June 26, 2024
- Australia inflation spikes, AUDUSD rallies.
- EURUSD weighed down by data and dovish comments,
- US dollar rises modestly compared to Tuesday.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3672, overnight range 1.3650-1.3694, close 1.3659
USDCAD complete erased its post-CPI losses yesterday and is at the top of its overnight 13650-1.3687 range. The Statistics Canada and Bank of Canada inflation measures contain enough data to support rate cut, rate hike, or unchanged rate views. Nevertheless, most analysts believe another rate cut is a given-it’s just the timing that’s in question. Traders quickly shifted their attention to the Fed’s interest rate outlook. Governor Michelle Bowman’s comments suggest only one Fed rate cut is likely in 2024.
WTI oil prices remain firm and traded in a 80.66-81.43 range. API reported US crude inventories rose by 914,000 barrels last week, but the results did not have a lasting impact. Oil traders are betting that US demand will increase during the summer.
There are no actionable US or Canadian economic releases today which indicates a very quiet trading session with many traders on courses.
USDCAD Technicals
The intraday technicals a have a modestly bullish bias while trading above 1.3660 but prices need to break above the 1.3710-1.3720 area or else risk retreading back to 1.3660. A decisive break above 1.3720 targets 1.3770.
The longer term technicals are bullish. The USDCAD uptrend from the beginning of the year remains intact above 1.3610 with a cluster of moving average support also in the area.
For today USDCAD support is at 1.3660 and 1.3620. Resistance is at 1.3720 and 1.3750. Today’s range is 1.3660-1.3740.
Chart: USDCAD 4 hour
Source: DailyFX
Fed and Traders Do Not See Eye-to-Eye
Fed Governor Michelle Bowman said, “Inflation in the U.S. remains elevated, and I still see a number of upside inflation risks that affect my outlook.” Her colleague Lisa Cook was more wishy-washy, essentially saying that rates will go lower but “the timing of any such adjustment will depend on how economic data evolve and what they imply for the economic outlook and balance of risks.” Meanwhile, Bloomberg reports that traders in the U.S. rate options market are pricing in 300 bps of rate cuts in the next nine months.
EURUSD
EURUSD traded poorly in a 1.0681-1.0781 range amid soft data and dovish comments from ECB officials. The German Gfk Consumer Confidence Survey fell to -21.8, which was worse than the forecast and the previous data. ECB policymaker Olli Rehn predicted two more ECB rate cuts this year. He said, “If you look at market data, it implies that there would be two more rate cuts so that we would end up at 3.25% by the end of this year and, with the terminal rate, somewhere around 2.25%, 2.50%. In my view, they are reasonable expectations.”
GBPUSD
GBPUSD traded in a 1.2654-1.2694 range in an uninspired session, devoid of domestic market-moving catalysts. Traders are awaiting the end of June portfolio rebalancing flows and U.S. PCE Price Index data.
USDJPY
USDJPY rallied from 159.62 to 160.07 as traders are seemingly flipping the bird at BoJ officials and their intervention threats. Fed Governor Michelle Bowman does not seem to be inclined to cut rates any time soon, and the BoJ has no idea when they will raise rates. The BoJ spent over $62 billion in May after USDJPY touched 160.24, and officials cannot be too thrilled by the current level. Intervention could happen Friday, coinciding with month-, quarter-, and half-year-end portfolio rebalancing flows and the release of the PCE Price Index data.
AUDUSD and NZDUSD
AUDUSD rallied on the heels of a hotter-than-expected inflation report, which boosted prices from 0.6636 to 0.6689 before they eased to 0.6675 in NY trading. CPI rose 4.0% in May (forecast 3.8%, April 3.6%), and that raised the odds that the RBA will raise rates in August.
NZDUSD traded sideways in a 0.6102-0.6128 range, with downside pressure seen from AUDNZD demand.
USDMXN
USDMXN rallied yesterday then consolidated the gains in a 18.0671-18.1827 range, and prices are in the middle of that band. Mexican politics and the ever-shifting Fed outlook for interest rates are creating a lot of noise ahead of Friday’s U.S. PCE Price Index data.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1225 vs exp. 7.2587 (prev. 7.1201).
Sanghai Shenzhen CSI 300 rose 0.65% to 3480.26.
Chart: USDCNY and USDCNH
Source: Investing.com
