September 18, 2024
- Fed decision day
- Today’s UK inflation data suggests unchanged BoE rates tomorrow.
- US dollar trading lower ahead of FOMC
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3586, overnight range 1.3582-1.3598, previous close 1.3598
USDCAD is largely unchanged ahead of today’s FOMC decision. A 50bps Fed rate cut should drive USDCAD toward support at 1.3440 while a 25 bp rate cut keeps the 1.3550-1.3660,range intact with an outside chance of 1.3750. The downside move is unlikely to last if the rationale for the cut is to avoid a recession, because the Canadian economy is weaker and more vulnerable.
The BoC Summary of Deliberations is released today but after Macklem opined about a possible 50 bp rate cut due downside risks to the economy on the weekend, the deliberations are stale.
It will be a “nothing-day” until 2:00 pm. US Building Permits and Canadian Foreign Portfolio Investment data will be ignored.
USDCAD technicals
The intraday USDCAD technical are unchanged from yesterday- bullish above 1.3560, looking for a break above 1.3630 to extend gains to 1.3690. A move below 1.3560 would extend losses to 1.3520, then 1.3480.
USDCAD has traded in a 1.3440-1.3760 range since the beginning of August and either side could be tested today, depending upon the Fed’s decision. However, the trend is bullish while prices are above 1.3440.
For today, USDCAD support is at 1.3540 and 1.3510. Resistance is at 1.3620 and 1.3650.
Today’s Range 1.3510-1.3610
Chart: USDCAD daily
Source: Investing.com
25 or 50 – The US Rate Cut Cycle Begins
Pundits and talking heads are in a tizzy ahead of today’s FOMC meeting. A rate cut is a given—Fed Chair Powell already said so, but the size of the cut is in question. A 25 bp rate cut would suggest that policymakers believe the economy is unfolding as expected. A 50 bp cut would suggest the Fed is behind the curve and worried about a recession. We will know at 2:00 pm EDT.
“Beep Beep BOOM”
Back in the ’80s, beepers were the iPhones of their day. Steely Dan famously begged Rikki not to lose that number, and the UK duo Count and Sinden later chimed in with “Hit me on my beeper.” Yesterday, Hezbollah terrorists learned the hard way that the Israeli Defense Force also enjoyed hits from the 80’s. Thinking they were clever, Hezbollah leaders dusted off ’80s-style pagers to avoid detection. BEEP, BEEP, BOOM—it didn’t end well. On to Plan B—smoke signals.
EURUSD
EURUSD traded with a small bid and rose from 1.1113 to 1.1140 overnight. Prices saw a bit of support following yesterday’s comments by Lithuanian Central Bank Governor and ECB policymaker Gediminas Simkus, suggesting that the likelihood of an October rate cut was “very small.” The EURUSD uptrend from the beginning of August is intact above 1.1015 and looking for a break above 1.1200 to extend gains to 1.1300.
GBPUSD
GBPUSD recovered yesterday’s losses and rallied from 1.3155 to 1.3228, where it sits in early NY trading. The gains were fueled by higher-than-expected Core-CPI, which rose 3.6% y/y compared to the 3.5% forecast and 3.3% previously. The Retail Price Index rose 0.6% m/m in August (forecast 0.5%, previous 0.1%). The data essentially guaranteed that the Bank of England would leave rates unchanged at tomorrow’s meeting.
USDJPY
USDJPY bounced from 140.32 yesterday to 142.37 overnight, then retreated to 141.64 by today’s NY open. The price action is just noise ahead of the FOMC decision. The short- and medium-term technicals remain bearish and target 137.00 then 131.00 respectively. Japan elects a new Prime Minister on October 1.
AUDUSD and NZDUSD
AUDUSD inched higher in a 0.6750-0.6785 range, supported by general US dollar weakness ahead of today’s FOMC meeting. Westpac leading index, which tracks nine gauges of economic activity including share prices and telephone installations, was -0.1% m/m compared to -0.04% in July.
NZDUSD rose from 0.6183 to 0.6226 with third-tier better-than-expected consumer confidence data and broad-based US dollar selling pressure supporting prices.
USDMXN
USDMXN is near the bottom of its overnight 19.0796-19.1575 range and is sitting just above the uptrend line from the end of May at 18.9700. A break below this line, which would occur on a Fed rate cut of 50 bps, targets 18.1400.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.0870 vs exp. 7.0828 (prev. 7.1030).
Shanghai Shenzhen CS! 300 rose 0.37% to 3171.01
Chart: USDCNY and USDCNH
Source: Investing.com
