Source:  HDClipart

February 25, 2022

  • Wall Street futures consolidating just below Thursday’s peak
  • Putin ignores blizzard of sanctions, while smiling at oil price levels
  • US dollar consolidates, safe-haven currencies give back some gains

FX at a Glance 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2806-10, overnight range-1.2758-1.2819, close 1.2820

USDCAD found its entire overnight range in the thin Asian session. Europe opened with USDCAD at the bottom, then Russian/Ukraine news took prices to the top. That move didn’t last either as S&P 500 futures turned overnight losses to gains before the NY open, driving USDCAD to 1.2758.

USDCAD direction is determined Wall Street moves, with modest insulation from price gains due to firm and rising oil and other commodity price gains.

USDCAD may have limited downside today as traders may be unwilling to hold positions heading into the weekend.

Technical view:  The USDCAD technicals are bullish above 1.2700, with a move above 1.2830 targeting 1.2890.  A break below 1.2760 would extend losses to 1.2730, while a break above 1.2890 suggests a test of 1.3000 is in the cards.

For today, USDCAD support is at 1.2750 and 1.2710.  Resistance is at 1.2830 and 1.2880. Today’s Range 1.2750-1.2830

Chart USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

The US dollar saw a little additional pressure following today’s better than expected US data which suggest the US economy is more than strong enough to withstand geopolitical developments in Europe.

January Durable Goods Orders rose 1.6%, easily beating the 0.8% forecast while Decembers result was revised from -0.9% to 1.2%. US personal income was flat but personal spending jumped 2.1%.

Yesterday’s price action on Wall Street summed up the reaction of traders to Russia’s invasion of Ukraine- “it’s not my problem.” 

Social media chirped all kinds of outrage and condemnation for everything Russian, safe in the knowledge that they are far away from danger and completely unaffected other than paying a little more for gas.

Fed officials were a tad more subtle, but they seemed to have a similar mindset. Cleveland Fed President Loretta Mester said the Fed is on track to raise rates if inflation doesn’t moderate but added that “The implications of the unfolding situation in Ukraine for the medium-run economic outlook in the US will also be a consideration.”  Atlanta Fed President Raphael Bostic admitted that the Fed should consider the medium-term impact of the invasion, but his focus was still on how many rate hikes in 2022.

Western world leaders are at their indignant best and slapped Russia with a barrage of sanctions for its invasion of Ukraine. But officials took great care not to disrupt Russia’s access to the global payment system (SWIFT) or to interfere with Russia’s energy exports. Iranian leadership wishes they were shown the same consideration when they upset the world.

Russia’s actions are viewed as an invasion of a sovereign country. However, President Putin begs to differ. All Ukrainian’s who are 30 years or older, were born Russian citizens, so it is not an invasion, but merely a “forced reconciliation.”

Yesterday’s US GDP, weekly jobless claims data, and speculation that the Fed would avoid hiking rates by 0.50% next month underpinned stocks, which helped Wall Street recoup all its intraday losses. Asian traders took note and Japan’s Nikkei 225 index led the major indexes higher, closing with a 1.95% gain. European bourses are in positive territory, although below their best levels.

EURUSD has rebounded from its overnight low of 1.1167 and rallied to 1.1241 in NY following the US data. However, traders ignored Eurozone data, which included, Economic Sentiment, Industrial Confidence, and Consumer Confidence as it became irrelevant following the Russian invasion.

GBPUSD rallied from 1.3369 to 1.3393 but is still well-below its overnight peak of 1.3438.

USDJPY climbed to 115.62 from 115.16, underpinned by the US 10-year Treasury yield rising to 1.99% in early NY trading.

Michigan Consumer Sentiment is expected unchanged at 61.7.

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3346, previous 6.3280

Shanghai Shenzhen CSI 300 rose 0.97% to 4,573.43

China’s Foreign Ministry says sanctions are not an effective way to solve problems.

China will cap Thermal Coal prices at a level 30% below the current price (prior to the announcement) effective May 1, 2022.

Chart: China 1 month

Source: Saxo Bank