USDCAD open: 1.3869 overnight range 1.3845-1.3888, close 1.3854
USDCAD came under pressure yesterday from broad-based US dollar selling, largely due to month end portfolio rebalancing flows. It has drifted higher from its Asian low into the NY opening this morning,
Canadians are rather irked at the Trump and his administration’s taunts and disparaging remarks about Canada. That’s fair, but as Brian Lilly wrote in the Toronto Sun yesterday, those taunts are aimed for Michigan voters. His tariffs threaten Michigan’s $70 billion Ontario/Michigan trade. Meanwhile, Carney won three by-elections overnight, reinforcing his majority government.
WTI oil prices rose from $86.16 to $88.11 due to the Iran and US escalation despite some conciliatory words from Iran’s president.
USDCAD Technicals
The USDCAD technicals are unchanged from yesterday. They are bullish while trading above 1.3840 and looking for a decisive break above the 1.3910-20 area to extend gains to the 1.3960-1.3980 zone.
Longer term, USDCAD is bearish below 1.3970, a level guarded by resistance in the 1.3900-20 zone and the 100-day moving average at 1.3916. That resistance band has capped every recovery attempt since the July high near 1.4245, and until it gives way the broader corrective move stays intact, with scope to revisit the 61.8 percent retracement near 1.3770 and, in a deeper setback, the 1.3480 low.
For today, USDCAD support is at 1.3840 and 1.3820. Resistance is at 1.3910 and 1.3940,
Today’s range is 1.3840-1.3920.
FX Heat Map
FX open high low 6:00 am
Trump/Bessent Drive Global Bond Yields Higher
Trump and Treasury Secretary Bessent have managed to drive global bond yields to multi-decade highs in their failed effort to Make America Great Again. Trump started a war with Iran. He secured a military victory but lost the economic one. Iran still controls the Strait of Hormuz and oil prices are rising. The prolonged war and its disruption of oil supllies has stoked inflation world wide and bond traders have taken notice. They have driven Bond yields to multi-decade highs around the world.
Bessents’s credibility took another hit when he invited Russia to the G20 and banned reporters from the WSJ and Bloomberg. In Bessent’s world, Russia is the good guy and Canada is the enemy.
U.S. Data
The ISM Manufacturing PMI and all its components like the Manufacturing prices paid and employment index along with the July JOLTS job openings data, will be watched more closely following Fed Chair Warsh’s hawkish pivot at Jackson Hole. However, it is still the last week of summer vacation for many so any market impact may be muted.
Taking Stock
Asian equity markets closed in the red except for Japan’s Topix, which squeezed out a 0.62% gain. The Hang Seng lost 0.93% while Australia’s ASX dropped 0.10%.
As of 535 am PT, European bourses are in negative territory. The German Dax is down 0.92%, the UK FTSE 100 has lost 0.54% and the French CAC 40 is down 0.21%. S&P 500 futures are down 0.64%, the 10-year Treasury yield is 4.787%, the DXY is 99.61 and Gold is $4,362.96.
EURUSD | Range 1.1588-1.1625
EURUSD gave back yesterday’s gains, which were partly due to month end rebalancing flows, and retreated overnight due to fears of higher inflation and rising bond yields. The 10-year German bund yield is at a 10-year high of 3.36%, fueled by Trump’s Iran war disruption oil and surging debt supply. Eurozone Harmonized Index of Consumer Prices (HICP) rose 3.3%y/y in August, as expected, but well above the ECB inflation target.
GBPUSD | Range 1.3529-1.3560
Sterling traded narrowly but defensively overnight. Manufacturing PMI improved to 51.7 (forecast 51.5, July 51.5), but the results were overshadowed by surging Gilt yields, which at 5.236% are at the highest level seen since 2008. Rising crude prices are exacerbating the problem.
USDJPY | Range 159.64-160.18
USDJPY has clawed back most of yesterday’s month end rebalancing losses due to rising oil prices and a downgraded threat of US and BoJ FX intervention. Bessent, probably still feeling the sting from his botched USDJPY intervention ploy, is now offering the Japanese authorities advice on how to manage their economy, which includes less fiscal stimulation and higher rates. Japanese authorities were heard to mutter something like, “gee Scott, you are not doing such a good job with your economy.”
AUDUSD | Range 0.7139-0.7181
AUDUSD fell under pressure as Fed Chair Warsh’s surprise hawkish pivot caught traders off guard. While the market had already priced in the RBA’s tightening bias, the unexpected shift in US rate expectations forced a rapid recalibration.
USDMXN | Range 16.9872-17.0215
USDMXN held on to yesterday’s gains. Traders are torn between peso demand from rising crude prices and peso selling from rising risk aversion. The rally in US Treasury yields is also weighing on USDMXN.
CHINA
- PBoC Fix: Â 6.7809 vs exp. 6.7170 (prev. 6.7828).
- Shanghai Shenzhen CSI 300 fell 0.3% to 4,611.44
Rating Dog August Manufacturing PMI 50.5, forecast and July 50.9
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
