Source: IFXA ltd
- Traders are cautious with US holiday
- WTI oil continues to slump
- US dollar opens mixed compared to Friday
FX change at a glance
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.2985-89, overnight range 1.2987-1.3035, close 1.3028
USDCAD tip-toed lower in a quiet overnight session due to today’s US holiday. Prices have edged lower since touching 1.3078 Friday when the S&P 500 index dropped to 3,675.00, and WTI oil prices plunged 8.3%.
WTI Oil prices dropped over 8.0% since Friday, due to the surge in the US dollar and fears that a US recession would greatly reduce demand. Also, Russia has displaced Saudi Arabia as China’s largest provider of crude which makes a mockery of western sanctions on Putin.
Scotiabank economists took the Federal government to task saying that the Federal government’s fiscal policies are doing nothing to slow inflation. That’s partly because the Feds plan to add more stimulus to an overheated economy by spending $8.9 billion to address inflation, which is inflationary.
Traders are looking ahead to Wednesday’s inflation data. Canada CPI is expected to have jumped to 7.5% y/y in May. The question is whether the BoC will match the Fed’s 0.75% hike or top it with a 1.00% move.
The US holiday should ensure a quiet FX market.
USDCAD technical outlook
The intraday USDCAD technicals are bullish. The retreat from the 1.3070-80 area is merely a correction while prices are above 1.2970. A move below 1.2970 while a drop below 1.2840, suggests more 1.2640-1.3050 consolidation.
For today, USDCAD support is at 1.2970 and 1.2950. Resistance is at 1.3030 and 1.3080. Today’s Range 1.2970-1.3050.
Chart: USDCAD 4 hour
Source: Saxo Bank
G-10 FX recap and outlook
The US is on holiday and the other financial markets are just passing time.
Central Bankers are contestants on the Economic Wheel of Fortune. They think they can hike rates to crush inflation while engineering a soft landing. That may be difficult. The Wall Street Journal’s Jon Sindreu pointed out in a column that of the twelve Fed tightening cycles since the 1950’s, nine ended with a recession.
Overnight markets didn’t react to rumours the US Secret Service want to put training wheels on President Biden’s bicycle. The reaction to French President Emmanuel Macron losing his parliamentary majority was very brief.
Asia equity indexes closed with losses, led by the Nikkei 225 loss of 0.74%. Australia’s ASX200 dropped 0.64% but Chinese markets posted gains. European bourses open soft but are trading in positive territory. US futures markets are higher, gold is flat and oil is modestly lower.
EURUSD traded in a 1.0476-1.0545 range overnight. Prices gapped lower at the Asia open following the French election news but recouped all the losses in Europe. Prices have retreated to 1.0520 as traders ponder the impact of the ECB’s anti-fragmentation” plan. EU construction output and German PPI data (actual 1.5% vs previous 2.8% m/m) were ignored.
GBPUSD is moderately bid and at the top of its 1.2201-1.2261 range. The currency speculation higher inflation readings will force the BoE to raise rates more aggressively. However, labor problems in the form of a rail strike may limit gains..
USDJPY continued to consolidate post-BoJ gains in a 134.54-1.35.43 range overnight. Reports that the Prime Minister and BoJ Governor discussed the weakening yen were dismissed, largely because policymakers are responsible for the slide. The BoJ reportedly spent $81 billion buying JGB’s last week to keep yields below 0.25%.
AUDUSD is at the top of its 0.6924-0.6995 range supported by profit taking as the US dollar gave back some of Friday’s gains. NZDUSD followed suit in a 0.6302- 0.6351 range
FX open, high, low, previous close as of 6:00 am ET
Source: Saxo Bank
Today’s Bank of China Fix 6.7120
Shanghai Shenzhen CSI 300 rose 0.50% to 4.330.43, Previous close 4,309.04,
PBoC leaves rates unchanged: 1 year Loan Prime Rate 3.70%, 5 year LPR 4.45%
Treasury Secretary Yellen says some tariffs on China serve no strategic purpose
US administration rejects China claims to Taiwan Strait
Chart: USDCNY 1 month
Source: Yahoo Finance