May 8, 2025
USDCAD: open USDCAD: open 1.3884, overnight range 1.3813-1.3890, close 1.3841
USDCAD rallied yesterday after the FOMC decision to leave rates unchanged and Powell’s comments that the Fed can wait to see how the tariffs impact the US economy. The Fed in “Park” contrasts the Bank of Canada’s outlook which is dovish but still in “Low” gear.
USDCAD is also underpinned by falling CAD/US 10-year interest rate spreads which have dropped to -120.3 today from -115.4 yesterday and -101.6 at the end of April.
WTI dropped from 59.20 to 57.75 before recovering all the losses in early NY trading. Expectations that Opec will continue to accelerate its production cut reversal, and the ongoing risk of a global economic slowdown suggest gains are limited. The short term technicals are bearish while prices are below 62.50.
Bank of Canada Governor Tiff Macklem will hold a press conference to discuss the Financial Stability report today at 10:00 ET.
Today’s US data includes weekly jobless claims and wholesale inventories.
USDCAD Technicals
The intraday USDCAD technicals turned bullish with the break above 1.3825 and has set a target on the 1.3920 and 1.4020 levels. The bullish bias should remain intact while prices are above 1.3810.
The medium-term technicals are bearish while prices are below the 200-day moving average (1.4011)
For today, USDCAD support is at 1.3820 and 1.3790. Resistance is at 1.3920 and 1.3960.
Today’s Range: 1.3720-1.3820
Chart: USDCAD daily
FX at a Glance
Fed Hits the Snooze Button
The FOMC left interest rates unchanged and Fed Chair Jerome Powell said that policymakers were in no rush to cut interest rates. More importantly, the Fed broached the subject of “stagflation” when it noted in the statement “The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.” Equity traders ignored the comment, but the US dollar has caught a bid.
𝐀 𝐁𝐈𝐆 𝐀𝐍𝐍𝐎𝐔𝐍𝐂𝐄𝐌𝐄𝐍𝐓—𝐂𝐎𝐌𝐈𝐍𝐆 𝐒𝐎𝐎𝐍!
The above headline is what Trump tweeted above a photo of his Carney meeting. As usual, the announcement won’t live up to its billing. His “Big Announcement” is a trade deal with America’s #7 ranked trading partner, the UK. Reportedly, the US will reduce the 25% tariffs on steel and autos while in return the UK will cut tariffs on US cars, cut its digital tax and put an end to the tax on tea. Nothing was said about the baseline 10% tariff.
The reality is this is not even close to a deal—it’s a face-saving tweak by the US administration in a desperate attempt to show progress. Furthermore, Trump has proved over and over that an agreement or treaty with America is only valid until Trump decides he doesn’t like it and whips out an Executive Order.
India/Pakistan Could Be the Next Vietnam War
Tensions between nuclear-armed India and Pakistan have boiled over into missile strikes and drone attacks. For now, it is just a regional conflict, although it affects 1.6 billion people. However, lurking in the weeds is the US who are backing India and China who supports Pakistan. During the Vietnam war, the US supported South Vietnam and China backed the Viet Cong. And the US lost that war.
Global Equity Indexes Climb
Wall Street appeared satisfied with the Fed decision and the major indices closed with modest gains. That sentiment continued in Asia. Australia’s ASX 200 gained 0.16% and Japan’s Topix rose 0.09%. Trump’s UK trade tweak boosted risk sentiment in Europe and the German Dax is trading 1.22% higher while the French CAC 40 is up 1.04%. S&P 500 futures have risen 1.11% (as of 6:15 am) while the 10-year Treasury yield is 4.308%.
EURUSD
NY Open: 1.1282, Overnight Range: 1.1271-1.1336
EURUSD traded higher in Asia then erased those gains in Europe and opened in NY near the low. The single currency is trading defensively due to the dovish outlook for the ECB and the prospect of unchanged US rates, for longer. Traders are also awaiting the “Big Announcement” and hoping to see evidence that Trump’s global trade war may end soon. It will if “soon” is defined as November 2028.
GBPUSD
NY Open: 1.3295, Overnight Range: 1.3261-1.3357
GBPUSD traded lower into the Bank of England decision time then popped from 1.3266 to 1.3317 after the BoE cut rates by 25 bp to 4.25%. The vote was a 5-2-2 split. Two members wanted a 50 bp rate cut while another 2 opted for no change. The BoE downgraded its 2025 inflation forecast saying inflation will peak at 3.25% rather than 3.7% previously. GBPUSD downside may be limited depending upon how the UK/US trade tweak is received.
USDJPY
NY Open: 144.72, Overnight Range: 143.45-145.00
USDJPY rallied steadily overnight but backed off 145.00 resistance and is at 144.68 in NY. Trump’s “Big Announcement” is sparking hopes for an overall thaw in global trade tensions and improved odds for a China-US trade deal, which has led to a bit of “safe haven” trade unwinding. The BOJ is still expected to raise interest rates which should limit gains.
AUDUSD
NY Open: 0.6411, Overnight Range: 0.6403-0.6465
AUDUSD rallied in Asia then fell sharply in Europe before trying to recover some of the losses in early NY trading. The price action is choppy because of the risks of further RBA rate cuts while the Fed remains sidelined.
NZDUSD
NY Open: 0.5920, Overnight Range: 0.5915-0.5975
NZDUSD is the worst-performing G-10 currency since yesterday’s NY open due to divergent RBNZ and Fed monetary policy. However, hopes for progress in the US/China trade war may limit losses.
USDMXN
NY Open: 19.6005, Overnight Range: 19.5613-19.6233
USDMXN traded choppily but has a modest bearish bias. Mexican first half of the month core inflation rose 0.49%, which was higher than the 0.43% previously. USDMXN extended its overnight losses as the inflation data may temper Banxico’ s enthusiasm to trim rates at the next meeting.
China Snapshot`
PBoC fix: 7.2005 vs exp. 7.2114 (Prev. 7.2008).
Shanghai Shenzhen 300 rose 0.56% to 3852.90
FX high, low, open (as of 6:00 am ET)
Sources: Yahoo Finance, Oanda, Investing.com, Bloomberg.
