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SUMMARY: USDCAD New 6-Year Lows, Bounces Ahead of 1.20 Support

FOREX
  • Buoyant commodities helped lift the Canadian dollar to six-year highs against the greenback on Tuesday. USDCAD printed a fresh low at 1.2007, however, the psychological 1.20 support barrier proved a step too far. The pair squeezed 0.5% as the US dollar regained some poise in the latter half of the session.
  • In similar fashion GBPUSD managed to break to new 2021 highs with 1.4250 capping the price action during European trade. Sterling proceeded to be the worst performing G10 currency, losing 0.4% as of writing. A lack of follow through after the February high was breached left fresh longs susceptible to an unwind, which was prompted by a small miss in the manufacturing PMI data as well as fresh Covid concerns.
    • Media speculation is escalating that the final stage of unwinding COVID-19 restrictions in England could be delayed from the intended date of 21 June due to a rise in new infections and a very small uptick in hospitalisations from the virus.
  • China FX is softer for a second session by around 0.2%, snapping the extended winning streak that pressured USD/CNY to its lowest levels since 2018. Markets continue to react to the PBoC's policy tweak on Monday, in which they raised the FX RRR to 7% from 5%.
    • Despite the statement on Monday morning, the DTCC has tracked close to $7bln in USD/CNY options trades, the bulk of which have been USD/CNY puts (with an average strike of 6.3845). USD/CNY put strikes at 6.25 and 6.30 have also garnered significant focus, with close to $1.5bln in notional trading across both strikes.
  • Broadly the US dollar has lacked direction following the US holiday, exactly unchanged on the day. The better performers include the Swedish Krona and the Australian Dollar, lifted by the strong commodity complex.
  • Wednesday's docket includes Australian GDP, German Retail Sales and Spanish Unemployment before a quiet US session headlined by the Fed's Beige Book.
Energy BulletsCommodities
Energy BulletsCommodities

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