June 21, 2024

• Weak Eurozone and German PMI data pressure EURUSD.
• Canada Retail Sales rebound in April.
• US dollar starts the session mixed to slightly higher.

FX at a Glance

Source: IFXA/RP

USDCAD open 1.3691, overnight range 1.3674-1.3705, close 1.3692

USDCAD received a bit of support after both the Industrial Product Prices Index and Raw Materials Price index were weaker than expected a sign that inflation is still cooling. Retail Sales (ex-autos) rose 1.8%, but the bulk of the gains were because of hire fuel costs. The data provides a bit more support for those hoping that the BoC cuts rates again, at its July 24 meeting.

China has heavily subsidized its EV industry, but its plans to dump cheap vehicles into G-7 are not being received favorably by governments. The US is planning a 100% tariff on imports of electric vehicles while the EU wants China to form joint ventures. Canada recently invested about $30 billion in EV ventures, and Ontario Premier Doug Ford is demanding the imposition of hefty tariffs on Chinese vehicles to protect Ontario’s share of those investments. It is definitely needed because 242,673 new people arrived in Canada in Q1 2024, and those people need jobs, along with the other 750,000 that are expected to have arrived by the end of the year

Source: Statistics Canada

USDCAD has some option expiry risk today and things may get really messy around the 10:00 option expiry window. Reportedly there are $1.4 billion of 1.3655-65 strikes, $1 billion of 1.3675-80 strikes and $2.1 billion of 1.3700-20 strikes maturing.

USDCAD Technicals

The intraday technicals are bearish below 1.3730. USDCAD support in the 1.3670 area survived a couple of tests overnight but the subsequent bounces is not convincing, suggesting another downside attempt is in the cards.

The daily chart shows a minor downtrend from June 14 that remains intact below 1.3720 which targets the 1.3660 support zone.  A move below targets support congestion in the 1.3580-1.3610 area.

For today, USDCAD support is in the 1.3660 and 1.3610. Resistance is at 1.3730 and 1.3760. Today’s range is 1.3650-1.3740

Chart: USDCAD daily

Source: DailyFX

Son of a Witch

Equity and FX markets may see a bout of volatility around the 10:00 am EDT option expiry window today when somewhere between $4.8 and $5.3 trillion of index, single-stock, and ETF options expire. Bloomberg reports that “the expiring value of calls is about 11 times greater than puts, a clear demand for upside exposure.”

FX traders are heavily into the action. Reportedly, $4.2 billion of EURUSD 1.0650-60 strikes are expiring along with another $2.0 billion at 1.0600-10 and $1.17 billion at 1.0680-60.

EURUSD

EURUSD traded in a 1.0671-1.0721 range with prices pressured by soft German and Eurozone PMI Eurozone Services PMI 52.6  which missed the 53.5 forecast and was lower than the 53.2 result in May. Manufacturing PMI  dipped to 45.6 from 47.3) in May.  The EURUSD technicals are bearish with the downtrend that started in early June targeting a break of support in the 1.0600-50 area If broken, losses could extend to 1.0400.

GBPUSD

GBPUSD did not get any support from the dovish Bank of England meeting yesterday which set the stage for and August rate cut. Uncertainty ahead of the July 4 election isn’t helping sentiment.  The GBPUSD technicals are bearish below 1.2690.  However, there remains plenty of support in between 1.2600-1.2650.

USDJPY

USDJPY is drifting in a 158.67-159.12 range supported by steady US Treasury yields and the lack of any action from the Bank of Japan beyond verbal intervention. Japanese inflation rose 2.8%  y/y in May compared to April’s 2.5% result which is encouraging for those expecting that the BoJ will cut rates in July. Manufacturing PMI fell to 50.1 from 50.4 S&P analysts said “suggested momentum has stalled after 5 consecutive of growth.”

AUDUSD and NZDUSD

AUDUSD bounced in a  0.6645-0.6670 band  Weaker than expected Manufacturing PMI (actual 47.5 forecast 50.6) weighed on prices.

NZDUSD drifted in a 0.6115-0.6131 range with early gains reversed due to broad US dollar demand with Wednesday’s stronger-than-expected GDP growth all but forgotten.

USDMXN

USDMXN traded lower in a 18.3027-18.3890 range due to a mix of profit-taking, interest rate spreads, and a dose of political optimism. Incoming President Claudia Sheinbaum announced some key cabinet picks which added to USDMXN selling.

FX high, low, open (as of 6:00 am ET)

Source: Investing.com

China Snapshot

PBoC fix: 7.1196 vs exp. 7.2698 (prev. 7.1192).

Shanghai Shenzhen CSI 300 fell 0.22% to 3495.62.

Chart: USDCNY and USDCNH

Source: Investing.com