Source: US Census Bureau

April 24, 2020

USDCAD open (6:00 am EST) 1.4074-78    Overnight Range 1.4056-1.4113

  • Headline USD Durable Goods Orders plunge 14.5% in March
  • EU Leaders fail to agree on recovery package
  • COVID-19 takes toll on German Business Sentiment-IFO
  • US lost 26.5 million jobs since mid-March
  • US dollar poised to close out the week with gains against the G-10 majors except CAD and JPY

Chart: Currency gain/loss (%) against the US dollar from Jan 31 NY open to Apr 24 NY open (6:00 EST)

Source: Saxo Bank/IFXA

FX Recap and outlook:  The US Census Bureau reported “New orders for manufactured durable goods in March decreased $36.0 billion or 14.4 percent to $213.2 billion.”  The US dollar reaction to the data was muted.

A mild whiff of risk aversion wafted through Asia markets, which were quieter than usual due to ANZAC day holidays in Australia and New Zealand.  Traders were cautious following Wall Street’s flat close, and the EU Leaders failure to agree on a recovery package. In addition, the Financial Times claimed tests showed that highly- touted Gilead Sciences Remdesivir coronavirus miracle cure was no miracle and no cure. The US COVID-19 death toll continues to rise, reaching 49,963, even as many US states are easing lock-down restrictions.

US job losses due to measures to combat the pandemic are also rising.  America lost 26.5 million jobs since the middle of March, which, to put in perspective, is equal to 70% of the population of Canada. And yet, the US dollar continues to rise.  The US declared a Public Health Emergency on January 31, and since then the US dollar has gained against all the G-10 major currencies except against JPY.   New Zealand and Canadian dollars are the worst-performing currencies, losing 7.18% and 6.31% respectively.

EURUSD awake from a sleepy Asia session and dropped to 1.0728 from 1.0785 when German IFO survey results showed the business confidence index suffered a record plunge, falling to 74.3 from 85.9 in March.  The reaction is a bit of surprise because the IFO results should not have been.  EURUSD recovered and touched 1.0809 during the joint EU/UK Brexit press conference. EU Chief Negotiator Michel Barnier promised to work with, not against, the UK.

GBPUSD suffered a data plunge as well.  UK Retail Sales fell 5.1% m/m in March compared to the forecast of a 4% decline.  However, the 31.4% increase in the volume of alcohol sales, suggests most Brits were too blotto to care. Nevertheless, GBPUSD dropped from 1.2360 to 1.2300, then rallied back to 1.2360, mirroring the EURUSD move.

USDJPY traded sideways but with a modest negative bias, after a report suggests that the Bank of Japan would eliminate its cap on government bond purchases.

Further USDCAD losses may be a struggle.  WTI prices at current levels do not do the Canadian energy industry any favours, suggesting support in the 1.3990-1.4005 area will be difficult to break.

USDCAD technical outlook:

 The intraday USDCAD technicals are bearish below 1.4080 looking for a break of support in the 1.3990-1.4005 area to extend losses to 1.3910 and then 1.3850.   A close above 1.4105 would negate the downtrend and suggest a retest of 1.4180 resistance. For today, USDCAD support is at the 1.3990- 1.4005 area and 1.3910.  Resistance is at 1.4070 and 1.4120.  Today’s Range 1.3970-1.4070

Chart: USDCAD hourly

Source: Saxo Bank