USDCAD open: 1.3844, overnight range 1.3826-1.3880, close 1.3833
USDCAD extended yesterday’s gains and is at the top of its overnight range due to broad US dollar demand, angst around the US-Canada trade war and the somewhat hawkish read on US inflation data .
Prime Minister Mark Carney has not responded to the latest round of tariffs from the US. He may be waiting to see how the dust settles after the Canada Investment Summit, which takes place in Toronto on September 14 and 15. He is hoping to drive $1.0 trillion in new investment.
WTI oil prices rallied to $104.46/barrel overnight but have since slipped to the session low of $98.76. The gains occurred after reports that the Iranian-backed Houthi rebels in Yemen secured another port city and islands along the coast, which jeopardize another major shipping route. Furthermore, Trump denied requests from Saudi Arabia to launch air strikes on the rebels. The NY price decline is the result of rumours that Iran and Pakistan are meeting to discuss de-escalation of the US-Iran war.
The Canadian data calendar is empty.
USDCAD Technicals
USDCAD technicals bullish above 1.3810, supported by the break above resistance in the 1.3830-40 area and are looking to extend gains above 1.3880 to 1.3950. A move below 1.3810 puts 1.3750 in play.
Longer term, the move above the 61.8% Fibo retracement of the January-July 2026 range now targets the 50% retracement level at 1.3873. The rally is further supported the break above the 200-day moving average (1.3833) which suggests a retest of the 100-day moving average at 1.3891.
For today, support is 1.3820 and 1.3770. Resistance is at 1.3880 and 1.3920.
Today’s range 1.3820-1.3920.
FX Heat Map
FX open high low 6:00 am
Bessent Dismisses Bond Sell-off
Bessent claims the Treasury market is in “very good shape.” Then he tacitly admitted that his boast that “I am the House” was not a challenge for the market to challenge him. He dismissed the bond sell-off by saying, “Look, if some of the Bloomberg terminal bros are unhappy with what I’m doing, well, that’s too bad.”
Those “terminal bros” drove the US 30-year yield to 5.35%, a level last seen in June 2004, and the 10-year yield to 5.05% post -CPI today. Good work, Scott.
Inflation Takes Center Stage
CPI rose 0.4% m/m as expected (previous 0.1%) and 3.4% y/y (unchanged) in August. The kicker is that Core CPI rose 0.3% m/m (forecast 0.2%) but Core-CPI y/y at 2.4% was a tick lower than the 2.5% in July.
The market initially reacted as if the data guaranteed a rate hike, then had second thoughts. Policymakers often stress that a single month’s data point is far less important than the longer-term trend. With year-over-year core inflation ticking down to 2.4% from 2.5%, the report arguably reduces, rather than increases, the urgency for a rate hike next week.
Taking Stock
Asian equities closed with losses led by a 0.65% drop in Japan’s Topix. The ASX 200 dropped 0.89% and the Hang Seng lost 0.60%.
As of 5:40 am PT, European bourses are in the green. The French CAC 40 is up 0.71%, the German DAX has gained 0.65% and the UK FTSE 100 is up 0.66%. S&P 500 futures are up 0.59%, the 10-year Treasury yield is 4.95%, the DXY is 99.55 and gold is $4,353.25.
EURUSD | Range 1.1570-1.1618
EURUSD traded defensively due to the mix of higher yields and rising oil prices, and found a bottom post-CPI, then bounced. Yesterday’s ECB decision acted as a brake on losses. The ECB hiked rates by 25 bps to 2.50% as expected, but upward revisions to inflation projections and comments by President Lagarde suggested further rate increases were in the cards. A move below 1.1560 will extend losses to 1.1480.
GBPUSD | Range 1.3482-1.3527
GBPUSD traded narrowly despite robust economic data. Prices dipped to the low in the wake of the US data but quickly reversed the move. UK GDP rose 0.4% m/m in July compared to the forecast of 0% and 0.3% in June. Some analysts suggest that the rate of growth means UK rates are not as restrictive as policymakers think. Manufacturing production, Industrial production and Index of goods services all beat estimates but the data was mostly ignored ahead of the US CPI data.
USDJPY | Range 153.55-154.62
USDJPY bounced around with elevated BoJ rate hike expectations and intervention concerns vying for dominance over soaring energy prices and rising US Treasury yields. August Producer Price Index, which rose 7.6% (forecast 7.4%, previous 7.7%), supports the BoJ’s rate hiking bias. Japanese Finance Minister Satsuki Katayama reiterated the government’s desire for an orderly FX market.
AUDUSD | Range 0.7150-0.7180
AUDUSD traded cautiously overnight. AUDUSD selling pressure because of broad US dollar demand from higher Treasury yields was mildly overshadowing AUDUSD demand from expectations of more RBA rate hikes. The uptrend from July is intact above 0.7100.
USDMXN | Range 16.9509-17.0110.
USDMXN rallied on the back of higher US Treasury yields, which are eroding the still-wide Mexican yield advantage. The latest budget proposal is providing a bit of a drag on gains
CHINA
- PBoC Fix: Â 6.7743 vs Exp. 6.7174 (prev. 6.7766).
- Shanghai Shenzhen CSI 300 fell 0.84% to 4,510.16
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
