USDCAD open: 1.3936, overnight range 1.3918-1.3935. close 1.3925
USDCAD continues to consolidate losses following Friday’s robust Canadian employment report and the weak US nonfarm payrolls data. The US numbers reduced the odds for a September Fed rate hike which fueled the selling. CAD/US interest rate differentials narrowed which also weighed on the currency pair.
Oil traders are eternal optimists. Shipping is attacked in the Red Sea and the Americans are firing on containers ships heading to Iran in the Sea of Oman. The Strait of Hormuz remains closed, and Iran is in no hurry to bow before Trump. Despite that WTI slipped from its Aia peak of 84.34 to 82.15 before climbing to 83.11 in NY. Yesterday, API reported a 9.07 millian barrel increase in US crude inventories.
USDCAD Technicals
The intraday USDCAD technicals are bearish below 1.3960 and looking for a break below 1.3920, which is also the 100-day moving average to extend losses toward 1.3870. A move above 1.3960 targets 1.3990.
Longer term, a break below the 100-day moving average at 1.3920 opens the door to a drop to the 200-day moving average at 1.3856. Below that, the 0.618 Fibonacci retracement of the 2026 range, at 1.3781 becomes the next support, and a break there opens the door to 1.3656, the 0.786 retracement. USDCAD selling is approaching oversold territory but has not reached extreme levels.
For today, USDCAD support is at 1.3920 and 1.3870. Resistance is at 1.3960 and 1.3990.
Today’s expected range is 1.3870-1.3970
FX Heat Map
FX open high low 6:00 am
Inflation Hists the Mark
Today’s US inflation data came in as expected with Headline CPI rising 3.4% y/y and Core-CPI rising 2.5% y/y. Both prints were a tick below the June results.
The inflation results were rather benign and provide little reason for the Fed to accelerate tightening but not enough to eliminate September hike speculation. With payrolls weakening sharply and core inflation holding at 2.5%, the data still tilt toward a Fed pause, leaving the dollar vulnerable if rate-hike expectations continue to fade.
Mid East Tensions Rise
The US fired on a ship supposedly heading to Iran while Houthis attacked a container ship in the Red Sea and killed four crew members. Trump still claims that the US controls the Strait of Hormuz, but Iran’s Secretary of the Supreme Security Council said it would remain closed until the US accepts Iran’s conditions.
Gold (XAUUSD) prices rallied from $4,030.33 on August 3 to reach $4,424.02 overnight, supported by the downgraded risk for Fed rate hikes and safe-haven demand due to Trump’s war.
Taking Stock
In Asia, Japan’s Topix rose 0.94%, while Australia’s ASX 200 fell 0.45% and Hong Kong’s Hang Seng index lost 0.83%.
As of 6:55 am, the German DAX is up 0.52%, while the UK FTSE 100 and the French CAC 40 are flat. S&P 500 futures have gained 0.28%, the US 10-year Treasury yield is 4.672%, the DXY is 99.83 and gold is 4,411.20.
EURUSD | Range 1.1532-1.1562
EURUSD was adrift. The single currency barely budged after German Harmonized Consumer Price Index data (actual 0.9% m/m and 2.8% y/y) but squeezed higher post-US CPI. Even so, the topside is limited due to higher oil prices from escalating tensions with Iran and the US.
GBPUSD | Range 1.3502-1.3544
GBPUSD inched higher in an uneventful session and extended the gains after todays US data. Traders are cautious ahead of key UK data on Thursday. That’s when GDP, Industrial Production, and Manufacturing Production numbers for June are released.
USDJPY | Range 158.61-159.46
USDJPY traded sideways in Asia then dropped to the session low just before NY opened. Bloomberg is reporting that US Treasury Secretary Scott Bessent and Japan Prime Minister Sanae Takaichi are at odds over monetary policy. To no one’s surprise, Bessent thinks that America knows best and wants Japan to raise rates. Ms Takaichi does not want to hike rates too high or too fast. She should just tell Bessent to go home and finish screwing up America before telling her what to do.
AUDUSD | Range 0.7054-0.7089
AUDUSD had an uneventful session but added to gains after todays US inflation numbers. Prices continue to be underpinned by the “hawkish” hold at this week’s RBA meeting because of comments that if inflation rises, rate hikes would follow.
USDMXN | Range 17.0157-17.0898
USDMXN extended yesterday’s losses overnight and again after the American CPI data. The losses have been driven by the latest Banxico decision to leave rates unchanged at 6.5% and by speculation for a benign US inflation reading today, which would reduce the risk of a Fed rate hike in September. Prices were also underpinned by yesterday’s 1.7% y/y increase in industrial output (previous -0.7%).
CHINA
- PBoC Fix: 6.7882 vs exp. 6.7430 (prev. 6.7900)
- Shanghai Shenzhen CSI 300 rose 0.58% to 4,690.92
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
