Source: Wikimedia

March 24, 2022

  • Sentiment cautiously positive ahead of G-7, NATO, EU meeting
  • Jobless Claims drop 28,000, Durable Goods Orders drop
  • US dollar mixed but steady compared to Wednesday NY open

FX at a Glance 24 hours

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Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2575-79, overnight range-1.2554-1.2584, close 1.2561

USDCAD traders could not ignore rising oil and other commodity prices which drove prices well below the 200 day moving average (1.2610) to a low of 1.2542 yesterday. Prices consolidated, rather choppily in a 1.2558-1.2584 range overnight.

WTI oil climbed from $108.97/barrel yesterday, to $116.60/b after traders were spooked by Putin’s threat to demand oil payments in rubles from “hostile countries.” Some analysts believe his remarks were an attempt to pre-empt a US plan offering American natural gas to Europe. Oil prices were already underpinned by the disruption of supply from the Caspian Pipeline Consortium (CPC). However, hopes that an Iran Nuclear deal would mitigate the impact of a Russian oil embargo are acting as a drag on gains.

The Canadian data calendar is empty

USDCAD technical outlook

The intraday USDCAD technicals are bearish below 1.2590, looking for a move below 1.2540 to extend losses to the 1.2490-1.2510 zone. A break below 1.2440 would extend losses to 1.2290, then 1.1970.  A bounce above 1.2590 targets 1.2650 and is just a correction, while a move above 1.2690 negates the downward pressure and targets 1.2800.

For today, USDCAD support is at 1.2540and 1.2510.  Resistance is at 1.2590 and 1.2650.  Today’s Range 1.2540-1.2610.

Chart: USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

The Band of (political) Brothers has convened in Europe with a satchel full of proposed new Russia sanctions, hoping to finalize a plan to neuter Putin. That plan includes a veiled threat of NATO intervention if Putin uses chemical weapons.

Central banks have been active. Norway’s Norges Bank hiked rates 0.25% to 0.75% and forecast rates would reach 2.5% by the end of 2023. The Swiss National Bank left rates unchanged at -0.75% and warned (as usual) about the “highly-valued” Swiss franc.

Yesterday, St Louis Fed President James Bullard downplayed risks to the US economy from the Russia/Ukraine war, then advocated for a faster pace of monetary tightening.

Asia equity indexes closed mixed. The Nikkei 225 and Australian ASX 200 inched higher while the Hang Seng closed down 0.94%. European bourses are on the defensive and trading with losses, and Wall Street is poised to open with modest gains. Wall Street is poised to open with small gains.  Gold and oil prices remain at or near yesterday’s closing levels while the US 10-year Treasury yield drifts down from its earlier 2.40% peak to 2.37%.

US February Durable Goods Orders dropped 2.2% compared to January’s 1.6% increase. However, the drop in weekly jobless claims to 187,000 easily beat forecasts This is the lowest level for insured unemployment since January 3, 1970  

Source: US Department of Labor

EURUSD see-sawed in a 1.0973-1.1013 band after upbeat economic data was offset by a bearish ECB Bulletin German Markit Manufacturing PMI reports beat expectations at 57.6 (forecast 55.8) while the EU PMI was 57 (forecast 56).and 57.6.

The ECB bulletin erased any positive sentiment from the data, after it warned that the “Russian/Ukraine war will have a material impact on economic activity and inflation.”  The bulletin also noted, “Governing Council sees the risks to the economic outlook as substantially increased and tilted to the downside.”  The intraday EURUSD technicals are bearish below 1.1050.

GBPUSD traded in a 1.3159-1.3213 range as it continued to consolidate yesterday’s losses.  Better than expected Service PMI data was offset by weaker than expected Manufacturing PMI.  Chancellor Rishi Sunak’s latest Spring Statement did not do anything to support the currency, or if you believe the press, low-income Brits. A break below 1.3130 suggests a move to 1.3000.

USDJPY rose from 120.96 to 121.74, underpinned by the 10-year US Treasury yield gains.

AUDUSD is supported by rising commodity prices and demand for AUDJPY, which lifted prices from 0.7468-0.7500.

Chart of the day- WTI oil daily

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3640, previous 6.3558

Shanghai Shenzhen CSI 300 fell 0.59% to 4,251.31

“The Office of the United States Trade Representative today announced its determination to reinstate certain previously granted and extended product exclusions in the China Section 301 Investigation. The determination reinstates 352 of the 549 eligible exclusions.”  (USTR Press Release)

Chart: China 1 month

Source: Saxo Bank