May 22, 2025

USDCAD: open 1.3881, overnight range 1.3846-1.3885, close 1.3860,

USDCAD sank on the back of widespread U.S. dollar selling pressure yesterday, but it was unable to break below support in the 1.3820 area, and it opened in NY close to where it opened on Wednesday.

USDCAD direction remains at the mercy of tariff talk and developments south of the border. This week’s Canadian inflation report lifted the Bank of Canada’s key metrics above the targeted 1-3% range, which should all but guarantee that the BoC leaves rates unchanged on June 6.

WTI oil prices dropped from 61.375 to 60.38 overnight on reports that OPEC is in discussions to raise production by another 411,000 barrels/day beginning July 1.

Canadian Industrial Product Price index fell 0.8% (forecast -0.5%) while the Raw Material Price Index fell 3.0% (forecast -2.2%, previously -1.0%).

U.S. data weekly jobless claims fell 2,000 to 227,000.

USDCAD Technicals

The USDCAD technicals are bearish while trading below 1.3970, a line guarded by intraday downtrend resistance at 1.3890.  A move below 1.3840 today negates the upward pressure and targets 1.3810 then 1.3770.

The medium term technicals are negative below 1.3970 and the longer-term downtrend line at 1.4100. The momentum indicators suggest further consolidation,

For today, USDCAD support is at 1.3830 and 1.3790. Resistance is at 1.3890 and 1.4020
Today’s Range: 1.3810-1.3890

Chart: USDCAD daily

FX at a Glance

The New and Meaner Colossus

In 1883, Emma Lazarus, a wealthy New Yorker, penned the poem “The New Colossus” as a fund-raiser for the pedestal of the Statue of Liberty that sits in New York Harbour. One hundred and forty-two years later, another New Yorker was behind the officially named “One Big Beautiful Bill Act.” Essentially it cuts taxes to the tune of $5.6 trillion, which are partially funded by slashing Medicaid to save $715 billion. A more accurate name for the bill would be “One Big Deficit-Booster Bill,” as it would increase the US deficit somewhere between $2.5 and $3.5 trillion. Its “MAPA – Make America’s Poor Abscond.” Regardless, the bill has cleared the House and it is on to the Senate.

Bond Traders are Not Amused

Yesterday’s $16 billion sale of US 20-year bonds was poorly received, and that drove bond yields higher and sank stocks and the US dollar, in a move reminiscent of the UK’s Liz Truss/Kwasi Kwarteng budget that saw her dumped as Prime Minister within 49 days of taking office. Back then, Gilt traders were not impressed with unfunded tax cuts in her budget.
The 10-year Treasury yield climbed from a low of 4.427 on Tuesday to 4.61% yesterday before drifting down to 4.58% in NY. The US dollar index (DXY) has given up most of May’s gains and has fallen from a peak of 101.81 on May 12 to 99.34 yesterday.
Profit-taking in Europe has stalled the Treasury sell-off and gave the greenback a bit of a lift.

Equity Markets Slide

Asian equity indexes followed Wall Street lower led by a 0.58% drop in Japan’s Topix and a 0.45% decline in Australia’s ASX 200. Hong Kong’s Hang Seng lost 1.19%.
European bourses joined the party with the French CAC 40 index down 0.95% and the German Dax down 0.87%. S&P 500 futures are the outlier and have gained 0.15% as of 6:20 am ET. Gold (XAUUSD) saw some profit-taking and has erased all of yesterday’s gains, falling from 3345.34 to 3292.06 in NY.

EURUSD
NY Open: 1.1295, Overnight Range: 1.1291-1.1345
EURUSD is trading in NY at its session low following a mixed bag of data and reports that the EU is eager to come to trade terms with the US. German Ifo Business Climate Survey rose to 87.5 from 86.9 in April (forecast 87.4) due to a positive outlook for Germany under the new government. The news was offset by another weak Eurozone PMI report which showed Composite PMI falling from 50.4 to contraction territory at 49.5 due to a decline in the service sector. Meanwhile, the EU wants a trade deal with the Americans and issued a proposal earlier this week that includes a gradual reduction of tariffs to zero. The EURUSD technicals are bullish above 1.1170 looking for a test of 1.1450.

GBPUSD
NY Open: 1.3403, Overnight Range: 1.3393-1.3441
GBPUSD traded sideways inside yesterday’s range and is trading defensively in NY. UK PMI data was mixed to positive. According to S&P Global, business confidence rebounded and price pressures abated, helped by the tariff deal which restored some confidence.

USDJPY
NY Open: 143.47, Overnight Range: 142.81-144.40
USDJPY extended yesterday’s losses overnight but bounced into the NY open. USDJPY is under pressure due to widespread safe-haven demand for yen, a sharp rise in JGB yields, and the prospect of BoJ rate hikes. Japan doesn’t need to worry about currency manipulation threats from the US after Treasury Secretary Scott Bessent and Japanese Finance Minister Katsunobu Kato, attending the FG-7 Finance Ministers meeting in Banff, said that the current USDJPY rate reflects fundamentals.

AUDUSD
NY Open: 0.6424, Overnight Range: 0.6423-0.6459
AUDUSD trading was uninspired and inside yesterday’s range. Australian PMI data was inconclusive. S&P Global noted continued expansion in output and new orders, but growth eased to around the weakest levels in 2025.

NZDUSD
NY Open: 0.5905, Overnight Range: 0.5902-0.5947
NZDUSD traded sideways but defensively. The New Zealand budget did not have any impact on FX trading.

USDMXN
NY Open: 19.4076, Overnight Range: 19.3286-19.4087
USDMXN has been grinding lower since the middle of April but the sell-off ran out of steam in the 19.2500 area. Mexican retail sales data, released yesterday, was better than expected but profit-taking boosted prices. Nevertheless, the USDMXN downtrend is intact while it trades below 19.5550. Mexican May CPI  rose 0.09% compared to the forecast of -0.1% in the My ½ month.

China Snapshot`

PBoC fix:  7.1903 vs exp. 7.2009 (Prev. 7.1937)

Shanghai Shenzhen 300 fell 0.06% to 3913.86

FX high, low, open (as of 6:00 am ET)

Sources: Yahoo Finance, Oanda, Investing.com, Bloomberg.

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