July 10, 2020
Percent change in US dollar from Thursday NY open to Friday NY open
Source: Saxo Bank/IFXA
FX Recap and outlook: Canadian employment rebounded in June. Canada regained 952,900 jobs, in addition to the 289,600 increase in May. A two-month total of 1.24 million jobs would be tremendous result in any other time. But these are Coronavirus times. Federal and provincial government actions taken to combat the spread of the pandemic cost the economy 3 million jobs in March and April. The May/June job gains are only 40% of the total losses and a full recovery is a long ways down the road.
That explains why USDCAD traders ignored the results. Instead they focus is on the rising number of coronavirus cases in the United States and used that as the excuse to book profits. Safe-haven currency demand got an added boost from slumping global equity markets overnight.
China’s Shanghai Shenzhen CSI 300 index enjoyed an impressive 9.28% gain until Friday, when cautious traders booked profits, knocking the index 1.81% lower overnight. European equity traders followed their lead during the European morning, but changed their minds when New York opened and turned positive. S&P 500 futures are flitting between positive and negative ahead of the Wall Street open.
GBPUSD is poised to close out the week as the best performing G-10 major currency against the US dollar. It rose 0.74% since Monday’s open, powered by a modestly better tone to the EU?UK trade talks. Prime Minister Boris Johnson told negotiators for both sides that he wanted the outline of a deal done by the summer.
EURUSD is trading above the 1.13000 area again but it is still trapped inside the month-long 1.1170-1.1360 range. The single currency did not get any support from news the European Union Council proposal of a €1.07 trillion budget. The Council left the Recovery Fund program proposal of €750.0 billion unchanged. They also included a plan for a €5.0 billion reserve to help mitigate damages caused by Brexit.
The Canadian dollar is the worst-performing major G-10 currency for the last 24 hours. USDCAD rejected attempts to drive below support in the 1.3490-1.3505 area yesterday. The subsequent rally broke above resistance at 1.3580 and led to a test of 1.3630 overnight. The drop in oil prices and risk-aversion demand for US dollars is underpinning prices.
FX price action will be governed by Wall Street, again.
USDCAD Technicals: The short term technicals are bearish while prices are below 1.3630 with a break below 1.3570 suggesting another test of support at 1.3505. Longer term, USDCAD continues to bounce erratically in a 1.3490-1.3660 range, albeit with a bullish bias. The weekly chart highlights the long term USDCAD uptrend that is intact while prices are above 1.3150. For today, USDCAD support is at 1.3560and 1.3510 . Resistance is at 1.3630 and 1.3680. Today’s Range 1.3530-1.3630
Chart: USDCAD weekly
Source: Saxo Bank