April 29, 2021

  • Biden spends, Powell sits, and US dollar sinks
  • US Q1 GDP rises 6.4% annualized
  • US dollar opens a tad higher compared to Wednesdays close

USDCAD open 1.2309-13,  Overnight Range 1.2283-1.2320, close 1.2311

FX at a Glance

FX Recap and Outlook

President Joe Biden and Fed Chair Jay Powell put the boots to the US dollar yesterday.  The greenback opened with very modest gains compared to yesterday’s closing levels but those gains disappeared after today’s US data.

Q1 GDP rose 6.4%, easily beating the forecast for a 6.1% gain y/y.  The Bureau of Labor Statistics attributed the improvement to “the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic.”

Weekly jobless claims were a steady 553,000, which was a modest improvement compared to the previous week’s upwardly revised result.  The US dollar dipped on the news.

Yesterday’s FOMC meeting lived up to its low expectations.  The Fed left everything unchanged.  Pre-meeting speculation that the Committee would discuss tapering proved to be a waste of time.  Mr Powell insists “it is not time yet,” when asked about reducing QE purchases.

President Biden announced his latest $1.8 trillion “American Families Plan.”  The details were well-known, and his remarks were merely confirmation of the latest “risk-on” trend.

EURUSD broke above resistance in the 1.2110 area, and it has its sights set on 1.2190.  Eurozone and German economic reports were better than expected, which supported the single currency.  German inflation rose 2.1% y/y (forecast 2.0%), while Eurozone Economic Sentiment climbed to 110.3 from 100.9.

GBPUSD is in the upper end of its 1.3934-1.3975 band, supported by today’s US data and positive risk sentiment. GBPUSD is in a 1.3880-1.4010 range with a break either side yielding 0.0080 points.

USDJPY is bouncing between 108.40 and 109.10.  Fed Chair Powell’s insistence that US interest rates will remain low until  its dual mandate is achieved on a sustainable basis has undermined the currency pair despite 10-year Treasury yields at 1.65%.

AUDUSD and NZDUSD are underperforming against the Canadian dollar.  Both currency pairs are trading below yesterday’s closing levels.  New Zealand Trade and Business Confidence data were ignored.

USDCAD dropped from 1.2405 yesterday to 1.2283 today.  The plunge was triggered by a sharp rise in WTI oil prices, better than expected Canadian retail Sales data, and wide-spread risk-on sentiment from the dovish Fed and Biden’s latest stimulus plan.  The Bank of Canada’s hawkish shift accelerated the decline.  USDCAD is vulnerable to further losses if Friday’s GDP report is better than expected.

USDCAD Technical Outlook

The short term USDCAD technicals are bearish below 1.2363, looking for a test of support at 1.2250. The long term USDCAD technicals are bearish as well.  The break below 1.2531( the 38.2% Fibonacci retracement of the November 2007-February 2020 range) targets further losses to 1.1862 (50% Fibonacci level).  However, Bollinger ban and RSI studies suggest USDCAD is at extreme oversold levels.  For today, USDCAD support is at 1.2270 and 1.2230.  Resistance is at 1.2320 and 1.2360.  Today’s Range 1.2250-1.2320

Chart: USDCAD daily

Source Saxo Bank

FX open, high, low, previous close

Source Saxo Bank