CAD hugs the limelight as BoC issues a dovish MPS

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9 months ago

Tuesday was dominated by the market’s reaction to the first US case of the coronavirus, while Wednesday saw markets shrug off the previous day’s negativity with equity markets in Asia rallying across the board.

The Hang Seng led with a gain of just over 1.25%. FX would also see a reversal with USDJPY rallying to 110.10.

GBP would continue to rally reaching a high of 1.3152, with traders less convinced of a rate cut in the UK next week.

AUD would briefly break 0.6840 support on the back of a weaker Westpac Consumer Sentiment survey, dropping as low as 0.6827. But the overall change in risk sentiment saw a squeeze back to 0.6856 during European trade.

The DAX briefly touched a new intraday record but backed off as European markets remained wary of the coronavirus.

The US session saw Wall Street open at new historical highs but for the DJ that would be short lived. The opening 100 point gain was largely erased as Boeing stock took yet another tumble.

However, the S&P and Nasdaq remained in positive territory into the European close.

EURUSD would try a move lower but ran into solid bids at 1.1070. USDJPY would once again fail above 110. More talk of the potential spreading of the Chinese coronavirus and the word ‘pandemic’ appearing in several news reports, didn’t help.

Gold continued to consolidate between 1,550 and 1,560. The real mover and shaker on the day would be the CAD. While the Bank of Canada didn’t cut rates at their MPS, the statement was particularly dovish.

USDCAD quickly jumped from 1.3045 to 1.3152. This seemed to be enough to drag AUD and NZD lower but not enough to make new lows on the day.

As the US day progressed, action was extremely limited for FX as equities dribbled lower. At the close, the DJ was down by just 9 points with the S&P and Nasdaq fractionally higher. GBP and CAD aside the major FX pairs ended little changed from Tuesday. Not the most exciting of days.

Given CAD was the big mover on the day, let’s look at an hourly USDCAD chart. I highlighted recently how USDCAD had been stuck in a 150 point range since the beginning of the year. Well, today it broke and broke with authority as we screamed through the 1.3105 level on the way to 1.3152.

Given the ferocity of the move, you would imagine there would now be good buying interest back to what is now support at 1.3105. The next band of resistance comes in around 1.3180-85.

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