Risk aversion fears rippled through Asia equity markets following Friday’s Wall Street losses. The Nikkei 225 led the major indices in the region lower with a drop of 3.01%. That move knocked USDJPY from 109.91 to 109.71 and the Antipodean currencies down as well. The FX moves were fully reversed before Europe opened, and they extended those gains in early New York trading.
US recession fears sparked by US Treasury 3 month-10 year yield inversion triggered the Wall Street sell-off. It also gave rise to a slew of contradicting opinions as to the accuracy of yield curve inversions in predicting recessions. Former Fed Chair Janet Yellen, speaking in Hong Kong today said, the Treasury yield curve may signal the need to cut interest rates at some point, but it does not signal a recession. An RBC economist notes that many UST buyers are foreign suggesting the yield inversion provides a more accurate read on global growth prospects rather than US prospects.
European equity indices have jumped into positive territory while US equity futures point to a small loss at the open.
The US dollar had a choppy overnight session and opened in New York on a mixed note. The greenback is slightly higher against JPY, GBP, and CHF, while a tad softer vs CAD, EUR, AUD, and NZD.
EURUSD is underpinned by better than expected German IFO Survey results. Business Confidence, Current Assessment and Expectations were all higher than forecast.
GBPUSD had a lot of travel time inside a 1.3162-1.3223 range. The European Commission has “upped” the pressure on the UK by issuing a press release that opens with “As it is increasingly likely that the United Kingdom will leave the European Union without a deal on 12 April, the European Commission has today completed its “no-deal” preparations.” It went on to say: “in a “no-deal” scenario, the UK will become a third country without any transitionary arrangements. All EU primary and secondary law will cease to apply to the UK from that moment onwards. There will be no transition period, as provided for in the Withdrawal Agreement. This will obviously cause significant disruption for citizens and businesses.”
USDCAD rallied on Friday, supported by weaker than expected Retail Sales data; however, it also tracked the sell-off in WTI oil prices and lower Canadian yields.
There aren’t any Canadian data available today. However, there are minor US data, including Chicago Fed National Activity Index and Dallas Fed Manufacturing Business index.
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish above 1.3380 looking for a break of resistance at 1.3470 to extend gains to 1.3660. A move below 1.3340 would target support at 1.3300. Fort today, USDCAD support is at 1.3390 and 1.3360. Resistance is at 1.3440 and 1.3470.
Today’s Range 1.3400-1.3470