February 4, 2025
- Canada-México trade war delayed
- US/China trade war heats up
- USD churns on Trump’s every utterance
FX at a Glance
USDCAD open 1.4408 overnight range 1.4387-1.4503 close 1.4427
USDCAD traders have been shaken, stirred, and then puréed in the past 24 hours, with Donald Trump as the mixologist. The yellow-haired geriatric who mocked Joe Biden incessantly for being “sleepy,” weak, and “mentally shot” is exhibiting similar characteristics, although he appears more robust. That may explain yesterday’s Canada trade war flip-flop.
Trump went from declaring Canada a major source of fentanyl supply to the US (actually 43 pounds in 2024) and a major source of illegal immigrants to no longer being a source of fentanyl and having secure borders.
The FX reaction was fast and furious. USDCAD surged from 1.4375 to 1.4795 when tariffs were supposed to go into effect, only to drop right back to 1.4375 after Trump delayed them.
So what changed? Trump is thrilled that Canada will implement “their $1.3 billion Border Plan” with nearly 10,000 front-line personnel that are, or will be, working on protecting the border. Bloomberg’s John Arthurs points out that the Canadian Border Services Agency only has 8,500 front-line employees. As for fentanyl, 42 pounds wouldn’t be enough for a small White House cocktail party.
The on/off trade war, which the US administration is now spinning as a misunderstanding (it was a war on drugs, not trade), has set US diplomatic relations back to the Stone Age.
USDCAD traders are now watching to see how Trump’s trade war with China unfolds while looking ahead to Friday’s US and Canadian employment reports.
USDCAD Technicals
The intraday USDCAD technicals are bearish while prices are trading below 1.4480, with a break below 1.4405 suggesting further losses to 1.4370, then 1.4330. A topside break suggests a retest of 1.4550 resistance.
Longer term, ignoring the past 24 hour price action suggests USDCAD is happily ensconced in the 1.4270-1.4550 band that has contained price action since the middle of December. That is likely to continue to be the case.
For today, USDCAD support is 1.4405 and 1.4370. Resistance is 1.4460 and 1.4510
Today’s Range: 1.4410-1.4490 Chart: USDCAD daily
China Fights Back
It may be the final day of Lunar New Year festivities in China, but Beijing officials were not celebrating. They responded to Trump’s 10% tariff with tariffs on about $15 billion worth of US goods. It is viewed as a mild response ahead of increased US/China discussions. However, they launched an anti-trust probe on Google. The move unsettled markets, but it did not have the same drama as the Canada/Mexico tariff comedy.
EURUSD
NY Open: 1.0326
Overnight Range: 1.0272-1.0351
EURUSD failed to recover all of its trade war losses despite yesterday’s slightly higher-than-expected eurozone flash CPI data. The gains may also have been limited because the EU is squarely in Trump’s tariff crosshairs.
GBPUSD
NY Open: 1.2418
Overnight Range: 1.2380-1.2454
GBPUSD is almost back to where it started before the trade war drama. GBPUSD is also supported because it has a limited trade exposure to the US. Furthermore, the UK Prime Minister met with EU officials in a sign that he wants to improve relations with the bloc.
USDJPY
NY Open: 155.29
Overnight Range: 154.70-155.52
USDJPY has recouped most of its “safe-haven” demand losses after global trade war risks diminished. US jobs data and the outlook for interest rates are in focus, especially after Chicago Fed President Austan Goolsbee’s comments suggesting “uncertainties necessitate the Fed being cautious.”
AUDUSD
NY Open: 0.6215
Overnight Range: 0.6170-0.6234
AUDUSD filled yesterday’s gap as trade risks abated. China did its bit to avoid inflaming trade tensions with its limited US tariff retaliation. Australia PMI data is on tap tomorrow, but US-centric events and data will continue to be the focus.
NZDUSD
NY Open: 0.5612
Overnight Range: 0.5582-0.5641
NZDUSD recovered almost all of yesterday’s losses as risk sentiment improved when China toned down its retaliation to Trump’s tariff increase. New Zealand employment data is due tomorrow, and the unemployment rate is expected to increase to 5.1% from 4.8%.
USDMXN
NY Open: 20.4028
Overnight Range: 20.3156-20.4839
“Plop, Plop, Fizz, Fizz-Oh what a relief it is?” The old Alka Seltzer tag-line is appropriate for USDMXN trading. The on-and-then-off trade war, at least for another month, shifts the focus to Banxico rate cuts and the Fed.
FX high, low, open (as of 6:00 am ET)
China Snapshot
Closed Lunar New Years
PBoC Fix: 7.1698 (prev. 7.1705) as of January 27, 2025
Shanghai Shenzhen CSI 300 rose 0.41% to 3817.08-close January 27
Chart: USDCNH-Hourly
Sources: Yahoo Finance, Oanda, Investing.com,
