Picture: Wannapik.com

November 17, 2020

USDCAD open (6:00 am ET) 1.3067-71, Overnight Range 1.3067-1.3115

  • Reports Brexit deal next week-Fears France would Veto
  • US Retail Sales rise 0.3%
  • FX risk-on sentiment is looking fragile

FX Ranges at a Glance

Source: IFXA Ltd/RP

FX Recap and Outlook:  US Retail Sales rose a lower than expected 0.3% in October but still managed to keep its monthly winning streak (now 6) alive.  The FX market barely budged on the news.

The US dollar is modestly lower against the majors, as hopes of a pending COVID-19 vaccine outweigh fears of rising COVID-19 cases in the US and elsewhere. Asia equity indexes closed with small gains, but European bourses and US equity futures are in the red. Crude oil and gold prices are virtually unchanged.

EURUSD climbed to 1.1885 from 1.1844, where it sits in NY.  Prices are supported by general US dollar weakness, with an added lift from somewhat positive noises around Brexit.  On the negative side, EU seven-year budget plans took a turn for the worse when Hungary and Poland vetoed the budget.  The EU membership must be asking “are we better off with, or without Hungary and Poland?

Also, the negative impact of recent covid-19 restrictions on EU economic growth is slowing EURUSD gains.

GBPUSD rallied with somewhat positive Brexit news.  The UK Chief Trade negotiator reportedly told Prime Minister Johnson to expect a deal early next week, according to the UK Express. Another newspaper, The Sun, said that France might veto any deal because of fishing rights issues.  GBPUSD technicals are bullish and looking for a break above 1.3290 to extend gains.

USDJPY traded lower on the back of higher US coronavirus cases, US political dysfunction, and lower Treasury yields.  USDJPY technicals are bearish while prices are below 104.70, looking for a test of support at 103.70.

AUDUSD  firmed after the RBA minutes re-confirmed that policymakers would not opt for negative interest rates.  The positive risk sentiment from the RCEP trade deal signing and coronavirus vaccine hopes underpinned prices. NZDUSD underperformed against AUDUSD and opened unchanged today.

USDCAD traded narrowly overnight, tracking broad US dollar moves against the majors. The combination of modestly improved risk sentiment from coronavirus vaccine hopes and bearish technicals is weighing on the currency pair.  There are a lot of 2021 forecasts calling for a weaker US dollar in 2021 and suggesting that the Canadian dollar will be a big beneficiary of such a move.  It is hard to accept when one considers that Canada’s fiscal position is the worst of the G-7.

Canada Housing Starts rose 214,900 in October, little changed from September.  Wholesale Sales rose 0.9%. 

 Upcoming US data includes Business Inventories, Capacity Utilization, Industrial production, and NAHB Housing Market Index.  All of the above are second tier and will be ignored in the current environment.

USDCAD Technicals:   The intraday and medium term USDCAD technicals are bearish.  The downtrend line from March is intact below 1.3320, while the short term downtrend from the beginning of the month is valid below 1.3150.  For today, USDCAD support is at 1.3050 and 1.3005.  Resistance is at 1.3120 and 1.3150. Today’s Range 1.3010-1.3110

Chart: USDCAD daily

Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank