February 24, 2020

USDCAD open (6:00 am EST) 1.3302-06     Overnight Range 1.3240-1.3304

USDCAD gapped higher when Asia opened for trading today. Prices accelerated  on fears the coronavirus (COVID-19) would become a pandemic after a spike in reported cases in South Korea and Italy.  Canada is not immune. Toronto reported a new presumptive coronavirus case and CBC reported an infected woman flew from Montreal to Vancouver on February 14. Financial markets were spooked.

The major European equity indexes are melting down, led by a 3.82% drop in the CAC-40.  Dow futures contracts suggest that the Dow Jones Industrial Average will open down around 700 points. Gold prices surged, climbing to a seven-year peak of US $1,689.17/ounce.  Oil prices plunged. West Texas Intermediate, the North American crude benchmark price sank to $51.31/barrel from Friday’s Toronto closing level of $53.46/b.

Chart: Currency gain/loss (%) against the US dollar from 5 pm NY close to 6 am NY open

Source: Saxo Bank/IFXA

FX Recap and outlook:  EURUSD gapped lower at the Asia open and then traded erratically in a 1.0804-1.0840 range until opening in Toronto at 1.0823.  The steep jump in coronavirus cases in Italy, from three on Friday to 152 yesterday, sparked fears the outbreak would spread throughout the Eurozone.  EURUSD is also suffering from divergent economic growth patterns between the Eurozone and the US.  The short term technicals are bearish following the break below 1.0860 and are looking for 1.0770 to give way to extend losses to 1.0670.  German IFO Survey results were better than expected and provided a little support to the single currency.

GBPUSD is languishing at the bottom of its overnight 1.2888-1.2957 range.  Prices are undermined by the broad US dollar strength, equity market strength and bearish technicals.  UK officials are expected to release some details of their position for the upcoming US trade negotiations.

USDJPY retreated overnight due to fresh risk-aversion sentiment.  However, the retreat was shallow, and at 111.40, prices are well-above last week’s low.  The short-term technicals are bullish above 110.30.

AUDUSD and NZDUSD were hammered due to the widening coronavirus outbreak which exacerbated the bearish technical outlooks for both currency pairs.

USDCAD will be supported by falling oil prices, general risk aversion sentiment and turmoil on the domestic front.  The Trudeau government has been unable to resolve the rail blockade, which threatens a negative impact to Q1 economic growth.  Tech Resources pulled their application for the Frontier oil sands project, due to a lack of clarity around Canada’s climate change policies.

USDCAD Technical Outlook

The USDCAD technicals are bullish above 1.326- looking for a break above 1.3310 to retest resistance in the 1.3350 area.  A break below 1.3250 re-targets 1.3210.  For today, USDCAD support is at 1.3260 and 1.3220.  Resistance is at 1.3310 and 1.3350.  Today’s Range 1.3260-1.3330.

Chart: USDCAD daily