May 12, 2025
USDCAD: open 1.3970, overnight range 1.3901-1.3994, close 1.3939
USDCAD is at the top of its overnight range as broad US dollar strength and divergent BoC and Fed monetary policy outlooks support the greenback.
Friday’s USDCAD strength was partly due to the weak employment report which suggests the BoC will cut rates at its June meeting. The news that China and the US have slashed their tit-for-tat tariffs for 90 days boosted demand for the US dollar on an improved outlook for US assets and downgraded risks for Fed rate cuts, at least for 90 days.
Prime Minister Mark Carney begins the week with 170 seats, 2 short of a majority government. He is expected to announce his cabinet appointments tomorrow.
WTI oil prices soared from 60.23 on Friday to 63.30 in NY today on the news of the US/China tariff cuts which raised hoes for a Chinese economic recovery and renewed crude demand.
The US and Canadian economic calendars are empty.
USDCAD Technicals
The intraday USDCAD technicals are bullish above 1.3905, supported by the break above the 1.3830 then 1.3860 on Thursday. The move above 1.3940 targets 1.4020. A topside break puts 1.4220 in play but a break-out failure shift the focus to 1.3800.
The medium term technicals are shifting to a bullish outlook supported by the break above the 61.8% Fibonacci retracement level at 1.3951. However, the bullish trend needs to clear resistance at the 1.4010 level (200-day moving average to confirm a sustained upside. Otherwise, recent gains may just be a corrective bounce within a broader downtrend.
For today, USDCAD support is at 1.3940 and 1.3890. Resistance is at 1.4020 and 1.4060.
Today’s Range: 1.3920-1.4020
Chart: USDCAD daily
FX at a Glance
Deal or Important Consensus?
Traders are euphoric. The US and China have suspended a large chunk of tariffs for 90 days with US Treasury Secretary Scott Bessent saying, “The consensus from both delegations this weekend is neither side wants a decoupling.” The US dollar index surged from 101.45 at Friday’s close to 101.79, S&P 500 futures are up 2.80%, and the 10-year Treasury yield rose to 4.44%. The following chart from Reuters depicts the pre-Geneva and post-Geneva US/China tariffs.
Enjoy the ride, but be buckled in. The Trump administration has demonstrated, almost daily, that you cannot trust anything from the Trump administration. If Trump is president, a trade pact or treaty with the US is merely the diplomatic equivalent of Monopoly money.
No Fear of Flying Free
The Trump administration hyperbole machine is cranked up to 11. Qatar is reportedly “gifting” him a Royal Family Boeing 747-8 worth upwards of $400 million which will eventually land on a shelf in the Trump presidential library (if he quits in 2028). In return, the US gives Qatar—what? A promise not to annex the country or make it the 51st state.
Traders ❤️America
The China/US trade war cease-fire fueled US dollar demand against all the majors and drove global stocks higher. Asian equity markets closed with optimism, but they had not seen the Chinese press release or Bessent’s press conference. Hong Kong’s Hang Seng rose 2.90% while Japan’s Topix gained 0.31%. Australia’s ASX 200 was flat.
European bourses are higher and they are getting an added lift from renewed ceasefire talks between Ukraine and Russia. The French CAC 40 is leading the way with a 1.63% gain while the German Dax has risen 1.16%. The UK FTSE 100 is up 0.32%. Gold got hammered and dropped from 3325.00 at Friday’s close to 3213.25 today.
EURUSD
NY Open: 1.1120, Overnight Range: 1.1083-1.1243
EURUSD gapped lower at the Asia open and remains close to its session low in early NY trading. The US/China trade announcement fueled speculation that reduced tariffs would stem the US economic slowdown but keep the heat on inflation, at least for 90 days. Meanwhile, the ECB is concerned with slowing growth and falling inflation and remains poised to keep cutting rates.
GBPUSD
NY Open: 1.3198, Overnight Range: 1.3160-1.3300
GBPUSD traders appear to have forgotten why they bought sterling on Friday, and all of its post-US/UK trade deal announcement gains have evaporated. The losses stem from US dollar demand in the belief that the Fed is on hold, while the BoE will deliver more rate cuts.
USDJPY
NY Open: 148.06, Overnight Range: 145.70-148.23
USDJPY gapped higher in the wake of the China/US trade talks and subsequent tariff reductions. The news sparked safe-haven trade unwinding which exacerbated the rally in addition to concerns that the BoJ may pause rate hikes due to slowing economic growth.
AUDUSD
NY Open: 0.6408, Overnight Range: 0.6393-0.6462
AUDUSD traders were undecided. They bought AUDUSD on the US/China trade news but then erased the move into the US open due to the dovish outlook for the RBA which contrasts with the perception of the Fed on hold.
NZDUSD
NY Open: 0.5889, Overnight Range: 0.5876-0.5941
NZDUSD opened where it opened on Friday, and it faces the same threat as Australia. The RBNZ is keeping a close eye on inflation readings.
USDMXN
NY Open: 19.5238, Overnight Range: 19.4206-19.5782
USDMXN dived on the US/China trade news then erased the entire move into the NY open. The prospect of another 50 bp rate cut by Banxico on May 16 supported the rally. Mexico industrial output is expected at 1.5% compared to -1.3% in February.
China Snapshot`
PBoC fix: 7.2066 vs exp. 7.2429 (Prev. 7.2095)
Shanghai Shenzhen 300 rose 1.16% to 3890.61
April CPI 0.1%m/m vs. forecast 0.0% (Prev. -0.4%), CPI -0.1% y/y unchanged from previous.
April PPI -2.7% y/y vs. forecast -2.8% (Prev. -2.5%)
FX high, low, open (as of 6:00 am ET)
Sources: Yahoo Finance, Oanda, Investing.com, Bloomberg.
