Source: Saxo Bank/IFXA Ltd
FX Recap and outlook: The US dollar sell-off which has been relentless this week stalled after the release of the weekly jobless claims report. The US Department of Labor announced, “seasonally adjusted initial claims was 1,416,000, an increase of 109,000 from the previous week’s revised level.” It was also the first increase in a month due to some US states rolling back reopening plans do the COVID-19 surge.
The US dollar recovered all its overnight losses after the claims data, as traders reassessed the “risk-on” sentiment. US equity futures gave back their overnight gains as well.
The US reported another 68,947 new COVID-19 cases yesterday, in contrast with the Euro area, where the coronavirus outbreak has been beaten into submission. President Trump’s ploy to deflect attention from his and his administration’s bungling of the pandemic management by increasing verbal attacks on China has not resulted in a flight into safe-haven US dollars, although the Euro may be benefitting.
EURUSD got within spitting distance of 1.1600 (1.1597) and then shied away, although prices may just be regrouping for another attempt. For some reason “big figures” give traders pause and this big figure represents the 50% Fibonacci retracement level of the 2018-2020 range (1.0653-1.2540). The downside may be limited due to ballooning US government deficits and coronavirus concerns.
If US dollar index (USDX) support in the 94.25-60 area crumbles, the bears will have their way with the greenback. The index bounced to 95.05 from the overnight low of 94.74, which is just a reprieve unless prices move above 96.55.
GBPUSD traded in a 1.2700-1.2753 band overnight then plunged to 1.2675 after the claims data. The currency pair is vulnerable to ongoing concerns that UK rates could drift into negative territory and on fears that the EU and UK trade talks will fail.
USDJPY barely moved as Japan was closed for a holiday.
AUDUSD extended overnight losses, falling from 0.7160 to 0.7092 Australia Treasurer Josh Frydenberg announced a $281.4 billion deficit for 2019-2020 and 2020-2021, which weighed on the currency pair.
USDCAD dropped to 1.3373 before bouncing to 1.3426 on the back of the post data, US dollar rally today. WTI oil gave back its overnight gains, which may have encouraged some USDCAD buying.
.Wall Street will drive FX markets. Corporate earnings reports will drive Wall Street.
USDCAD Technicals: The intraday USDCAD technicals are bearish below 1.3430, looking for a break below 1.3360 to extend losses to 1.2960. The 1.3360 level represents the 76.4% Fibonacci retracement of the 2020, 1.2960-1.4670 range. It has been tested three times between June 8-10, and it held. For today, USDCAD support is at 1.3360 and 1.3310. Resistance is at 1.3430 and 1.3460. Today’s Range 1.3360-1.3440
Chart: USDCAD daily
Source: Saxo Bank