USDCAD open: 1.3855, overnight range 1.3840-1.3867, close 1.3844
The G-10 FX major currencies consolidated yesterday’s losses as global markets digested the barrage of verbiage from the White House and Treasury Secretary Bessent. Meanwhile USDCAD is ticking higher after Canada and the US essentially declared a trade war. Both sides will get hurt, but Canada will likely suffer more as it is a smaller, less diversified economy.
The US and Canada each claim the other demanded last-minute changes, although many media sites report it was Commerce Secretary Howard Lutnick’s last minute demands that scuppered a pending deal and they were unacceptable to Canada, so the delegation walked away from the table.
Trump was irked that Canada did not bow to America that he announced a new 50% tariff on cars trucks and auto parts beginning January 1, 2027. Ontario Premier Doug Ford told Trump to “Kiss My Ass”
Trump responded this morning at 7:00 am “The United States is giving serious consideration to changing the name of Lake Ontario to Lake America in that we don’t expect to doing much business with Ontario any longer. Thank you for your attention to this matter! President DONALD J. TRUMP
WTI oil traded in an $82-81-$85.84 and is near the bottom of the band in early NY trading. Traders shrugged off the latest US action against Iran dubbed “Operation Economic Outcast” as just more hot air in an already abnormally hot summer.
Today’s US data releases include August Consumer confidence, Housing Price Index and New Home Sales Change. It is also the last week of summer and the Jackson Hole Symposium begins Thursday which suggests traders are not very motivated.
There is no Canadian data.
USDCAD Technicals
The intraday USDCAD technicals are modestly bullish above 1.3840, due to the move above the 61.8% Fibonacci retracement level of1.3841 and the 200-day moving average at 1.3847, and a move above 1.3870 targets the 100-day moving average at 1.3897. A break above 1.3900 would extend gains to 1.3920. Failure to hold 1.3840 shifts the focus back to 1.3790, then 1.3740.
Longer term, the USDCAD downtrend from the July peak of 1.4253 is intact while prices are below the 100-day moving average at 1.3897 and the 50% Fibonacci retracement of the May-July range at 1.3921. However, the corrective rebound has gained traction. The daily RSI has climbed from deeply oversold levels to a neutral, which leaves room for further gains. A daily close above 1.3920 would suggest a deeper retracement toward 1.4000, while a rejection would confirm the rally as just another correction and reopen the downside.
For today, USDCAD support is at 1.3840 and 1.3810. Resistance is at 1.3900 and 1.3920.
Today’s expected range is 1.3810-1.3900.
FX Heat Map
FX open high low 6:00 am
Operation Outcast Fizzles
Yesterday, US Treasury Secretary Scott Bessent announced the launch of Operation Economic Outcast to great fanfare. It is a plan to bring Iran’s IRGC to its knees by totally isolating the country and it is destined to fail. The plan essentially orders every country in the world to stop dealing with Iran or face financial sanctions from America, saying “no one is above the reach of U.S. sanctions.”
China already told the Americans to pound sand, and the EU has been rather quiet. America is demanding obedience from nations that it has repeatedly shown it cannot be trusted to deal with fairly. Why would they trust them in this?
Taking Stock
Asian markets closed with Japan’s Topix gaining 0.50%, Australia’s ASX 200 rising 0.68%, while Hong Kong’s Hang Seng finished flat.
As of 7:00 am, European bourses are in the green. The German DAX is up 0.86%, the French CAC-40 has climbed 0.43% and the UK FTSE 100 is up 0.23%. S&P 500 futures have risen by 0.42%, the US 10-year yield is 4.669%, and gold is $4,639.12.
EURUSD | Range 1.1651-1.1674
EURUSD traded directionless in a narrow band as it continues to consolidate gains from last Wednesday. EURUSD selling pressure from a bout of risk aversion on the latest US sanctions on Iran was offset by German data. The German Ifo business climate index rose to 88.8 in August (previous 86.7) while current conditions improved to 88.5 from 86.5. Essentially, the data supports higher ECB rates.
GBPUSD | Range 1.3622-1.3649
GBPUSD traded sideways with prices weighed down by risk aversion sentiment stemming from the US sanctions on Iran. Support stems from previous stronger than expected UK data earlier and ongoing expectations for a BoE rate hike by year end.
USDJPY | Range 159.04-159.49
USDJPY rose in Asia then gave back the gains in Europe and in early NY trading with price action tracking US Treasury yields and oil prices. Furthermore, traders became more cautious as prices approached the 160.00 area, fearing BoJ intervention.
AUDUSD | Range 0.7138-0.7160
AUDUSD continues to consolidate its recent gains and it garnered additional support from the hawkish RBA minutes. They showed policymakers still see upside inflation risk and even discussed the possibility of a hike, but the move is being capped by softer Australian labor data and broader USD risk sentiment. Traders are looking ahead to Wednesday’s CPI numbers.
USDMXN | Range 16.9309-16.9665
USDMXN traded narrowly, but with a slightly bullish bias due to risk aversion demand for US dollars and mixed GDP data. The Mexican economy grew 1.4% q/q (forecast and previous 1.5%) and 2.1% y/y (forecast and previous 2.2%). Headline inflation rose 0.10% compared to 0.7% previously which supports Banxico’s decision to pause cutting rates.
CHINA
- PBoC Fix: Â 6.7852 vs exp. 6.7219 (prev. 6.7841)
- Shanghai Shenzhen CSI 300 fell 0.24% to 4,552.03
China is not impressed with Operation Economic Outcast. Foreign Ministry Spokesperson Lin Jian said that China’s cooperation with Iran is conducted within international law and “should not be disrupted,” while warning that “economic wars and maximum pressure are not the solution” and “will only lead to escalation and risks of spillover.
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
