USDCAD open: 1.3766, overnight range 1.3761-1.3813, close 1.3811
USDCAD plunged yesterday, coinciding with Trump’s claim of a trade deal with Canada, but the real catalyst was Bessent’s decision to intervene in the US long Treasury market. Prices remain near the overnight low in early NY trading.
Trump and Trade Rep Greer are touting the “tentative” trade deal and saying how American farmers will be thrilled. Greer said “We feel confident that we’ve reached an agreement that will not only continue to protect American workers, American jobs, American supply chains, but really strengthen the North American economy.”
The Canadians have been silent. Carney is asking the Premiers to restock American alcohol. And they might. However, the old adage about leading a horse to water but you can’t make him drink is applicable. Many Canadians are thoroughly irked at the US administration and may continue to ignore anything “Made in America.”
WIT oil prices have inched higher, rising from 84.25 to 87.54 in NY doe to Iran-US war escalation fears after Trump’s latest tweet. “today, I am announcing the MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST ANY COUNTRY! This will be Economic Warfare and Isolation on an unprecedented scale. ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences.”
Today US jobless claims were at tad better than forecast rising just 206,000, compared to the forecast of 210,000 and 209,000 last week. The Philadelphia Fed Manufacturing Survey was 47.4 (forecast 25, previous 41.4) but both data points are overshadowed by the fall-out from Bessent’s Treasury intervention.
Canadian data includes Industrial Product Prices rose 0.6% m/m in June while Raw Materials Prices fell 2.2% m/m.
USDCAD Technicals
The intraday USDCAD technicals are bearish while prices trade below the downtrend line from the June peak at 1.3990, and are looking for a break below 1.3750 to extend losses toward support at 1.3720. A move above 1.3810 targets 1.3835.
Longer term, USDCAD is trading below the 100-day moving average at 1.3917 and has broken below the 200-day moving average at 1.3850, which now reverts to resistance. The pair is pressing against the bottom of the Bollinger band at 1.3759, and with the daily RSI deeply oversold at 12, the risk of a corrective bounce is rising even though the trend is lower.
In the bigger picture, the decline from the June peak of 1.4248 has retraced beyond the 61.8% Fibonacci level of the May-June rally at 1.3833, shifting the focus to the 78.6% level at 1.3720. A decisive break below 1.3720 would suggest a full retracement to the May low of 1.3570.
For today, USDCAD support is at 1.3750 and 1.3720. Resistance is at 1.3810 and 1.3835.
Today’s expected range is 1.3720-1.3810.
FX Heat Map
FX open high low 6:00 am
Bessent Tanks Greenback
Treasury Secretary Bessent’s decision to inject himself into the Fed’s interest rate debate torpedoed the US dollar. Bessent announced he was doubling the size of the US long-bond buybacks to $4.0 billion from $2.0 billion, yesterday and the US 30-year bond plunged nearly 14 bps intraday. His objective was to stem the rise in US borrowing costs and for the past 24 hours, he was successful.
Bessent’s actions had the added benefit of weakening the US dollar which is an objective for the Trump administration. The US dollar index (DXY) dropped from 99.57 yesterday to 98.60 today before moving back to 98.82
Taking Stock
Asian markets closed on a positive note. Hong Kong’s Hang Seng gained 0.80%, Japan’s Topix rose 1.18% and Australia’s ASX 200 climbed 0.33%.
As of 5:30 am PT, European bourses are in the red. The German DAX is down 0.42%, the French CAC-40 has lost 0.34% and the UK FTSE 100 is down 0.31%. S&P 500 futures are flat, the US 10-year yield has dipped to 4.679%, and gold is $4,484.69.
EURUSD | Range 1.1670-1.1711
EURUSD rallied hard following Bessent’s bond market intervention, rising from 1.1602 to close at 1.1680 in NY, then extended the gains in a more subdued manner overnight. The single currency got a bit of support from today’s German PPI numbers which showed prices rising at the fastest pace in more than three years, which supports an ECB rate hike. EURUSD technicals are targeting 1.1800 while above 1.1680.
GBPUSD | Range 1.3523-1.3566
GBPUSD got a lift after the Bessent bond action and is sitting near the top of its overnight range in early NY trading. Sterling remains underpinned by the hotter-than-expected inflation read earlier this week. The intraday technicals are bullish above 1.3520 but face strong resistance in the 1.3670 area which has capped gains since February.
USDJPY | Range 158.03-158.73
USDJPY is consolidating its post-Bessent bond intervention losses, but the wider July trade deficit of JPY 634.5 billion and surging energy import costs put a short term floor under the currency pair.
AUDUSD | Range 0.7103-0.7133
AUDUSD rallied with the broad US dollar weakness and consolidated the gains overnight. Bullish sentiment was not deterred even by a weaker than expected employment report (actual -15,800, forecast 15,000, previous 80,200) and a jobless rate rising to its highest since 2021 (actual 4.5%). Prices continue to be supported by the RBA’s hawkish bias.
USDMXN | Range 16.9429-16.9699
USDMXN traded quietly just above a 26-month low. Broad US dollar weakness with the prospect of lower US rates while Banxico leaves monetary policy on hold is weighing on prices. The minutes from the Banxico monetary policy meeting on August 5 are due today.
CHINA
- PBoC Fix: 6.7808 vs exp. 6.7196 (prev. 6.7854)
- Shanghai Shenzhen CSI 300 fell rose 0.09% to 4,592.75
PBoC Loan Prime Rate (LPR) 1-year unchanged at 3.0%, 5-year unchanged at 3.5%.
The PBoC fixed USDCNY 612 bps higher than Reuters estimate to signal policymakers were actively working to slow the pace of the yuan rally.
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
