April 11, 2025
- China hikes US tariffs to 125%
- Gold makes new record high
- US dollar in free-fall-CHF soars.
FX at a Glance
USDCAD: open 1.3890, overnight range 1.3874-1.3985, close 1.3984
USDCAD dropped like a rock overnight and in early NY trading. Global investors are dumping US dollars against the majors amid talk that the days of the US dollar being the world’s reserve currency are numbered. Trump wanted a weaker dollar, and he is getting it—perhaps far quicker than he wanted. Traders fear that Trump’s obsession with tariffs as a negotiating tactic will drive America into a recession.
An American recession is never good for Canada, and this time is no different. In fact, it could be worse because Trump has levied 25% tariffs on Canadian steel and aluminum and 10% tariffs on oil and potash. The US is better situated to mitigate a recession because of its diverse economy. No such luck for Canada.
Trump had a tantrum when China defied his edict of “not to retaliate.” Canada did—and has not repealed tariffs on US cars. What will happen when Trump notices?
Today’s US data includes PPI and Michigan Consumer Sentiment. The magnitude of this week’s FX moves suggests the US dollar may rally somewhat, due to profit-taking and caution ahead of the weekend.
USDCAD Technicals
The intraday USDCAD technicals are bearish with a breach of support at 1.4020. Prices are in a downtrend channel (hourly chart) between 1.3850 and 1.3970. The short-term momentum indicators show the RSI and Bollinger Bands pointing to further downside before they become extremely oversold.
Longer term, USDCAD has decisively broken the uptrend line that guided prices higher since September 2024. The move below the 61.8% Fibonacci retracement level of the September–February range suggests a test of the 78.6% level at 1.3722.
For today, USDCAD support is at 1.3820 and 1.3780. Resistance is at 1.3930 and 1.3980
Today’s Range: 1.3790-1.3890.
Chart: USDCAD 1 day
America First-Greenback Last
Global investors are voting on Trump’s economic strategy with their wallets.
They want no part of it. For decades, during times of turmoil and crisis, the US dollar was the de facto “go-to” safe haven along with the Swiss franc, Japanese yen, and gold. Not anymore. Trump has not just upset the global economic apple cart, he has chopped it into pieces, because he wants to Make America Great Again.
He is drawing on his decades of experience as a real estate developer and is treating America like it is an aging office building that needs renovating. Unfortunately, his renovations may turn it into a pile of bricks. And they no longer want to own US dollars.
The US dollar index has dropped nearly 5% since April 1. That’s massive. It took two full weeks for a similar-sized drop to occur during the Covid crisis. Meanwhile, gold (XAUUSD) has surged to a record high of 3230.29, and the Swiss franc has rallied 7.5%. US Treasuries are not the safe haven they used to be. The 10-year yield is 4.41% after reaching 4.467% yesterday.
China Hits Back
China raised its tariffs on US imports to 125% and said it would ignore any future US tariff increases, saying, “Even if the US further raises tariffs to even higher levels, it would be economically meaningless and would ultimately become a laughingstock in the history of global economics. However, should the US insist on continuing to substantially harm China’s interests, China will resolutely institute countermeasures and see them through to the end.”
China has a very powerful weapon in its economic warfare chest—it owns $760 billion (as of January 2025) of US debt. It could send US Treasuries into the abyss with just a hint that they would unload it. Selling their Treasury holdings is the nuclear option, as it would harm them as well.
Tariffs Did Not Pause Tariffs
Trump did not pause tariffs—all he did was levy a uniform 10%. And it appears he cannot go a day without firing a tariff bazooka at some country.
Last night, he decided Mexico needed to be slapped down, tweeting: “Mexico OWES Texas 1.3 million acre-feet of water under the 1944 Water Treaty, but Mexico is unfortunately violating their Treaty obligation. THAT ENDS NOW! I will make sure Mexico doesn’t violate our Treaties, and doesn’t hurt our Texas Farmers. Just last month, I halted water shipments to Tijuana until Mexico complies with the 1944 Water Treaty. My Agriculture Secretary, Brooke Rollins, is standing up for Texas Farmers, and we will keep escalating consequences, including TARIFFS and, maybe even SANCTIONS, until Mexico honors the Treaty, and GIVES TEXAS THE WATER THEY ARE OWED!”
Equity Markets Churn
The S&P 500 closed with a loss of 3.46% yesterday, but overseas traders were not as negative. Asian equity markets closed mixed, with Chinese markets posting gains while Japan’s Topix got slammed with a 2.85% loss and Australia’s ASX 200 fell 0.82%. European bourses are floundering after opening with strong gains. The German DAX is down 1.06%, the French CAC 40 is flat, and the UK FTSE 100 is up 0.87%. S&P 500 futures are up 0.86%.
EURUSD
NY Open: 1.1368 Overnight Range: 1.1192–1.1473
EURUSD surged on a wave of safe-haven demand, benefiting from its status as the second most liquid currency on the planet. However, prices have retreated from the peak due to profit-taking ahead of the weekend. EU officials are trying to be the adults in the room and so far have not matched the US 10% tariff. And in view of the US hostility, EU officials are making nice with China. German inflation data was as expected and not a factor.
GBPUSD
NY Open: 1.3113 Overnight Range: 1.2965–1.3145
GBPUSD is seeing the love. Trump has treated the UK kindly (more or less), and a slew of economic reports were far better than expected. UK February GDP rose 0.5% vs forecast 0.1%, Manufacturing Production jumped 2.2% m/m compared to -0.1% in January, and Industrial Production rose 1.5%. GBPUSD has given up some of the gains in early NY trading and sits at 1.3069.
USDJPY
NY Open: 142.68 Overnight Range: 142.07–144.55
USDJPY sank and is treading water just above its session low. Traders ignored the spike in US 10-year Treasury yields and bought yen as a safe haven due to surging global recession risks. The US and Japan are opening tariff talks, and Trump’s comment that “We pay hundreds of billions of dollars to defend them, but… they don’t pay anything,” has set the tone.
AUDUSD
NY Open: 0.6233 Overnight Range: 0.6181–0.6250
AUDUSD consolidated yesterday’s gains. Prices were underpinned by widespread US dollar selling pressure, but gains were capped due to the escalating US-China trade war.
NZDUSD
NY Open: 0.5813 Overnight Range: 0.5736–0.5834
Kiwi extended Thursday’s gains, but the rally stalled, and prices have dropped to 0.5799 in NY.
Prices saw a bit of support after Performance of Manufacturing Index data, although down 0.9%, remained in expansion territory (Actual 53.2 vs previous 54.1). BNZ’s Senior Economist Doug Steel said that “the PMI supports the notion that manufacturing GDP has increased in early 2025.”
USDMXN
NY Open: 20.4333 Overnight Range: 20.4028–20.6228
USDMXN rallied on Trump’s latest rant about Mexico stealing water from Texas farmers but gave back those gains in NY trading.
FX high, low, open (as of 6:00 am ET)
China Snapshot`
PBoC fix: 7.2087 vs exp. 7.3104 (Prev. 7.2092).
Shanghai Shenzhen 300 rises 0.41% to 3750.50
Sources: Yahoo Finance, Oanda, Investing.com, Bloomberg.
