April 23, 2020

USDCAD open (6:00 am EST) 1.4146-50    Overnight Range 1.4117-1.4197

  • Initial jobless claims data rise 4.4 million
  • EURUSD traders awaiting results of EU Summit meeting
  • Oil prices surge 51% since yesterday morning
  • US dollar trading softer, post claims data

Chart: Currency gain/loss (%) against the US dollar from NY close to NY open (6:00 EST)

Source: Saxo Bank/IFXA

FX Recap and outlook:  The US Jobless Claims report, at 4.2 million, was a tad weaker than forecast but better than last week’s 5.2 million result.  The news improved overall risk sentiment and flipped S&P futures from mildly negative to mildly positive.

The 51% rebound in crude prices despite yesterday’s EIA data showing a 15 million barrel/day increase inventories also underpins risk sentiment. President Trump did his part.  He threatened Iran, tweeting “I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.”  Price are also rising on the approach to the onset of the May 1, Opec/Russia 10.0 million barrel/day production cuts.

Eurozone April Manufacturing data weighed on EURUSD even though weaker-than-forecast results should not have been a surprise, due to widespread COVID-19 lockdown measures.   Eurozone PMI fell to 33.6 from 44.5 in March, while German Manufacturing PMI dropped to 34.4 from 45.4. EURUSD was also undermined by yesterday’s news that the ECB tweaked their bond-buying rules and will be able to accept junk-rated debt in some cases.  EURUSD dropped from at the European open to 1.0834 to 1.0757 in NY.  Prices are gravitating  toward the 1.0780-00 area as upwards of $3.1 billion of options expire today.

GBPUSD is  suffering from the “ugly PMI blues.”  UK April Manufacturing PMI fell to 32.9 from 47.8, while Services PMI sank to 12.3 from 34.5.  The news was expected to be bleak, but the actual numbers drove home the extent of the pandemic on the UK economy.  Bank of England policymaker Jan Vlieghe did not help sentiment when he said, “it seems that we are experiencing an economic contraction that is faster and deeper than anything we have seen in the past century, or possibly several centuries.”

Nevertheless, GBPUSD recovered from its 1.2310 overnight low and is trading at 1.2350 as of 8:55 am EDT.

USDJPY traded in a narrow 107.55-107.86 range.  The government said that “Japan’s economy is worsening rapidly and is under an extremely severe situation due to the novel coronavirus,” adding that economic conditions will remain extremely severe.  Traders shrugged and said, “Welcome to the coronavirus party.”

AUDUSD and NZDUSD rallied alongside the bounce in oil and other commodity prices, supported by improved risk sentiment with yesterday’s Wall Street gains.  AUDUSD got an added boost by strong export data, particularly to China.

USDCAD dropped alongside gains in the antipodean currencies, oil prices, and the modest improvement in risk sentiment that goes hand in hand with Wall Street price action.  Canada’s inflation data, released yesterday, was weaker than expected, but the news had little impact on USDCAD trading.

US data New Home Sales data is due today, but prices will continue to be driven by coronavirus news and remember:

Source:  somewhere on the internet

USDCAD technical outlook:

 The intraday USDCAD technicals are bearish.  A series of lower highs after peaking at 1.4260 on April 21, comes into play at 1.4180 today.  While prices are below that level, they will continue to probe support in the 1.4110 area, which represents the uptrend line from April 14.  A break either side is worth about 0.0100 points.   For today, USDCAD support is at 1.4105 and 1.4060. Resistance is at 1.4180 and 1.4260. Today’s Range 1.4090-1.4180

Chart: USDCAD 4 hour

Source: Saxo Bank