Source: Amazon books
- Wall Street futures crater with “nuclear” talk
- Russian rouble plunges 36% as sanctions intensify
- US dollar climbs on safe-haven demand
FX at a Glance 24 hours
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.2737-41, overnight range-1.2724-1.2808, close 1.2702
USDCAD remains bid despite the rest of the G-10 major currencies recouping all or most of their overnight losses despite a steep rally in WTI oil prices.
WTI climbed from $91.95/barrel at Friday’s close to $98.98 overnight before retreating to $96.10 in NY. Prices are underpinned on fears the EU may ban imports of Russian oil and gas, despite the pain it would cause domestically.
USDCAD may be seeing a bit of month-end portfolio rebalancing demand.
The odds that the BoC announces a 0.25 bp rate hike on Wednesday improved after Canada Raw Materials and Industrial Product Price indexes rose higher than expected.
USDCAD technical outlook
The intraday USDCAD technicals are unchanged and prices are rangebound. USDCAD is modestly bearish below 1.2810, looking. for a move below 1.2730 to extend losses to 1.2700. However, 1.2700 is the base of the January 28 uptrend channel which is capped at 1.2900.
For today, USDCAD support is at 1.2730 and 1.2700. Resistance is at 1.2800 and 1.2850. Today’s Range 1.2720-1.2790
Chart USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
Remember Friday? Wall Street traders felt like they had seen the worst. The Dow Jones Industrial Average and the S&P 500 index closed with gains of 2.51% and 2.24%, respectively. Oops.
On the weekend, Russian President Vladimir Putin injected “nuclear” into the Ukraine discussion. He announced that Russia’s “nuclear deterrent” forces were on high alert.
S&P 500 futures gapped lower in Asia, falling from Friday’s close of 4384.65 to 4257.00 in Asia before grinding higher ahead of the Wall Street open. Oil and gold prices soared, while the US 10 year Treasury yield dropped to 1.894% from 1.986% Friday.
The Western world has financially nuked Russia’s economy. Canada, US, EU, UK, Japan, Australia, and New Zealand banned financial transactions with the Central Bank of Russia (CBR). At the same time, they revoked access to SWIFT (global payments system) for many Russian banks.
USDRUB rallied 36% from Friday’s close of 83.72 to Monday’s peak of 113.99 before dropping back to 106 in early NY hours. The Russian government took steps to counter the moves. The CBR hiked rates from 10.5% to 20.0%, suspended sales of Russian assets, and implemented mandatory sales of FX revenues for Russian companies.
Russia and Ukraine developments are center stage, but month end portfolio rebalancing flows are in the wings and may add another layer of volatility to FX markets. The 2.0% drop in the S&P 500 since February 1 implies US dollar demand.
Gold prices have whipped-sawed since Thursday, and violent moves were the norm overnight. XAUUSD plunged from $1972.00 to 1878.00 Thursday and closed at $1889 Friday, as risk sentiment improved. Putin’s nuclear comments sent prices to $1928.00 overnight, and they are at $1913.36 in NY. Traders are torn between selling the precious metal due to fears of higher inflation and buying it as a safe-haven.
EURUSD gapped lower at the Asia open. The single currency fell to 1.1124 after closing Friday at 1.1272 but has managed to recoup more than half of the losses and trades at 1.1205 in NY. The EU announced it planned to finance arms sales to Ukraine, in addition to a host of sanctions. Germany is getting into the act. Chancellor Olaf Scholz said the country would spend $113 million to modernize the military (which made historians shudder).
GBPUSD plunged from Friday’s close of 1.3416 to 1.3313 in early Asia trading, but the move was fully reversed in early NY hours, with GBPUSD trading at 1.3408-1.3410. GBPUSD gains were supported by EURGBP selling.
USDJPY traded in a 114.92-115.77 range and is just below the top of that band in NY trading. The currency pair is supported by fears of Fed rate hikes exceeding expectations, even as safe-haven demand for yen slows gains.
AUDUSD and NZDUSD recovered all their Asia losses partly because of higher commodity prices. AUDUSD may have received a lift after TD Inflation rose 3.5% y/y compared to 2.8% last month, which may force the RBA to raise rates sooner than expected.
The Chicago Purchasing Managers and Dallas Fed Manufacturing Business indexes are due. Traders are also looking ahead to Wednesday when Fed Chair Powell testifies before Congress to see if the Russia/Ukraine war will impact the Fed’s monetary policy outlook.
Chart of the Day: USDRUB 15 minute from Thursday.
Source: Saxo Bank
FX open, high, low, previous close as of 6:00 am ET
Chart: Saxo Bank
China Snapshot
Today’s Bank of China Fix 6.3222, previous 6.3346
Shanghai Shenzhen CSI 300 rose 0.18% to 4,581.64
China abstains from voting UN resolution to condemn Russia, risking wrath of Uncle Sam
Chart: China 1 month
Source: Saxo Bank
