Questions as to whether President Trump can deliver on his election promises of tax cuts and infrastructure spending have unnerved equity markets.
Global equity indices followed US equity indices lower in Asia and in Europe and that weakness drove USDJPY down to levels last seen on November 22.
Tuesday’s USDJPY sell-off in New York extended throughout the entire overnight session, helped by a better than expected Japan Trade report. Japan posted a trade surplus of ¥813.4 billion. USDJPY dropped from 111.78 to 111.16 by the start of trading in the Big Apple.
The antipodeans were under pressure. AUDUSD dropped steadily from 0.7688 to 0.7650 before attempting to rally in Europe. That move was short lived and AUDUSD dropped to 0.7640. NZDUSD churned inside a 0.7018-0.7047 band.
EURUSD attempted to extend gains made in New York in early Asia trading but couldn’t get above 1.0817. The proximity of the medium-term downtrend line in the 1.0890-00 area and ongoing concerns about the Eurozone and Brexit tempered the buying enthusiasm.
ECB board member and Bank of France President Francois Villeroy put a damper on speculation that the ECB may be shifting its policy stance when he said “We are reasonably confident that both headline and underlying inflation will converge, close to our target in 2019, “Given this progress, should we stop pursuing an accommodative monetary policy? At this stage, the answer is clearly no.”
Sterling traded in a narrow 1.2460-1.2505 range supported by the broad US dollar weakness and a further unwinding of GBPUSD short positions.
Oil prices dropped further overnight with traders spooked by another large increase in US crude inventories. The American Petroleum Institute (API said that crude stocks rose by 4.5 million barrels last week. WTI dropped from $48.21 to $47.75 and hasn’t recovered.
The Canadian dollar was beaten up. USDCAD added to Tuesday’s gains in Asia. It poked its head above 1.3400, touching 1.3407 as New York opened. Weak oil prices and perhaps a dash of Canada Budget jitters, fueled the gains.
FX markets will take direction from Wall Street. Wall Street is using the headlines around the Trump healthcare bill as an excuse to book some of the profits achieved since the Trump election. The Dow Jones Industrial average has gained over 17% in that time. Today’s US housing data won’t do anything to shift the focus from equities.
The Canadian dollar is getting whacked by falling oil prices. Yesterday’s speech by Bank of Canada Deputy Governor Lawrence Schembri in Vancouver, followed Governor Stephen Poloz’s script. He stressed the risks to the Canadian economy while down-playing the positives.
The Federal budget is due to be delivered at the end of the day. Normally, the budget has little impact on USDCAD trading which will likely be the case today.
|Close 4:00 pm EDT-Open 6:00 am EDT|
USDCAD Technical outlook:
The intraday USDCAD technicals are bullish. The break above resistance at 1.3360 and 1.3380 has shifted the focus to 1.3540, the March peak. A break above 1.3530 would suggest that a short-term bottom is in place at 1.3270. For today, USDCAD support is at 1.3380 and 1.3350. Resistance is at 1.3520 and 1.3560.
Today’s Range 1.3360-1.3540
Chart: USDCAD 4 hour
This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.
Last update: 22 Feb, 2020
The strong start to the year for “risk-on” currencies is already a distant memory.
Posted: 3 Feb, 2020
The threat of a proxy war between the US and Iran in Iraq has pared back some of the recent gains of “risk-on” currencies.
Last update: 8 Jan, 2020