June 7, 2021

USDCAD open 1.2084-88, Overnight range 1.2075-1.2105,  Previous  close 1.2080

FX at a Glance-Friday open-Monday open

FX Recap and outlook

The US dollar is not a whole lot worse for wear after Friday’s disappointing nonfarm payrolls report, which rose 559,000 rather than the 650,000 forecast.  Some analysts were expecting an upside risk to the numbers following Thursday’s robust ADP report.  The US dollar dropped on the news, but nothing really changed.  The greenback remains entrenched inside well-defined ranges.

Treasury Secretary Janet Yellen dismissed concerns about inflationary risks from President Biden’s $4 trillion spending bonanza.  She told Bloomberg News, “If we ended up with a slightly higher interest rate environment, it would actually be a plus for society’s point of view and the Fed’s point of view.”

Global equity indexes are uninspiring to start the week.  Asian indexes closed mixed.  Japan’s Nikkei 225 was modestly higher, while Hong Kong’s Hang Seng Index closed lower and Australia’s ASX200 ended unchanged.  European bourses are hovering around unchanged except the UK FTSE 100, which is higher.  Oil and gold prices are trading below Friday’s closing levels while 10 year Treasury yields are 1.58% compared to 1.625% pre-NFP, Friday.

EURUSD jumped from a 1.2105 low to 1.2183 following the US employment data Friday, then spent the overnight session in a 1.2146-1.2172 range.  German Factory orders fell 0.2% m/m in April, which drove prices to the session low, but prices recovered quickly as the March results were revised higher.  Traders have low expectations for the ECB meeting on Thursday.  The intraday EURUSD technicals are bullish above 1.2140, looking for another test of 1.2270.

GBPUSD rallied from a pre-NFP level of 1.4113 to 1.4198, then retreated to 1.4158 at the NY close. Prices bounced between 1.4113 and 1.4169 overnight and are trading in the middle of that range in early NY trading.  GBPUSD continues to be underpinned by the prospect that the Bank of England raises interests rates earlier than expected.  GBPUSD technicals are bullish above 1.4090, looking for a test of 1.4250.

USDJPY plunged from 110.15 Friday to 109.36, then bounced between the bottom and 109.63 overnight. The drop in 10-year US Treasury yields from 1.625% to 1.581% weighed on prices, as does the combination of weak Japanese growth and ultra-easy monetary policy.

AUDUSD and NZDUSD consolidated Friday’s gains in narrow ranges.  AUDUSD is expected to underperform because the RBA left interest rate guidance unchanged,  while risks increase for higher rates in the UK, Canada, and US.

Oil prices remain elevated.  WTI  topped out at $69.97 before retreating to $69.26 in early NY trading as anticipation of strong global demand in H2 2021 boosts prices.

USDCAD snapped a nascent rally last week when prices climbed from 1.2030 June 2 to 1.2130 Friday before the Canadian and US employment reports. The Canadian jobs data missed forecasts, but it wasn’t a factor.  Instead, prices reacted to the broad US dollar selling pressure due to the NFP data. The subsequent drop below  1.2110 turned the intraday technicals negative (again).  USDCAD continues to be weighed down by the modestly hawkish BoC stance, in the face of a dovish Fed, and by rising commodity prices.

The US and Canadian economic calendars are empty.

USDCAD technical outlook

The USDCAD technicals are bearish below 1.2120 although prices are entrenched in a 1.2000-1.2200 range which has contained moves since May 10.   A break below the 1.1990-1.2000 area targets the 1.1935-1.1950 zone, while a break above 1.2140 puts 1.2200 in play.   For today, USDCAD support is at 1.2040 and 1.2010.  Resistance is at 1.2120 and 1.2140   Today’s range 1.2040-1.2110

Chart USDCAD 4 hour

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank