USD/CAD Daily Forecast – Canadian Dollar Loses Ground Ahead Of The Weekend

USD/CAD Video 29.05.20.

U.S. Dollar Gains Ground As Canada Reports Grim GDP Numbers

USD/CAD tested the support level at 1.3730 but reversed course and climbed back to 1.3800 as the U.S. Dollar Index rebounded from the 98 level while Canada provided a disappointing GDP Growth Rate report.

Canada’s GDP Growth Rate in the first quarter was -2.1% quarter-on-quarter. GDP Growth Rate Annualized was -8.2% in the first quarter as the Canadian economy received a double hit from coronavirus and low energy prices. Canada expects that GDP growth declined by 11% in April.

The U.S. also reported grim economic data as Personal Spending was down by 13.6% as virus containment measures put significant pressure on consumer activity.

The U.S. Dollar Index has recently breached the low end of the previous 99 – 101 range and tested the 98 level but started to rebound, providing additional boost to USD/CAD.

The equity markets are worried about an additional increase in U.S. – China tensions but the U.S. dollar has not received too much support despite its role of a safe haven asset.

Technical Analysis

usd cad may 29 2020

USD/CAD has once again tested the nearest support level at 1.3730 but this attempt was unsuccessful. Instead of getting below 1.3730, USD/CAD gained significant near-term upside momentum and headed towards 1.3800.

Currently, USD/CAD is trading in the range between the support level at 1.3730 and the resistance level at 1.3850. The 20 EMA has recently crossed the 50 EMA to the downside, suggesting the increase in downside momentum, but USD/CAD will have to stay below 1.3850 to have material chances for additional downside.

In case USD/CAD manages to settle below 1.3730, it will head towards the next support level at 1.3650.

On the upside, USD/CAD will have to deal with the major resistance at 1.3850 which has previously served as the support level in a two-month trading range between 1.3850 and 1.4250.

In case USD/CAD gets above 1.3850, it will gain additional upside momentum and head towards the 20 EMA level at 1.3935. The 50 EMA is located close to the 20 EMA so this resistance level may be very significant.

If USD/CAD settles above both the 20 EMA and the 50 EMA, the next resistance will likely be seen closer to 1.4000.

For a look at all of today’s economic events, check out our economic calendar.

 

Economic Data to Take a Back Seat with Trump’s News Conference the Main Event

Earlier in the Day:

It was a relatively busy day on the economic calendar this morning. The Japanese Yen and Aussie Dollar were in action early in the day.

Away from the economic calendar, the markets responded to Trump’s announcement on Thursday of plans to unveil measures against China at the news conference later today.

Fiscal stimulus from Brussels and the easing of lockdown measures across the EU and the U.S had provided support to riskier assets ahead of today’s open.

Looking at the latest coronavirus numbers,

On Thursday, the number of new coronavirus cases rose by 112,124 to 5,900,627. On Wednesday, the number of new cases had risen by 110,221. The daily increase was higher than both Wednesday’s rise and 106,139 new cases from the previous Thursday.

France, Germany, Italy, and Spain reported 5,612 new cases on Thursday, which was up from 1,892 new cases on Wednesday. On the previous Thursday, 1,976 new cases had been reported.

From the U.S, the total number of cases rose by 22,413 to 1,768,216 on Thursday. On Wednesday, the total number of cases had risen by 20,392. On Thursday 21st May, a total of 28,089 new cases had been reported.

The uptick on Thursday will need to be monitored in the coming days. With the easing of lockdown measures now in the 4th week, it would be in the coming days that a 2nd wave would become evident…

For the Japanese Yen

Inflation was in focus in the early part of the day, along with industrial production and retail sales figures.

In May, the Ku-area of Tokyo saw inflationary pressures return, with core consumer prices rising by 0.20% In April, consumer prices had fallen by 0.10%, year-on-year.

According to the Ministry of Internal Affairs and Communication.

  • Rising prices for clothes & footwear (+1.7%), furniture & household utensils (+1.7%), and culture & recreation (+1.2%) supported the rise.
  • There were also increases in prices for medical care (+0.8%) and housing (+0.7%).
  • Prices for Education (-8.9%) and fuel, light, & water charges (-1.9%) pinned back inflationary pressures, however.
  • There were also declines in prices for transport & communication (-0.1%) and miscellaneous (-0.8%).

In April, industrial production slumped by 9.1%, based on prelim numbers, following a 3.7% decline in March. Economists had forecast a 5.1% slide.

According to the Ministry of Economy, Trade, and Industry,

Industries that mainly contributed to the decrease were:

  • Motor vehicles, iron, steel & non-ferrous metals, and transport equipment (excl. motor vehicles).

Industries that mainly contributed to the increase were:

  • Production machinery.

Forecasts for May were not much better, with the forecast for industrial production revised from -1.4% to -4.1%. For June, however, forecasts are for production to rise by 3.9%.

Retail sales also disappointed in April, with lockdown and social distancing measures weighing.

According to the Ministry of Economy, Trade, and Industry, retail sales tumbled by 13.7% in April, year-on-year, following a 4.7% slide in March. Economists had forecasts an 11.50% decline.

The Japanese Yen moved from ¥107.701 to ¥107.608 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.22% to ¥107.41 against the U.S Dollar.

For the Aussie Dollar

Private sector credit stalled in April, following a 1.10% increase in March.

According to figures released by RBA,

  • Business credit rose by 0.1%, following a 3.1% rise in March.
  • Personal credit slid by 3.0%, following a 1.4% decline in March.
  • Housing credit rose by 0.2%, which was down from a 0.3% rise in March.

The Aussie Dollar moved from $0.66312 to $0.66315 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.08% at $0.6642.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.11% to $0.6203.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include French and German retail sales figures for April and the Eurozone prelim inflation numbers for May.

Prelim inflation figures for France and Italy and 2nd estimate GDP numbers for France are also due out.

We will expect the numbers to have a muted impact on the EUR, however. The EU’s recovery plan and the continued easing of lockdown measures remain positives.

While COVID-19 news and updates remain EUR positive, the markets will need to monitor the number of new cases. On Thursday, there was an uptick. If an upward trend begins, this could question member state plans to ease lockdown measures further.

From the early part of the day, it was risk aversion that pinned back the EUR as the markets await Trump’s news conference later today.

At the time of writing, the EUR was up by 0.07% to $1.1085.

For the Pound

It’s yet another quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

Through the day, expect market risk sentiment and any Brexit chatter to be key drivers.

At the time of writing, the Pound was up by 0.01% to $1.2322.

Across the Pond

It’s another busy day ahead on the U.S economic calendar. Economic data includes April inflation and personal spending figures and May consumer sentiment and Chicago PMI numbers.

Expect the May figures to have the greatest influence, with the markets likely to brush aside April numbers.

Outside of the numbers, FED Chair Powell is scheduled to speak. Any commentary on the U.S economy and monetary policy will garner plenty of attention.

The main event of the day, however, is Trump’s news conference. What does the U.S President have in store for China?

The Dollar Spot Index was up by 0.02% to 98.407 at the time of writing.

For the Loonie

It’s also a busy day on the economic calendar. Key stats include 1st quarter GDP numbers and April’s RMPI.

Expect the GDP figures to have some influence, though the markets are expecting some quite dire numbers. Anything better than forecast should be Loonie positive…

Crude oil prices and market risk sentiment will be the key driver on the day, however.

At the time of writing, the Loonie was down by 0.10% to C$1.3777 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Daily Forecast – Flat Despite Broad Weakness Of U.S. Dollar

USD/CAD Video 28.05.20.

Canadian Dollar Fails To Gain More Ground

USD/CAD stays below the resistance level at 1.3800 as the U.S. dollar is losing ground against a broad basket of currencies while oil is steady despite a surprising increase in oil inventories.

Today, the U.S. has provided a number of economic reports. In general, the economic picture continues to look grim.

Initial Jobless Claims report showed that 2.1 million Americans filed for unemployment benefits in a week. Durable Goods Orders declined by 17.2% month-over-month in April. First-quarter GDP Growth Rate was -5%.

However, some hope was provided by Continuing Jobless Claims which declined from 25 million to 21 million.

The new portion of economic data from the U.S. and the continued increase in U.S. – China tensions did not spoil the mood of global markets today. The demand for safe haven assets decreased, and the U.S. dollar found itself under material pressure.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has declined closer to 98.5. The U.S. Dollar Index has spent two months between 99 and 101, and a move out of this range could lead to increased downside momentum for the U.S. dollar.

Technical Analysis

usd cad may 28 2020

USD/CAD failed to continue the downside move despite the fact that the U.S. dollar is under significant pressure against a broad basket of currencies. The likely reason for this is that the previous downside move was too fast and USD/CAD needs a pause before it will be able to make the next move.

The nearest support level for USD/CAD is located at 1.3730. This level has already been tested several times and has proved its strength. In case USD/CAD manages to get below this level, it will likely gain additional downside momentum and head towards the next support level at 1.3650.

The 20 EMA has recently crossed the 50 EMA to the downside, suggesting the continuation of the downside trend.

On the upside, a minor resistance near 1.3800 was formed. If USD/CAD gets above this level, it will head towards the test of the major resistance level at 1.3850. I’d expect that USD/CAD will attract a lot of interest if it gets back to 1.3850 as this level served as the low end of the two-month trading range between 1.3850 and 1.4250.

For a look at all of today’s economic events, check out our economic calendar.

U.S Weekly Jobless Claims to Put the Greenback in Focus as Geopolitical Risk Lingers

Earlier in the Day:

It was a relatively busy day on the economic calendar this morning. The Aussie Dollar and Kiwi Dollar were in action once more.

Away from the economic calendar, the markets also responded to the moves across the EU and the U.S from Wednesday.

Fiscal stimulus from Brussels and the U.S government’s moves to further reopen the economy provided both support for riskier assets early on. Market sentiment overshadowed economic data that remained weak while improving …

For the commodity currencies, however, concerns over rising tensions between the U.S and China did pin back any breakouts.

Looking at the latest coronavirus numbers,

On Wednesday, the number of new coronavirus cases rose by 110,221 to 5,788,503. On Tuesday, the number of new cases had risen by 95,878. The daily increase was higher than both Tuesday’s rise and 89,941 new cases from the previous Wednesday.

France, Germany, Italy, and Spain reported 1,892 new cases on Wednesday, which was up from 1,535 new cases on Tuesday. On the previous Wednesday, 3,225 new cases had been reported.

From the U.S, the total number of cases rose by 20,392 to 1,745,803 on Wednesday. On Tuesday, the total number of cases had risen by 19,185. On Wednesday 20th May, a total of 21,774 new cases had been reported.

For the Kiwi Dollar

Business Confidence improved in May, with the ANZ Business Confidence Index rising from an April -66 to a finalized -41.8. May’s prelim had come in at -46.

According to the latest ANZ Report,

  • A net 39% of firms expect weaker economic activity in their own business, with the retail sector the most pessimistic once more.
  • Employment intentions rose from a net 50.8% of firms intending to reduce employment to a net 42%.
  • Investment intentions improved marginally from a negative 45% to a negative 32%.
  • Profit expectations rose from a net 70.4% expecting lower profitability to a net 56%. The agricultural sector remained the weakest at -71%, with the construction sector the least negative at -42%.
  • Export intentions rose by just 6 points to -36.

The Kiwi Dollar moved from $0.61897 to $0.61840 upon release of the numbers. At the time of writing, the Kiwi Dollar was up by 0.05% to $0.6185.

For the Aussie Dollar

1st quarter private new capital expenditure fell by 1.6%, quarter-on-quarter, following a 2.8% fall in the 4th quarter. Economists had forecast a 2.6% decline.

According to the ABS,

  • While investments in building and structures fell by 1.1%, investments in equipment, plant, and machinery slid by 2.3%.
  • Year-on-year, total New CAPEX slid by 6.1%.
  • Investments in building and structures tumbled by 7.9%, with investments in equipment, plant, and machinery falling by 4.0%.

The Aussie Dollar moved from $0.66222 to $0.66282 upon release of the figures. At the time of writing, the Aussie Dollar flat at $0.6622.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.13% to ¥107.86 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s another relatively quiet day ahead on the economic calendar. Key stats include prelim May inflation figures from Germany and Spain.

Business and Consumer confidence figures out of Italy and the Eurozone should have a muted impact, following the EU’s COVID-19 recovery plan announced on Wednesday.

We will expect EU’s recovery plan and the continued easing of lockdown measures to provide support.

The markets will need to track any chatter from Beijing and Washington, however. Any rise in tensions and action from either side will test risk appetite on the day.

At the time of writing, the EUR was up by 0.11% to $1.1018.

For the Pound

It’s yet another quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

On Wednesday, we saw the Pound take a hit in response to the threat of the BoE cutting interest rates into negative territory.

BoE Chief Economist Haldane had attempted to pour cold water on such a prospect but to no avail.

Through the day, expect market risk sentiment and any Brexit chatter to be key drivers.

At the time of writing, the Pound was up by 0.05% to $1.2267.

Across the Pond

It’s a busy day ahead on the U.S economic calendar. Economic data includes April durable goods, 2nd estimate GDP numbers, and pending home sales figures for April.

Barring any deviations from 1st estimates, expect April’s core durable goods orders to garner some attention.

Any moves in response to the durable goods orders are likely to be limited, however. The market focus will be on the weekly jobless claims figures.

There’s plenty of optimism as the U.S economy continues to reopen, but whether the markets can stomach another 2m jump remains to be seen.

The Dollar Spot Index was down by 0.17% to 98.893 at the time of writing.

For the Loonie

It’s a quiet day on the economic calendar. There are no material stats due out of Canada to influence the Loonie.

A lack of stats will leave the Loonie in the hands of market risk sentiment and the weekly EIA crude oil inventory numbers…

At the time of writing, the Loonie was down by 0.02% to C$1.3755 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Index (DX) Futures Technical Analysis – In Position to Post Closing Price Reversal Bottom

The U.S. Dollar is trading higher against a basket of major currencies late Wednesday after reversing earlier weakness. After feeling some early session selling pressure, the greenback was able to stabilize and move higher against the Euro, British Pound, Canadian Dollar and Japanese Yen.

The move against the Euro came about even as the common currency remained supported by news of a proposal for an economic recovery package to help the Euro Zone region recover from the coronavirus pandemic.

Sterling retreated below $1.2300 as investor focus shifted back to the possibility of negative interest rates in Britain and comments from government officials that not much progress had been made in Brexit negotiations.

Worries about the U.S. response to China’s proposed security law for Hong Kong helped drive U.S equity indexes lower during the cash market session, which in turn increased the U.S. Dollar’s appeal as a safe-haven asset. This move led to lower demand for the Japanese Yen.

At 19:16 GMT, the June U.S. Dollar Index is trading 99.240, up 0.334 or +0.34%.

Daily June U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at 98.715 will signal a resumption of the downtrend, while a move through the 98.345 swing bottom will reaffirm the downtrend.

The minor trend is also down. A trade through 99.995 will change the minor trend to up. This will also shift momentum to the upside.

The main range is 94.530 to 103.960. Earlier today, the index attracted buyers when it tested its retracement zone at 99.245 to 98.130.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 99.240, the direction of the June U.S. Dollar Index into the close on Wednesday is likely to be determined by trader reaction to yesterday’s close at 98.906.

Bullish Scenario

A sustained move over 98.906 will indicate the presence of buyers. This will also put the index in a position to form a potentially bullish closing price reversal bottom. If confirmed, this could trigger a 2 to 3 day counter-trend rally.

Overcoming the 50% level at 99.245 will indicate the buying is getting stronger. This could trigger a rally into the next 50% level at 99.690.

Bearish Scenario

A sustained move under 98.906 will signal the presence of sellers. This could trigger a test of the main bottom at 98.345, followed by the major Fibonacci level at 98.130.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Daily Forecast – U.S. Dollar Tries To Rebound After Sell-Off

USD/CAD Video 27.05.20.

Lower Oil Puts Pressure On The Canadian Dollar

USD/CAD is rebounding after yesterday’s major downside move as the U.S. dollar is gaining strength against a broad basket of currencies while oil is losing ground due to increase in U.S. – China tensions.

U.S. Dollar Index has recently tried to settle below the key 99 level but faced significant support and rebounded back above 99. A move below 99 would have been bearish for USD/CAD as it would have signaled broad U.S. dollar weakness.

In addition to the rebound of the U.S. dollar, oil is under pressure, which is a bearish catalyst for the Canadian currency.

Canada has recently reported that Building Permits declined by 17.1% month-over month in April which is not surprising given the significant pressure from coronavirus-related measures.

Interestingly, the Bank of Canada stated that it could provide additional monetary stimulus if necessary. The Bank of Canada maintains its 2% inflation target, although the near-term challenge is to avoid deflation.

Technical Analysis

usd cad may 27 2020

USD/CAD has recently breached the important support level at 1.3850 and gained downside momentum. Today, USD/CAD is trying to rebound after this material downside move.

The nearest resistance for USD/CAD is located at the previous support level at 1.3850. I’d expect very material interest from traders in case USD/CAD gets back to this level.

Previously, USD/CAD was in a wide trading range between 1.3850 and 1.4250, and a move out of this range is a major development.

In case USD/CAD manages to get above 1.3850, it will likely gain additional upside momentum and head towards the next resistance level at the 50 EMA at 1.3970.

On the downside, the nearest support level is located at the recent lows at 1.3730. The 20 EMA is about to cross the 50 EMA to the downside, suggesting the continuation of the current momentum. Thus, a test of the nearest support level is likely unless the U.S. dollar gets too much support from the demand for safe haven assets.

In case USD/CAD manages to settle below 1.3730, it will gain additional downside momentum and head towards the next support level at 1.3650.

For a look at all of today’s economic events, check out our economic calendar.

Midweek Market Drivers: Global Expand Of COVID-19, Situation In Europe, and US-China Tensions

The number of new COVID-19 cases across the globe has exceeded 5 million.

How the situation is evolving in the European Union?

Aside from Spain, which has had 1 blip of over  1,000, we’ve seen the most adversely affected see sub-1,000 new cases each day for 9 consecutive days. The most affected being France, Germany, Italy, and Spain.

We had some concerns over how quickly governments were easing lockdown measures. When we factor in the 2-week incubation period, these numbers are fairly positive. They should give the markets some hope that a 2nd wave can be avoided.

Governments are about a 4-5 day period and about a week out to convince the more pessimistic…

If we look at China as a base case that should also be supportive.

We can then also look at virus vaccine news that has also been market positive late last week and early this week.

It appears that the coronavirus crisis continues to hit the global economy dramatically.

In the meantime, are there any improvements?

From the economic data, shifting through May and June numbers, the focus remains on employment and business and consumer confidence figures.

In Germany this week, we saw both business and consumer confidence improve, coming off the back the easing of lockdown measures.

The key, however, remains labor market conditions, which need to materially improve to drive confidence and consumption.

Expect these to be the key areas of focus and to drive the market near-term.

A pickup in consumption would drive a service sector recovery that would then filter through to the manufacturing sector.

Despite positive forecasts, the US-China conflict continues to be in the spotlight. Also, the Chinese government introduced a new HK Securities Law.

How did these events affect the markets?

There was some skepticism over the phase 1 trade agreement. We then saw accusations fly over the cause of the coronavirus pandemic leading to a deterioration in relations.

China has responded with the HK Securities Law and the U.S government is expected to respond in kind this week. This could include sanctions.

The markets have been almost Teflon in the early part of the week. On Wednesday morning, however, we saw risk appetite tested, as focus shifted back to the U.S – China tensions.

This shift in focus came as Trump announced that the U.S will respond to China’s plans for HK.

Let’s see what happens there. Beijing is not going to sit back this time around, not after the year-and-a-half that it took to come up with a phase 1 trade agreement.

Risk appetite will be tested. We do have COVID-19 news to keep the markets buoyed and there is also vaccine talk to provide support.

U.S China tensions, that relationship isn’t going to improve any time soon. Could you imagine a China-Russia alliance against the U.S and anyone else who wants to jump on Trump’s bandwagon?

That would certainly give the markets a rough time, particularly with Iran there in the Middle East as well.

It seems like the US-China tensions do not influence the markets significantly.

Meanwhile, is there anything else notable in regards to commodities and geopolitics?

Other than COVID-19, vaccines, and U.S China relations, there’s very little else to consider from a global financial market perspective.

There is one thing to consider, however, looking further down the track. Will the markets be as optimistic about the economic recovery once June stats begin to come out.

We saw May’s economic indicators show economic activity pickup from the depths of the abyss in April figures.

If we see June numbers fall off from May, then that optimism will come into question. May would have seen a larger pickup just due to the fact that economies were reopening.

I’m not convinced that the global economy will recover as quickly as the markets suggest. When you look at the equity markets and the rebound in the Aussie Dollar and Loonie. These are quite big moves when considering the doom and gloom ahead.

So, let’s see what happens when we begin to see June numbers…

For a look at all of today’s economic events, check out our economic calendar.

China and Hong Kong Pressures are Having Limited Knock-on Effects

The spill-over into today’s activity has been minor. The heightened tensions weighed on China and Hong Kong markets, but Japan, South Korea, Taiwan, and Indian equity markets rose.

Europe’s Dow Jones Stoxx 600 is higher for the third consecutive session, the longest streak this month. US shares are also trading higher, and the S&P 500 looks poised to rechallenge yesterday’s high, leaving yesterday’s opening gap unfilled. Benchmark bond yields are a little lower, and the US 10-year is hovering around 68 bp.

The greenback is bid against most of the major and emerging market currencies. Among the majors, the yen, the Canadian dollar, and New Zealand dollar are steady to higher, while the European complex, led by the Swiss franc, is nursing small losses. Turkey, Hungary, and South Africa led the losers among emerging market currencies.

The Chinese yuan (onshore and offshore) fell to its lowest level of the year. Gold drifted to two-week lows a little above $1700, while July WTI is consolidating in $33.50-$34.30 range as Russia seems to be balking at extending the maximum output cuts beyond next month.

Asia Pacific

President Trump is threatening “very interesting” action against China by the end of the week. Apparently, under consideration are a new set of sanctions against officials, businesses, and financial firms over the effort to crack down on dissent in Hong Kong.

There are actions the US could take, including limiting transactions and freezing assets. The US could suspend Hong Kong’s special trade privileges, but this seems potentially too disruptive for US companies and would punish Hong Kong more than China. Meanwhile, demonstrations and conflict with police have escalated in Hong Kong.

Pressure on the Hong Kong dollar is evident in the forward market. The 12-month forward points increased by almost 60 to 670. A week ago, they stood at 256. The 3-month forward points increased by almost 20 today to about 167. A week ago, they stood at 75.

Separately, the PBOC set the dollar’s reference rate at CNY7.1092, while the bank models implied CNY7.1144. However, the dollar rose to almost CNY7.1630 to approach the CNY7.1850 peak last September. The dollar rose to almost CNH7.1770 against the offshore yuan. It peaked last September near CNH7.1965. Chinese officials do not appear to cause the yuan’s weakness but are not resisting it forcefully.

Separately, China reported a 4.3% decline in April industrial profits, almost a third of the decline that the median forecasts in the Bloomberg survey anticipated and what seems like an improvement after the nearly 35% decline in Q1. However, the performance of the state-owned enterprises suggests a more complicated picture. Profits in this sector fell 46% in the January to April period, a little worse than the 45.5% decline reported in Q1.

Nevertheless, with the latest reserve requirement cuts for large banks, and additional efforts for small and medium businesses, and signs of more fiscal support coming from the National People’s Congress, China is stepping up economic and financial efforts. At the same time, Japan’s cabinet has approved a JPY117 trillion supplemental budget with JPY72.7 trillion of fiscal outlays. South Korea is expected to deliver another 25 bp rate cut tomorrow (bringing the seven-day repo rate to 50 bp).

For the sixth consecutive session, the dollar stuck on the JPY107-handle. It has not traded below JPY107.30 since May 18. It neared JPY108 yesterday but backed off. Today there are $1.7 bln in options in the JPY107.80-JPY107.90 area that expire. If that is not a sufficient cap, there is another billion-dollar option at JPY108.15 that will also be cut. The Australian dollar is in a narrow range below yesterday’s high near $0.6675. There is an option for nearly A$635 mln at $0.6650 that expires today.

Europe

The European Commission appears to be combining the German-French proposal with the other proposal by Austria, Sweden, Denmark, and the Netherlands to advance a 750 bln euro fiscal support effort. It would include 500 bln euro in grants and 250 bln euros in loans.

It seems a popular meme to see an EU bond as a step toward the mutualization of debt and a fiscal union. This seems exaggerated. There are already common obligations, such as bonds issued by the European Stabilization Mechanism and the European Investment Bank. The EU itself has issued bonds in the past.

ECB President Lagarde is laying the foundation for an increase in the central bank’s Pandemic Emergency Purchase Program next week. She cautioned today that the more mild scenario that had been considered was out of date and that the more likely scenario is the one that anticipates an 8-12% contraction this year.

The internal debate seems to be over relaxing more of the self-imposed limits. The capital key has already been diluted for PEPP, and the issue limit of 1/3 has also been waved. There does not seem to be much interest in taking rates deeper into negative territory.

There has been much discussion of the Bank of England adopting negative rates. We have understood officials to be keeping that option on the table, which may help lower UK rates, such as last week’s 3-year Gilt auction that resulted in a negative yield.

However, it does not seem to be imminent. More likely, the Bank of England will increase its bond purchases when it meets on June 18. The BOE’s chief economist, Haldane’s comments, were consistent with the idea that other policy options will be explored before negative rates.

The euro initially slipped to almost $1.0930 after stalling in front of $1.10 yesterday. However, with a running start in the European morning, the euro punched above $1.10 and above last week’s high to poke above the 200-day moving average (~$1.1015) for the first time since the end of March.

The $1.1050 area may hold some offers, but there is little chart-based resistance ahead of $1.1160-$1.1200. Sterling, on the other hand, is firm but through late in the London morning, has been unable to surpass yesterday’s high near $1.2365. The next target above there is around $1.2425.

America

The US reports the May Richmond Fed survey and the Fed’s Beige Book for ahead of next month’s FOMC meeting. Nearly every survey (diffusion indices and sentiment surveys) have shown some moderation in the weakness since in April. The improvement has also mostly been better than expected. And yesterday’s it was reported that April new home sales, which were forecast to have imploded by nearly a quarter, eked out a small (0.6%) gain.

Yes, there is little doubt that the world’s biggest economy has suffered a large hit in this quarter, but the data suggests ideas of a Q3 recovered may not be misplaced. Other data, including traffic patterns, are also pointing to a slight pick up in activity as the lockdowns ease. Canada and Mexico’s calendars are light today. Banxico issues its inflation report today, and coupled with the strength of the peso may spur speculation of another 50 bp rate cut at its next meeting.

Although Fed officials have played down the likelihood of negative rate policy in the US and the fed funds futures curve is not implying negative rates, the central bank may not be done. There is more virtual ink being devoted to the possibility of yield curve control, where the Fed would not target a certain amount of Treasuries to be bought, as it is now ($5 bln a day down from $75 bln a day at the peak) but to target another rate.

The Bank of Japan targets the 10-year yield, and the Reserve Bank of Australia targets the three-year yield. If the Fed adopts such a tool, it would more likely target a short or intermediate coupon such as something between a two- and five-year maturity. It would help steepen the curve and send a signal that rates will remain low for some time.

The Canadian dollar joined the Australian dollar in breaking out of its recent range. The US dollar fell below the lower end of its two-month range against the Canadian dollar near CAD1.3850 yesterday. The losses are being extended today. The break of CAD1.38 is important from a technical perspective as it coincided with the halfway mark of this year’s range.

The next retracement objective is near CAD1.3600. More immediately, a bid in the European morning was found near CAD1.3730. The old support near CAD1.38 now offers resistance. The greenback is also pushing below the halfway mark of this year’s range against the Mexican peso (~MXN22.15). A break of MXN22 would set the sights on the MXN21.00-MXN21.10 area. Mexico is reporting a record increase in virus cases and related fatalities. The peso’s strength largely reflects the broader risk-on mood.

For a look at all of today’s economic events, check out our economic calendar.

The ECB and Brussels Put the EUR in Focus as Geopolitics Tests Risk Sentiment

Earlier in the Day:

It was a relatively busy day on the economic calendar this morning. The Aussie Dollar and Kiwi Dollar were in action, with economic data out of China also in focus.

Away from the economic calendar, the market’s attention returned to U.S – China tensions and China’s security law for HK.

COVID-19 news and numbers did remain supportive, however, with positive vaccine news hitting the news wires in the 1st half of the week.

Looking at the latest coronavirus numbers,

On Tuesday, the number of new coronavirus cases rose by 95,878 to 5,678,282 On Monday, the number of new cases had risen by 83,824. The daily increase was higher than both Monday’s rise and 94,189 new cases from the previous Tuesday.

France, Germany, Italy, and Spain reported 1,535 new cases on Tuesday, which was up from 747 new cases on Monday. On the previous Tuesday, 2,848 new cases had been reported.

From the U.S, the total number of cases rose by 19,185 to 1,725,411 on Tuesday. On Monday, the total number of cases had risen by 19,790. On Tuesday 19th May, a total of 20,688 new cases had been reported.

For the Kiwi Dollar

The RBNZ’s Financial Stability Report was in focus in the early hours.

Salient points from the latest report included,

  • COVID-19 has led to unprecedented economic disruption, with small businesses under stress.
  • Fiscal and monetary policy has cushioned the near-term impact. These include wage subsidies, large scale asset purchases to reduce interest rates, and a record low OCR.
  • Banks are in a strong position to support the economic recovery. The Reserve Bank has adjusted policies to enable banks to keep lending.
  • Measures include:
    • Mortgage deferrals for households and small businesses.
    • Delayed implementation of planned increases to capital requirements by a minimum of 12-months.
    • Eased core funding ratio requirements.
    • Supported the Business Finance Guarantee Scheme by creating a Term Lending Facility.

The Kiwi Dollar moved from $0.61971 to $0.61984 upon release of the report. At the time of writing, the Kiwi Dollar was up by 0.11% to $0.6192.

For the Aussie Dollar

Construction Work Done fell by 1.0% in the 1st quarter, following on from a 3.0% slide in the 4th quarter. Economists had forecast a 1.5% decline.

According to the ABS,

  • Residential work done fell by 1.6%, quarter-on-quarter, and slid by 12.5% when compared with the 1st quarter of 2019.
  • Total construction work down fell by 6.5% in the 1st quarter, year-on-year.

The Aussie Dollar moved from $0.66512 to $0.66530 upon release of the figures. At the time of writing, the Aussie Dollar down by 0.11% to $0.6646.

Out of China

Industrial profit figures for April had little influence. Year-on-year, profits were down by 4.3%, following a 34.9% slump in March. Year-to-date, profits were down by 6.75%, following a 36.7% tumble in March.

The Aussie Dollar moved from $0.66512 to $0.66530 upon release of the figures.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.04% to ¥107.50 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. While there are no material stats due out of the Eurozone, the ECB and the EU Commission are in focus today.

In the early part of the European session, ECB President Lagarde is scheduled to speak. Expect any chatter on monetary policy or the economic outlook to influence. Lagarde’s speech precedes the release of the ECB’s Financial Stability Review. We will expect the review to be a key area of focus for the markets today.

With the ECB in focus early in the day, Brussels will also be in the spotlight. The European Commission is due to announce the COVID-19 Recovery Fund and EU Budget.

At the time of writing, the EUR was down by 0.10% to $1.0971.

For the Pound

It’s another quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

A lack of chatter on Brexit and the risk-on sentiment has provided the Pound with further support this week. Expect any updates on Brexit and COVID-19 to test this support, however.

At the time of writing, the Pound was down by 0.06% to $1.2327.

Across the Pond

It’s also a quiet day ahead on the U.S economic calendar. Following Tuesday’s consumer confidence figures, there are no material stats to influence later today.

A lack of stats leaves geopolitics center stage. On Tuesday, U.S President Trump stated that there would be a U.S response to China’s plans for HK by the end of the week… Measures could include sanctions on China…

The Dollar Spot Index was up by 0.14% to 99.042 at the time of writing, with the U.S – China jitters providing support.

For the Loonie

It’s a relatively quiet day on the economic calendar. Building permit figures are due out later today that will likely have a muted impact on the Loonie.

With concerns over the U.S – China relations and the prospects of sanctions on China resurfacing, we can expect the Loonie to be under pressure.

Much will depend on how Beijing will respond to any steps taken by the U.S government. The continued easing of lockdown measures across major economies, remains Loonie positive, however.

At the time of writing, the Loonie was down by 0.06% to C$1.3785 against the U.S Dollar.

USD/CAD Daily Forecast – Canadian Dollar Enjoys Major Boost

USD/CAD Video 26.05.20.

U.S. Dollar Loses Ground As Demand For Safe Haven Assets Decreases

USD/CAD has finally breached the major support level at 1.3850 and heads lower as the U.S. dollar is under pressure due to global market optimism which decreases demand for safe haven assets.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has declined to the 99 level, which is the low end of the current range.

Unexpectedly, U.S. New Home Sales increased by 0.6% month-over-month in April compared to analyst consensus which called for a decline of as much as 21.9%.

The U.S. New Home Sales data provided additional support for riskier assets like the Canadian dollar and put pressure on safe haven assets like the U.S. dollar.

Oil is holding well following the recent upside move and provides additional support to the Canadian currency.

Technical Analysis

usd cad may 26 2020

The pattern of lower highs, which I highlighted in my previous articles on USD/CAD, has finally played out, and USD/CAD has breached the major support level at 1.3850.

The move was very significant since USD/CAD started the day near the 50 EMA level at 1.3980 but then tested the 1.3800 level.

The global pressure on the U.S. dollar served as a major catalyst for this move, although I’d note that the U.S. Dollar Index is still inside the previous range between 99 and 101.

A potential rebound of the U.S. Dollar Index is a material risk factor for USD/CAD bears.

Now that USD/CAD got below the support at 1.3850, it will have to settle at these lower levels to get a chance to continue the downside trend. If this happens, USD/CAD will head towards the next material support level at 1.3750.

On the upside, the previous support at 1.3850 will turn into a material resistance level. If USD/CAD manages to get above 1.3850, it will signal a fake breakout, which would serve as a bullish catalyst.

In this scenario, USD/CAD will get significant upside momentum. The next resistance for USD/CAD is located at the 50 EMA at 1.3980 since no material levels were formed between the major support at 1.3850 and the 50 EMA.

For a look at all of today’s economic events, check out our economic calendar.

Dollar Wobbles on Reopening Hopes

The positive market mood should support appetite for risk at the expense of safe-haven assets like the Dollar and Japanese Yen which have both weakened over the past 24 hours. However, the risk-on sentiment is unlikely to last given how escalating US-China trade tensions and global growth concerns remain dominant market themes.

King Dollar was not so mighty on Tuesday, weakening against every single G10 currency thanks to vaccine optimism and reopening hopes. Focusing on the technical picture, the Dollar Index remains in a very wide range on the daily charts with support around 99.0. A strong daily close below this point may swing open the doors lower towards 98.50 and 97.80.

Euro takes advantage as Dollar weakens

The Euro wasted no time in exploiting a weaker Dollar this morning, as prices jumped to a fresh one week high above 1.0936.

Expect the EURUSD to push higher in the week ahead if the Dollar continues to weaken amid the improving market sentiment. Looking at the technical picture, the EURUSD remains in a very wide range on the daily charts with support at 1.0740 and resistance 1.1000.

While a depressed Dollar could push prices back towards 1.1000, it may take a fundamental catalyst for prices to break above this stubborn resistance. Alternatively, sustained weakness below 1.1000 could encourage a move back down to 1.0850.

USDCAD eyes 1.3850

Expect the Canadian Dollar to appreciate this week as Oil prices recover.

If the Canadian Dollar holds its ground against the Dollar, the USDCAD may sink towards 1.3850. A breakdown below this level could pave a way towards 1.3680.

Alternatively, if 1.3850 proves to be reliable support, prices may rebound back towards 1.4050.

Commodity spotlight – WTI Oil

Oil prices are positioned to push higher as economies across the globe relax lockdown measures.

However, gains will most likely be capped by escalating trade tensions and fears around slowing global growth.

Looking at the technical picture, a solid weekly close above $34 may open the doors back towards $40.

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Who Needs China? Optimism and Hope Continue to Drive Riskier Assets Northwards

Onwards and upwards the global equity markets go and the commodity currencies are joining in on the rally.

Just 6-weeks ago, the Aussie Dollar was down at sub-$0.60 levels against the Greenback.

When considering the quite dire economic environment and the grim outlook, the broad-based recovery has been a remarkable one.

The bigger question that needs to be answered, however, is whether the latest breakout is sustainable.

The Here and Now

As we have moved beyond the 1st quarter and April economic indicators, the markets have formed a clear view.

May’s private sector PMIs suggested that the economic meltdown had bottomed out in April. Consumer confidence and business confidence figures have also shown that sentiment has picked up.

There’s one clear issue with the current sentiment, however.

While the U.S and China go back at it and the global supply chain remains broken, central banks and governments will be looking for a consumer-driven economic rebound.

In fact, when the news wires report of small firms leaving stimulus monies untapped, there must be some concern over what lies ahead.

At a minimum, there needs to be a marked bounce back in labor market conditions. That then needs to translate into consumption to fuel the merry-go-round.

The Good News

While there is so much uncertainty, the good news is that new coronavirus cases continue to head downwards. In key economies at least, with Asia and the EU impressing.

It is particularly poignant when considering the fact that we are now reaching that 2-week time-lapse since governments began introducing their lockdown measures, however.

At a minimum, this trend must continue in the next 1-2 weeks and with it, a successful treatment or vaccine.

Only then can the services sector truly expect a marked shift in outlook.

The Bad News

Trump could turn on China and the EU at any time and the China ball has already started rolling.

Throw in the EU, talk of a conflict with Iran and even the U.S severing ties with the Saudis and the geopolitical landscape may change forever.

As we have seen in the past, the markets don’t do too well to change. Just look at the effects of Brexit on the UK economy and the Pound.

So, for Trump there is the hope that, while the U.S economy may have seen its worst quarter since the Great Depression, the U.S equity markets continue to line voter pockets…

Today’s Market Moves

Today, we saw optimism overshadow U.S – China tensions and a gloomy economic outlook once again.

This may well continue should we see progress being made towards a COVID-19 vaccine or treatment drug.

Near-term, however, we will need to begin considering June figures to assess the speed of the economic recovery.

Today’s consumer confidence figures may be positive from a risk perspective. This is assuming that U.S consumer confidence does rise in spite of quite dire weekly jobless claims figures.

That leaves the markets exposed to a market shock, once we begin to digest June numbers…

Let’s face it, it would be almost a dream for labor market conditions, private sector activity, consumer consumption to bounce back to the end of 2019 levels…

At the time of writing, the EUR was up by 0.60% to $1.09603. Assuming that governments and central banks continue to throw money where it’s needed, we could even see $1.13 levels.

For the Aussie Dollar and Kiwi Dollar, we could see even greater gains…

It is a long way to fall though should that optimism shift in June, however.

26/05/20 EUR/USD Daily Chart

Fear is Still on Holiday

Equity markets have rebounded strongly. Nearly all the equity markets in the Asia Pacific region rose (India was a laggard) led by an almost 3% rally in Australia, which was seen as particularly vulnerable to the Sino-American fissure.

The Nikkei is approaching its 200-day moving average as it reached the best level since March 5. Europe’s Dow Jones Stoxx 600 is up around 1% after a 1.5% gain yesterday. It is at its best level since March 10.

The S&P 500 is set to gap sharply higher, above 3000, and its 200-day moving average for the first time since March 5. Benchmark 10-year bond yields are mostly firmer (US ~70 bp), but peripheral yields in Europe are softer, which is also consistent with the risk-on mood. Germany sold a two-year bond today with a yield of minus 66 bp and saw the strongest bid-cover in 13 years.

The dollar is heavy. Among the majors, the Antipodean and Norwegian krone lead the way. The yen is least favored and is struggling to gain in the softer dollar environment. Emerging market currencies are higher, led by more than 1% gains by the Mexican peso, South African rand, and Polish zloty. Gold is consolidating at softer levels (~$1725-$1735), while oil prices continue to recover. July WTI is probing the recent highs around $34 a barrel.

Asia Pacific

The risk-on mood has not been sparked by any sign of a thaw in the US-Chinese tensions. Indeed, the PBOC set the dollar’s reference rate against the yuan a little higher than the bank models suggested (CNY7.1293 vs. CNY7.1277). It was the second successive fix that was the highest since 2008. Still, the yuan snapped a three-day decline and rose less than 0.1%.

Legislation that makes it easier to crack down on dissent pressured Hong Kong, where the stock market fell more than 5.5% before the weekend, and forward points for the Hong Kong dollar exploded. The Hang Seng stabilized yesterday and gained more than 1.8% today. The 3-month and 12-month forward points are more than double what they were a week ago, but have eased from the extreme readings before the weekend. The situation is far from resolved despite the market moves.

The focus in Japan is on the government’s second supplementary budget for nearly JPY1 trillion. It could be approved by the Cabinet as early as tomorrow and would nearly double the government’s efforts. Japan is lifting the national state of emergency.

The dollar is firm against the yen but held just short of JPY108.00 (last week’s high was ~JPY108.10). There is an option for a little more than $400 mln struck at JPY107.90 that expires today. The market looks poised to challenge the highs in North America today. Note that the 200-day moving average is found near JPY108.35, and the greenback has not traded above it since mid-April.

The Australian dollar is punching above $0.6600 and is at its best level since March 9. Its 200-day moving average is found near $0.6660. The dollar peaked against the Chinese yuan at the end of last week near CNY7.1437. It rose against the offshore yuan on the same day near CNH7.1646, just below the high set on March 19.

Europe

The EU responded to Germany’s proposal to take at least a 20% equity stake (~9 bln euros) in Lufthansa by requiring it to give up some slots at airports in Frankfurt and Munich. Meanwhile, the larger focus is on the EC’s proposal for a recovery plan now that the German-French proposal has been countered by Austria, Denmark, Sweden, and the Netherlands.

However, the basis for a compromise does appear to exist in the form of some combination of grants, loans, and guarantees and in terms of access. With the European Stabilization Mechanism and the European Investment Bank issuing bonds for which there is a collective responsibility, we are not convinced that an EU bond is a step toward mutualization of existing debt or a fiscal union. In fact, such claims do little more than antagonize the opposition.

The ECB’s Pandemic Emergency Purchase Program (PEPP) has spent a little more than a quarter of its 750 bln euro facility in the first two months. Hints from some officials suggest that this could be expanded as early as next week when the ECB meets. At the current pace, PEPP will be out of funds toward the end of Q3 or early Q4. Talk in the market is that a 250-500 bln euro expansion is possible.

The political controversy of UK’s Cummings violation of the lockdown seems to have little impact for investors. Sterling, the worst performing of the major currencies this month, is bouncing back smartly today, and while the UK stock market was closed yesterday, it is playing a little catch-up today. The benchmark 10-year Gilt yield is a few basis points higher, but faring better than German Bunds and French bonds (where the 10-year yield is now back into positive territory, albeit slightly).

The euro has bounced a full cent from yesterday’s low near $1.0875. The market has its sights on last week’s high just shy of $1.1010 and the 200-day moving average a little above there. The euro has not traded above its 200-day moving average since the end of March. Above there, the $1.1065 area corresponds to about the middle of this year’s range. Sterling is near its best level in a couple of weeks.

After finding support near $1.2160 in the past two sessions, it bounced to about $1.2325 today to toy with the 20-day moving average (~$1.2315). The short-covering rally has stretched the intraday technical readings, and it may be difficult for the North American session to extend the gains very much before some consolidation.

America

The US reports some April data (Chicago Fed’s National Economic Activity Index) and new home sales. The reports typically are not market-movers even in the best of times. Moreover, it is fully taken on board that the economy was still imploding. May data is more interesting. The Dallas Fed’s manufacturing survey and the Conference Board’s consumer confidence surveys will attract more attention and are expected to be consistent with other survey data suggesting the pace of decline is moderating. This is thought to be setting the stage for a recovery in H2.

Canada’s economic diary is light today, and Mexico is expected to confirm that Q1 GDP contracted by 1.6%. Yesterday Mexico surprised by with a nearly $3.1 bln trade April deficit. The median forecast in the Bloomberg survey was for a $2 bln trade surplus. Apparently, none of the economists surveyed expected a deficit. Exports fell by nearly 41%, and imports tumbled by 30.5%. Many economists are revising forecast for Mexico’s GDP lower toward a double-digit contraction this year.

Nevertheless, the peso is flying. It is the strongest currency here in May. The 1.75% gain today brings the month’s advance to a dramatic 9%+ gain. The US dollar is near MXN22.10, giving back about half of this year’s appreciation. A break of the MXN22.00 area would target the MXN21.30 area.

The intraday momentum indicators are stretched. The US dollar is heavy against the Canadian dollar as well. It is approaching the lower end of its two-month trading range near CAD1.3850. The next important chart point is around CAD1.3800. Here too, the greenback’s slide in Asia and Europe is leaving intraday technicals indicators stretched as North American dealers resume their posts.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the EUR and the Greenback in Focus as Risk Appetite Builds

Earlier in the Day:

It was a relatively quiet day on the economic calendar this morning. The Kiwi Dollar was in action, with April trade figures in focus.

Away from the economic calendar, the markets continued to monitor HK and the U.S reaction to China’s security law. Progress of the bill to make it more difficult for Chinese companies to list on U.S exchanges and China’s response also remains a factor.

COVID-19 news and numbers, however, remained supportive, driving market optimism and demand for riskier assets.

Looking at the latest coronavirus numbers,

On Monday, the number of new coronavirus cases rose by 83,824 to 5,582,404. On Sunday, the number of new cases had risen by 101,608. The daily increase was lower than Sunday’s rise, while higher than 82,564 new cases from the previous Monday.

France, Germany, Italy, and Spain reported just 747 new cases on Monday, which was down from 1,470 new cases on Sunday. On the previous Monday, 1,916 new cases had been reported.

From the U.S, the total number of cases rose by 19,790 to 1,706,226 on Monday. On Sunday, the total number of cases had risen by 20,190. On Monday 18th May, a total of 22,231 new cases had been reported.

For the Kiwi Dollar

On the trade front, the trade deficit narrowed from a NZ$3,460m to NZ$2,500m in April. The monthly trade surplus jumped from NZ$722m to a record NZ$1,267m.

According to NZ Stats,

  • The total value of goods exports decreased by NZ$220m (4.0%) from April 2019 to hit NZ$5.3bn.
    • A fall of NZ$211m (-69%) in the export of logs pinned back exports in April.
    • The slide in log exports, however, was offset by a NZ$202m (29%) jump in milk powder exports.
    • Kiwi fruit exports also continued to support, with a NZ$116m (37%) rise compared with April 2019.
    • Compared with April 2019, exports to Japan and the U.S increased, while exports to China, the EU, and Australia slumped.
  • Goods imports in April 2020 slid by NZ$1.1bn (-22%) to NZ$4.0bn, marking the 2nd largest decline on record.
    • A sharp slide in petroleum and products of NZ$352m (-58%) contributed to the slump in imports.
    • The imports of crude oil fell by NZ255m (77%), with petrol and diesel imports falling by NZ$97m (35%).

The Kiwi Dollar moved from $0.61011 to $0.60992 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.29% to $0.6121.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.14% to ¥107.86 against the U.S Dollar, while the Aussie Dollar was up by 0.24% to $0.6561.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Germany remains in focus, with May’s GfK Consumer Climate figures due out later this morning.

Expect some influence from the numbers, which will give some indication of whether a service sector-driven economic recovery is feasible near-term.

Global trade terms remain weak, which will likely shift focus to service sector activity near-term. Consumer confidence and consumption will be pivotal in any economic recovery.

At the time of writing, the EUR was up by 0.11% to $1.0910.

For the Pound

It’s another quiet day ahead on the economic calendar. Following Monday’s holiday, expect Brexit and COVID-19 news updates to be the key drivers on the day.

Will there be a surprise decision to agree to a Transition period extension? The current economic environment would support such a move. It would be hard to imagine voters complaining when considering the impact of the COVID-19 pandemic on the UK economy.

At the time of writing, the Pound was up by 0.14% to $1.2208, with risk sentiment providing support.

Across the Pond

It’s also a relatively busy day ahead on the U.S economic calendar. Following Monday’s public holiday, May’s consumer confidence figures are due out later today.

A marked pickup would be needed in confidence to support a more optimistic economic outlook. Weekly jobless claims figures suggest that, while an easing of lockdown measures is positive, labor market conditions will weigh.

April’s new home sales and March house prices figures also due out should have a muted impact later today.

Away from the calendar, chatter from the Oval Office and any progress with the bill to toughen rules on Chinese firms listing on U.S exchanges will also influence. There’s also any U.S response to China’s plans for the HK security law to also monitor.

The Dollar Spot Index was down by 0.18% to 99.687 at the time of writing.

For the Loonie

It’s a quiet day on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

Geopolitics and improved market sentiment towards the economic outlook will likely remain the key drivers.

Overnight BoC Governor Poloz spoke of inflation likely to take some time to return to target. Poloz added that the BoC has some flexibility in the time it takes to get inflation back to target. The comments suggested that there would be no monetary policy moves to fuel inflationary pressures.

At the time of writing, the Loonie was up by 0.17% to C$1.3961 against the U.S Dollar.

USD/CAD Daily Forecast – Stronger Oil Helps The Canadian Dollar

USD/CAD Video 25.05.20.

Quiet Action At The Beginning Of The Week

USD/CAD stays flat as trading activity is low due to Memorial Day holiday while oil holds its ground despite worries about oil demand in the upcoming months.

Oil’s comeback after the sell-off on Friday had a material impact on USD/CAD dynamics, and the pair returned back under 1.4000.

The U.S. dollar is flat against a broad basket of currencies. The U.S. Dollar Index continues to stay in the range between 99 and 101, and a move out of this range will lead to increased momentum in USD/CAD.

I’d note that the U.S. Dollar Index has been range-bound for two months and it will need material catalysts to move out of this range.

Currently, there is a balance between optimism about the reopening of the world economy and worries about the pace of the economic recovery, so the U.S. dollar cannot make a significant move in any direction.

Once this balance is broken, we’ll see more decisive action in USD/CAD.

Technical Analysis

usd cad may 25 2020

The technical picture for USD/CAD is still rather bearish since each attempt to rebound from the major support level at 1.3850 is met at a lower level. This time, the rebound from the support at 1.3850 was met near 1.4050.

This level will serve as the first material resistance level for USD/CAD. In case USD/CAD manages to settle above this level, it will head towards the next resistance at the high of the previous rebound at 1.4150.

A move above 1.4150 will be bullish for USD/CAD since the two previous rebounds were stopped at this level. In this case, traders can count on a test of the major resistance level at 1.4250.

On the support side, USD/CAD will have to deal with the major support level at 1.3850. There are no material support levels between 1.3850 and 1.4000, although some support may be seen closer to 1.3900.

USD/CAD will likely gain major downside momentum in case it settles below 1.3850. In this scenario, it could quickly get to the next support level at 1.3750.

From a big picture point of view, USD/CAD remains range-bound. It will certainly need additional catalysts to get out of the current trading range.

For a look at all of today’s economic events, check out our economic calendar.

 

Economic Data Puts the EUR in Focus, with Geopolitics and COVID-19 to also Influence

Earlier in the Day:

It was a particularly quiet day on the economic calendar this morning. There were no material stats out through the Asian session to provide any direction.

A lack of stats left the markets in the hands of chatter from the weekend and the latest COVID-19 news and numbers.

At the end of last week, news had hit the wires of China’s security law heading for Hong Kong, leading to some caution through the Asian markets.

Strong words from both the U.S and China as tensions have built tested market risk appetite early on.

While the rise in tension is certainly a concern, positive updates from COVID-19 vaccine trials provided support to riskier assets early on. The positive news was coupled with a continued downward trend in new coronavirus cases across the EU and the U.S.

Looking at the latest coronavirus numbers,

On Sunday, the number of new coronavirus cases rose by 100,455 to 5,497,427. On Saturday, the number of new cases had risen by 99,013. The daily increase was higher than both Saturday’s rise and 83,321 new cases from the previous Sunday.

France, Germany, Italy, and Spain reported 1,470 new cases on Sunday, which was down from 1,658 new cases on Wednesday. On the previous Sunday, 2,500 new cases had been reported.

From the U.S, the total number of cases rose by 20,190 to 1,686,436 on Sunday. On Saturday, the total number of cases had risen by 21,152. On Sunday 17th May, a total of 19,891 new cases had been reported.

The Majors

At the time of writing, the Japanese Yen was down by 0.01% to ¥107.65 against the U.S Dollar, with the Aussie Dollar down by 0.08% to $0.6532. The Kiwi Dollar was up by 0.01% to $0.6095.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Germany is back in focus, with 2nd estimate GDP numbers and May’s IFO Business Climate Index figures due out.

Barring a marked downward revision to the GDP numbers, the IFO figures will likely have the greatest influence.

As lockdown measures ease through May, the markets will be looking for a pickup in both business and consumer confidence.

Away from the economic calendar, expect the news wires to also influence. China and the U.S will be in focus as will any chatter from Brussels and EU member states on the COVID-19 recovery fund.

At the time of writing, the EUR was down by 0.02% to $1.0899.

For the Pound

It’s a quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction, with the UK markets closed.

A lack of stats leaves the Pound in the hands of Brexit and COVID-19 updates, both of which remain Pound negative.

While an easing in lockdown measures is positive, the continued spread of the virus across the UK has led to a delay of a more widespread opening of the economy.

With the UK’s neighbors taking more aggressive steps to ease lockdown measures, the UK economic recovery will likely trail behind those of the EU and the U.S.

At the time of writing, the Pound was up by 0.10% to $1.2185.

Across the Pond

It’s also a quiet day ahead on the U.S economic calendar, with no material stats due out to provide the Dollar with direction. The U.S markets are closed, which will leave volumes on the lighter side.

A lack of stats will leave the Dollar in the hands of any chatter from Beijing and the Oval Office and COVID-19 news…

The Dollar Spot Index was down by 0.08% to 99.787 at the time of writing.

For the Loonie

It’s a quiet day on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

Expect risk sentiment to provide direction on the day. While the tension between the U.S and China was negative, progress towards a COVID-19 vaccine was positive early on.

At the time of writing, the Loonie was up by 0.01% to C$1.3997 against the U.S Dollar.

The Week Ahead – Geopolitics, Central Banks and COVID-19 in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 57 stats in focus in the week ending 22nd May. In the week prior, 57 stats had also been in focus.

For the Dollar:

It’s a relatively busy week ahead on the economic data front.

A quiet 1st half of the week leaves May consumer confidence figures in focus on Tuesday. The markets will be looking for a pickup in confidence as the government eases lockdown measures. A continued rise in jobless claims, however, may lead to softer than anticipated numbers.

In the 2nd half of the week, April durable goods orders and weekly jobless claims will be in focus on Thursday.

While the markets may be able to stomach a slide in durable goods order, the weekly jobless claims will need to slide back considerably.

At the end of the week, April inflation figures, personal spending, and May’s Chicago PMI will also be in focus.

Barring any downward revision, we would expect 2nd estimate GDP numbers to have a muted impact on Thursday.

Other stats in the week include the April housing sector and trade data and finalized Michigan consumer sentiment figures. Expect the markets to also brush these numbers aside in the week.

Outside of the numbers, we will expect chatter from Capitol Hill and COVID-19 numbers to remain key drivers. On the monetary policy front, FOMC members will also draw more attention. At the end of the week, FED Chair Powell delivers a speech to wrap things up.

The Dollar Spot Index ended the week down by 0.54% to 99.863.

For the EUR:

It’s another busy week ahead on the economic data front.

In the 1st half of the week, key stats include German business and consumer confidence figures and 2nd estimate GDP numbers on Monday.

Barring a downward revision from 1st estimates, expect the consumer and business confidence figures to have a greater impact.

The markets will then need to look ahead to a relatively busy Friday.

Key stats include German and French retail sales figures for April and 2nd estimate GDP numbers from France.

The data is unlikely to have a material impact on the EUR, however. With the Eurozone in lockdown throughout April, the markets should be able to look beyond any dire numbers.

Over the course of the week, prelim May inflation figures are also due out but will have little influence.

For the EUR, a continued easing in lockdown measures and a downward trend in new COVID-19 cases is a must.

From the ECB, ECB President Lagarde is due to speak on Wednesday ahead of the ECB Financial stability review. Expect EUR sensitivity.

The EUR/USD ended the week up by 0.75% to $1.0901.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar.

There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will leave the Pound in the hands of Brexit and COVID-19 news updates.

We’ve seen the Pound under tremendous pressure as a result of the lack of progress on Brexit.

Boris Johnson has stated that, in spite of the lockdown, there would be no extension to the transition period. Based on progress to date, the chances of a hard Brexit have increased as a result. A change in stance by the British PM and the Pound would find support, else expect a reversal of last week’s gains.

Brexit news from the weekend was Pound negative…

The GBP/USD ended the week up by 0.47% to $1.2173.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

For the Loonie, however, the markets will need to wait until Friday for economic data.

Key stats include 1st quarter GDP numbers and April’s RMPI.

We’ve seen GDP numbers from elsewhere. Will Canada see a similar contraction? Economists think so. It may be for that very reason that BoC Governor Poloz is scheduled to speak on Tuesday and Wednesday…

Away from the calendar, the upward trend in crude oil prices and a continued easing in lockdown measures remain Loonie positives. It remains to be seen whether crude can continue on the road to recovery, however.

Downside risks do remain. These include any signs of a 2nd wave pandemic and the U.S and China moving beyond words…

The Loonie ended the week up by 0.80% to C$1.3996 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another quiet week ahead for the Aussie Dollar.

Key stats include 1st quarter construction work done and private new CAPEX on Wednesday and Thursday.

On Friday, April private sector credit figures will also be in focus.

With the economy in meltdown going into April, however, we would expect the numbers to have a muted impact.

The RBA has talked of material contraction in the 2nd quarter, so don’t expect 1st quarter and April stats to do too much damage.

Expect COVID-19 updates and any U.S or China move to influence, however.

The Aussie Dollar ended the week up by 1.93% to $0.6537.

For the Kiwi Dollar:

It’s another relatively quiet week ahead on the economic data front.  Key stats include April trade figures on Tuesday and May business confidence figures on Thursday.

The RBNZ downplayed the market optimism in its last policy statement. That should limit any material upside for the Kiwi Dollar from the stats.

While trade data has stood up well considering the economic lockdown, will business confidence see some improvement?

Concerns over global trade terms and tourism will certainly be two major issues that businesses will continue to face.

Outside of the numbers, the RBNZ Financial Stability Report Wednesday will draw attention. The Kiwi will also be sensitive to any chatter or action from Beijing and Capitol Hill.

The Kiwi Dollar ended the week up by 2.68% to $0.6094.

For the Japanese Yen:

It’s a relatively busy week ahead on the economic data front.

The markets will need to wait until Friday for the numbers, however.

Key stats include May inflation figures and April industrial production and retail sales numbers.

With the Japanese government only just lifting the COVID-19 state of emergency, April figures are likely to be dire… There shouldn’t be too many surprises, however.

May inflation figures will also have little influence on the Yen. A pickup in crude oil prices will provide support but unlikely to be material, with consumption having tanked…

Outside of the numbers, risk sentiment will continue to influence, though it may be too soon for the Dollar to give up the safe-haven mantle…

The Japanese Yen ended the week down by 0.54% to ¥107.64 against the U.S Dollar.

Out of China

It’s another quiet week ahead on the economic data front. Economic data is limited to April’s industrial profits. No one is expecting any major rebound, which leaves the markets exposed to any accelerated decline…

Ultimately, the market focus will remain on COVID-19 news and moves by Beijing and Washington amidst the latest spat.

Beijing’s plans to impose a security law on HK will also need close monitoring… U.S President Trump has promised a strong U.S response to any such move.

The Chinese Yuan ended the week down by 0.39% to CNY7.1294 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit and lockdown measures remain the key areas of focus in the week ahead.

While the Pound found much-needed support last week, a lack of progress on Brexit will be an issue.

News hit the wires over the weekend of the EU beginning to prepare for a hard Brexit. This may price out the element of hope that has continued to support the Pound.

COVID-19 news will also be of influence, as the UK government struggles to contain the spread of the virus.

U.S Politics:

Rising tensions between the U.S and China will likely be a key driver in the week ahead.

If Trump signs the Bill to target Chinese companies, expect China to target U.S companies with heavy reliance on China…

The markets will also be watching to see how the U.S responds should China formally introduce the security law for HK.

The Coronavirus:

Easing measures will continue in the week.

We’ve yet to see a marked increase in the number of COVID-19 numbers across the EU or the U.S, though concerns will linger over what lies ahead. Some comfort will be taken from the fact that China reported zero new cases on Saturday.

From the market’s perspective, there are 3 key considerations that remain:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. The downward trend in new coronavirus cases continues.
  3. Governments continue to progress with the easing of lockdown measures.

All of this will need to translate into a marked decline in jobless claims and a pickup in consumer confidence and consumption… U.S Jobless claims figures released last week were disappointing, raising some doubt over how quickly the job markets will recover.

At the time of writing, the total number of coronavirus cases stood at 5,396,972, with the U.S reporting 1,666,246 cases to-date.

The Weekly Wrap – Optimism Delivered Riskier Assets a Boost as Lockdown Measures Eased

The Stats

It was a particularly busy week on the economic calendar, in the week ending 22nd May.

A total of 57 stats were monitored, following the 61 stats from the week prior.

Of the 57 stats, 28 came in ahead forecasts, with 25 economic indicators coming up short of forecast. 2 stats were in line with forecasts in the week.

Looking at the numbers, however, just 24 of the stats reflected an upward trend from previous figures. Of the remaining 33, 31 stats reflected a deterioration from previous.

For the Greenback, it was the 1st week in the red out of 3. The U.S Dollar Spot Index fell by 0.54% to end the week at 99.863. In the previous week, the Dollar had risen by 0.67%.

COVID-19 news, geopolitics, and central bank chatter continued to be key drivers in the week.

Looking at the latest coronavirus numbers.

The total number of coronavirus cases stood at 5,297,959, rising from last Friday’s 4,617,740 total cases. Week-on-week, the total number of cases was up by 680,119, on a global basis. This was higher than the previous week’s increase of 616,865 in new cases.

In the U.S, the total rose by 163,260 to 1,645,094. In the week prior, the total number of new cases had risen by 163,330.

Across France, Germany, Italy, and Spain combined, the total number of new cases increased by 19,110 to bring total infections to 872,494. In the previous week, the total number of new cases had risen by 29,514.

Out of the U.S

It was a relatively busy week on the economic calendar. On the economic calendar, however, the main area of focus was on the weekly jobless claims figures for the week ending 15th May.

Another 2.438m jump in jobless claims in the week tested risk sentiment and weighed on the Dollar.

While May’s prelim private sector PMIs were also out in the week, the numbers had a muted impact on the Dollar.

Housing sector conditions deteriorated drastically in April, by contrast, though much of this was attributed to the lockdown.

Existing new home sales slumped by 17.8%, in spite of U.S mortgage rates sitting at record lows.

FED Chair Powell had managed market expectations going into the week, talking of a slow economic recovery.

While the FOMC minutes and the FED Chair spoke of plenty of ammunition left to support the economy, rising tension between the U.S and China pressured the Dollar.

In the week, the House of Representatives passed a Bill to oust and ban Chinese companies from U.S exchanges.

China warned of retaliation and the rhetoric failed to ease over the course of the week.

In the equity markets, the Dow rose by 3.29%, with the NASDAQ and S&P500 gaining 3.44% and 3.20% respectively.

Out of the UK

It was a busy week on the economic calendar. April employment, inflation, and retail sales figures pinned the Pound back in the week.

A slower rate of contraction across the private sector failed to support a late rally in the Pound, with geopolitics in focus.

A lack of progress on Brexit and an extended lockdown were negatives for the Pound in the week. In spite of this, support kicked on off the back of Dollar weakness and hopes of a pickup in economic activity.

In the week, the Pound rose by 0.47% to $1.2173. The FTSE100 ended the week up by 3.90%, reversing a 2.29% loss from the previous week.

Out of the Eurozone

It was also a relatively busy week economic data front, with the stats skewed to the positive for once.

ZEW’s May economic sentiment and consumer confidence figures were in focus in the 1st half of the week.

In Germany and the Eurozone, economic sentiment amongst economists improved, with consumer confidence also improving across the Eurozone in May.

May’s prelim private sector PMIs also pointed to a possible bottoming out in April, which supported the EUR.

Positive stats, progress towards a COVID-19 recovery fund and a continued easing of lockdown measures delivered the upside in the week.

From the ECB, the monetary policy meeting minutes had a muted impact. There were no surprises, with the minutes continuing to call for fiscal support from member states.

For the week, the EUR rose by 0.75% to $1.0901, reversing a 0.18% loss from the previous week.

For the European major indexes, it was a bullish week. The DAX30 rallied by 5.82%, with the CAC30 and EuroStoxx600 gaining 3.90% and 3.63% respectively.

Elsewhere

It was a particularly bullish week for the Aussie Dollar and the Kiwi Dollar, with a Friday pullback being the only day in the red.

In the week ending 22nd May, the Aussie Dollar rose by 1.93% to $0.6537, with the Kiwi Dollar up by 2.68% to $0.6094.

For the Aussie Dollar

It was a particularly quiet week for the Aussie Dollar on the economic data front.

There were no material stats to provide the Aussie Dollar with direction. That left the Aussie Dollar in the hands of market risk sentiment and the RBA meeting minutes from Tuesday.

While the minutes painted a grim picture, however, upbeat sentiment towards an easing of lockdown measures delivered the upside.

The gains came in spite of rising tensions between the U.S and China. There was also talk of positive results in early COVID-19 vaccine trials…

For the Kiwi Dollar

It was a quiet week on the economic calendar.

Key stats included 1st quarter wholesale inflation and retail sales figures.

While the numbers were skewed to the negative, there was little interest in the Q1 figures.

Rising demand for commodities from China and an easing of global lockdown measures delivered the upside.

For the Loonie

It was a busy week on the economic calendar. Economic data was limited to March and April stats, however, that garnered little attention.

As expected, inflationary pressures eased further, with consumer prices on the slide in April.

The effects of COVID-19 were evident in March retail sales figures as well, which disappointed on Friday.

Ultimately, a jump in crude oil prices in the week, fueled by news of a jump in demand and falling output delivered the upside.

The markets are expecting demand to pick up as lockdown measures ease further. This was also positive for the Loonie in the week.

A sharp pullback on Friday limited the upside, however, as the Loonie slid back from C$1.38 levels.

The Loonie rose by 0.80% to end the week at C$1.3996.

For the Japanese Yen

It was a busy week on the data front. Key stats included 1st quarter GDP and April trade figures, and May private sector PMIs.

At the end of the week, April inflation figures were also in focus. It was a mixed bag on the data front, leaving the Yen in limbo.

While the economy contracted at a slower pace, trade data going into the 2nd quarter was particularly dire. Exports tumbled by 21.9%, with imports also in decline.

Private sector PMIs delivered little confidence on Thursday, with manufacturing sector activity contracting at a faster pace.

Adding more angst was the return of deflation in April, with core consumer prices falling by 0.2% year-on-year…

In spite of a pickup in market risk appetite in the week, the Yen failed to find support.

The Japanese Yen fell by 0.54% to end the week at ¥107.64. In the week prior, the Yen had fallen by 0.38% against the U.S Dollar.

Out of China

There were no stats in the week for the markets to consider. On the monetary policy front, the PBoC also left loan prime rates unchanged, leaving geopolitical risk in focus.

There was plenty to consider in the week as a Bill to oust Chinese firms from U.S exchanges progressed.

China responded with threats of its own before the news hit the wires on Friday of a new security law heading HK’s way. The law is set to ban acts against the government in a bid to end future protests. Unsurprisingly, the threat of more protests and riots weighed heavily on risk sentiment at the end of the week…

In the week ending 22nd May, the Yuan fell by 0.39% to CNY7.1294 against the Greenback.

The CSI300 and Hang Seng ending the week down by 2.27% and by 3.64% respectively. A Friday sell-off left the pair in the red as the markets responded to the news of China’s proposal to impose the security law on HK SAR.

USD/CAD Daily Forecast – Weaker Oil Puts Pressure On Canadian Dollar

USD/CAD Video 22.05.20.

U.S. Dollar Continues To Rebound From The Major Support Level

USD/CAD got back above 1.4000 as the U.S. dollar gained ground against a broad basket of currencies while the Canadian dollar found itself under pressure due to the sell-off in the oil market.

The U.S. Dollar Index has found material support near the 99 level and has rebounded towards the 100 level. The U.S. Dollar Index continues to stay in the range between 99 and 101, and a move out of this range will likely be required for a decisive move in USD/CAD.

The demand for safe haven assets is increasing as China decided to drop its annual GDP target while U.S. – China tensions continued to increase. The recent developments in China put pressure on oil, while weaker oil contributed to weakness of the Canadian dollar.

Canada has recently reported its Retail Sales data for March. Retail Sales were down 8.4% on a year-over-year basis and declined by 10% on a month-over-month basis.

Almost all of the decline was attributed to the decrease in auto sales since Retail Sales excluding Autos were down just 0.4%.

Traders and investors should note that Canada reported data for March while most developed countries have already reported Retail Sales data for April so Canada’s numbers are not directly comparable to recent reports by other countries.

Technical Analysis

usd cad may 22 2020

 

USD/CAD continues to rebound from the strong support level at 1.3850. The pair has already managed to get above the 50 EMA at 1.3985 and the 20 EMA at 1.4010.

The next resistance for USD/CAD is located at 1.4150. The two previous rebounds in USD/CAD were stopped at this level, so it is a material obstacle on the pair’s way to the major resistance at 1.4250.

I maintain my view that USD/CAD will need additional upside catalysts to get a realistic chance to get through the resistance at 1.4250. Such catalysts could include a major sell-off in the oil market or a rush to safety in the world markets which would provide additional demand for safe haven assets like the U.S. dollar.

On the support side, USD/CAD has a major support area between 1.3850 and 1.3900 while levels that are located above this area are much weaker. From a big picture point of view, the pair stays range-bound between 1.3850 and 1.4250.

Retail Sales Put the Loonie and the Pound in Focus, as Geopolitical Risk Lingers

Earlier in the Day:

It was a relatively quiet day on the economic calendar this morning. The Kiwi Dollar and Japanese Yen were in action, with retail sales and inflation figures in focus.

Away from the economic calendar, the U.S government’s plans to ban Chinese companies from U.S Exchanges continued to be a test.

On the coronavirus front, a pickup in the number of new cases in the U.S may start to garner attention if the trend continues…

Looking at the latest coronavirus numbers,

On Thursday, the number of new coronavirus cases rose by 106,139 to 5,188,800. On Wednesday, the number of new cases had risen by 99,724. The daily increase was higher than both Wednesday’s rise and 93,671 new cases from the previous Thursday.

France, Germany, Italy, and Spain reported 1,976 new cases on Thursday, which was down from 2,856 new cases on Wednesday. On the previous Thursday, 4,230 new cases had been reported.

From the U.S, the total number of cases rose by 28,089 to 1,620,080 on Thursday. On Wednesday, the total number of cases had risen by 21,408. On Thursday, 14th May, a total of 26,397 new cases had been reported.

For the Kiwi Dollar

Retail sales fell by 0.7% in the 1st quarter, quarter-on-quarter, following a 0.70% increase in the 4th quarter. Core retail sales rose by 0.6%, quarter-on-quarter, following on from a 0.5% increase from the 4th quarter.

According to NZ Stats,

  • 8 of 15 industries had lower volume sales in the March quarter.
  • Motor vehicle and parts retailing tumbled by 7.5% to lead the way, with food and beverage services sales sliding by 6.7%.
  • Accommodation services saw a 9.3% slide, with clothing, footwear, and accessories down by 6.6%.
  • On the rise were supermarket and grocery store sales, which jumped by 8.5% to lead the way.

The Kiwi Dollar moved from $0.61236 to $0.61261 upon release of the figures. At the time of writing, the Kiwi Dollar up by 0.10% to $0.6120.

For the Japanese Yen

In April, inflationary pressures vanished, with Japan seeing an annual rate of core deflation of 0.2%. In March, the annual rate of inflation had stood at 0.6%, according to figures released by the Ministry of Internal Affairs and Communication. Economists had forecast an annual rate of core deflation of 0.1%.

Month-on-month, consumer prices fell by 0.2% in April after having stalled in March. The annual rate of inflation softened from 0.4% to 0.1%.

The Japanese Yen moved from ¥107.628 to ¥107.618 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.06% to ¥107.68 against the U.S Dollar

Elsewhere

At the time of writing, the Aussie Dollar was up by 0.05% to $0.6568.

The Day Ahead:

For the EUR

It’s a particularly quiet day ahead on the economic calendar. There are no material stats to provide the EUR with direction.

On the monetary policy front, the ECB monetary policy meeting minutes are due out later today and will draw some interest.

The markets will be looking for what the ECB has left to offer by way of support and whether there’s any tension in the camp…

Away from the economic calendar, expect the news wires to also influence. Renewed tensions between the U.S and China remains negative for the EUR, while the ongoing easing of lockdown measures are positive.

The number of new COVID-19 cases continues to sit at sub-1,000 levels across France, Germany, Italy, and Spain and it will need to stay that way.

The positive COVID-19 numbers together with the expectation of further fiscal support should limit any downside.

At the time of writing, the EUR was up by 0.02% to $1.0952.

For the Pound

It’s another relatively busy day ahead on the economic calendar. Key stats include April’s retail sales figures.

The markets are not expecting the numbers to provide the Pound with any support, with the UK in deep lockdown throughout April.

Brexit and COVID-19 news will remain the key drivers. The current week uptick will need to be accompanied by an easing in lockdown measures to support a breakout.

There have been plenty of concerns over the Government’s handling of the COVID-19 pandemic. This has limited the government’s ability to ease lockdown measures.

A combination of negative Brexit updates and extended lockdown measures will likely continue to pin back the Pound.

At the time of writing, the Pound was up by 0.07% to $1.2232.

Across the Pond

It’s a quiet day ahead on the U.S economic calendar, with no material stats due out to provide the Dollar with direction.

A lack of stats will leave the Dollar firmly in the hands of chatter from Beijing and the Oval Office…

The Dollar Spot Index was up by 0.04% to 99.405 at the time of writing.

For the Loonie

It’s a relatively busy day on the economic calendar. Key stats include March retail sales figures.

Another slide in sales would pressure the Loonie, though any moves will likely be short-lived.

The continued global easing of lockdown measures and the rise in demand for crude remain positives for the Loonie.

On the downside, however, is the risk of another full-blown U.S – China trade war that could muddy waters.

At the time of writing, the Loonie was up by 0.06% to C$1.3946 against the U.S Dollar.