains across the board, and then retreats

US Percent change in currency value

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Source: Saxo Bank/IFXA

FX Recap and outlook:  The US dollar may be down, but it is not out.  Blame Japan.

USDJPY dropped from 109.68 Monday morning, to 107.80 overnight, which nearly erased all last week’s gains.  The drop coincided with a plunge in 10-year US Treasury yields from 0.929% to 0.825% today and the looming FOMC meeting.

Australian’s came back from a holiday and promptly started selling AUDUSD driving prices from 0.7042 to 0.6900.  There wasn’t a specific reason for the sell-off, as weak, but mixed domestic data was not a surprise.  Arguably, traders wanted to protect profits ahead of Wednesday’s FOMC meeting.

Nevertheless, the USDJPY drop and the AUDUSD sell-off set off a chain reaction of US dollar demand against the major G-10 currencies, most of which were showing signs of being extremely overbought against the US dollar.  NZDUSD dropped to 0.6471 from 0.6579, tracking the Aussie move.

EURUSD traded sideways in Asia and then dropped from 1.1314 to 1.1242 in Europe.  Prices managed to bounce to 1.1272 in NY.  Weak German trade data and 3.1% y/y drop in Eurozone Q1 GDP also weighed on prices.  The combination of weak economic data, overbought EURUSD conditions, and caution ahead of Wednesday’s Fed meeting weighed on prices.

GBPUSD dropped from 1.2755 to 1.2620, mirroring EURUSD moves. Prices are consolidating the losses in a 1.2620-60 range.

Oil prices retreated.

WTI fell to $37.09/barrel from $38.84/b as yesterday’s report that US shale producers were reopening wells, and concerns that post-COVID-19 oil demand will remain muted encouraged selling.

USDCAD joined the rally party, rising from 1.3362 to 1.3485, on the back of broad US dollar demand, with the oil price dip providing added incentive to buyers.

US economic releases are second tier, and the Canadian calendar is empty.  FX markets will track equity moves, and the S&P futures indicate a negative open on Wall Street.USDCAD Technicals: Th intraday USDCAD technicals are bullish, supported by the break above 1.3440 but need to move above 1.3510, to extend gains.  A failure to break above 1.3510 will keep the focus on support in the 1.3350 area. For today, USDCAD support is at 1.3430 and 1.3380. Resistance is at 1.3480 and 1.3510. Today’s Range 1.3410-1.3490

Chart: USDCAD 4 hour

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Source:  Saxo Bank