February 14, 2020
USDCAD open (6:00 am EST) 1.3239-43 Overnight Range 1.3242-1.3267
US Retail Sales inched higher, rising 0.3% in January. The results provide additional support to the Fed view that the US economy is in a good place.” The results were expected, which gave traders an excuse to book profits ahead of the President’s Day and Canada Day long weekend holiday.
Equity indexes closed on a mixed note, European bourses are trading around flat, and US equity futures are slightly higher. Oil prices rebounded and gold prices inched higher. Traders were content to take profits ahead of the US long weekend, Presidents Day holiday.
The US dollar opened with very little change compared to yesterday’s New York closing levels. However, since last Friday, it has lost ground against the G-10 majors, except against EUR, JPY, and CHF.
Chart: Currency gain/loss (%) against the US dollar from New York close Feb.7 to New York open Feb 14 (6:00 EST)
Source: Saxo Bank/IFXA
FX Recap and outlook: No one is buying roses and chocolates for the beleaguered Euro today. The single currency is beset by a litany of woes including German political uncertainty, pending UK/EU trade talks, dovish-speak from ECB officials, weak economic data, bearish EURUSD technicals, and broad US dollar strength from US economic growth.
German Q4 GDP came in at 0.0% q/q worse than the 0.1% q/q forecast. The bad news was tempered by the upward revision to the previous results from 0.1% to 0.2%. Eurozone Q4 GDP at 0.9% y/y was worse than expected, but the news was offset by the upward revision to the previous data, from 1.0% to 1.2% y/y. EURUSD technicals are bearish while prices are below 1.0940.
GBPUSD rallied yesterday following Prime Minister Boris Johnson’s cabinet shuffle and the resignation of Chancellor of the Exchequer Sajid Javid. Some analysts expect that Mr Javid’s replacement, Rishi Sunak will provide more expansionary fiscal policies. The rally stalled at 1.3062 and today’s break below minor support at 1.3020, targets 1.2970.
USDJPY continues to consolidate inside this week’s 109.50-110.10 range. Gains are capped by lingering safe-haven demand for yen, stemming from coronavirus fears, and US actions against China’s Huawei. Slumping US Treasury yields are also weighing on prices.
AUDUSD and NZDUSD are consolidating this week’s gains, as pre-US long weekend position adjusting pressure the downside. AUDUSD traders are hoping that the RBA monetary policy meeting minutes, released on Tuesday, will show that the central bank is on hold, and support the currency by default.
Oil prices are firmer as traders walk-back concerns that the coronavirus will have a long-term impact on China demand. Profit-taking after Wednesday’s losses also contributed to the gains. A decisive breach of WTI oil prices at $53.10/barrel would negate the downtrend that has been in place since January 7.
USDCAD continues to flirt with support in the 1.3240 area. Concerns about the rail service disruption on the Canadian economy and still soft oil prices are limiting the downside. The currency pair continues to track US dollar price action against the antipodean currencies.
Michigan Consumer Sentiment Index is projected at 99.5, compared to 99.8 in January.
US and Canada are both closed for holidays on Monday.
USDCAD Technical Outlook
The intraday technicals, on a 30 minute chart, are bearish while prices are below 1.3270 and looking for a break below 1.3240 to extend losses to 1.3150. The 4-hour chart, highlights the uptrend line from the beginning of January which comes into play at 1.3180. A break above 1.3270 targets 1.3330. For today, USDCAD support is at 1.3240 and 1.3210. Resistance is at 1.3270 and 1.3330. Today’s range 1.3230-1.3290
Chart: USDCAD daily
Source: Saxo Bank