May 16, 2025
USDCAD: open 1.3981, overnight range 1.3960-1.3989 close 1.3985
USDCAD traded sideways and quietly. Prices continue to be underpinned by widening CAD/.US 10-year yield spreads which are -126.4 compared to -123.6 on Monday.
Price action will continue to be driven by Trump and his tariffs. However, the bottom line is that imports from the US are going to cost more and Trumps fixation on moving auto jobs back to America is only going to hurt the domestic economy.
Canada March Wholesale Sales rose 0.2%, (forecast -0.3%) and Manufacturing Sales fell1.4% m/m (forecast -1.9%).
USDCAD Technicals
The intraday technicals are bullish with USDCAD in a rising channel between 1.3960 and 1.4005 with the base of the channel guarding the steep May uptrend line at 1.3910. However, unless the 1.4020 area is decisively broken, the rally is merely a correction and a retest of support in the 1.3860 area is likely.
The medium term technicals are unchanged. They are bearish while prices are below the 100-day moving average 1.4220 and the 200-day moving average at 1.4013.
For today, USDCAD support is at 1.3960 and 1.3920. Resistance is at 1.4010 and 1.4030
Today’s Range: 1.3920-1.4020
Chart: USDCAD daily
FX at a Glance
The Art of the Deal
The US and Iran have “sort of” reached a nuclear deal with Iran, according to Trump. The President revealed the leverage he is wielding to secure a nuclear agreement. Quite simply, it’s a binary process: “there is a very, very nice step and there is the violent step.” Oil prices tumbled on the possibility of a deal which would likely lead to increased Iranian crude supplies.
Bond Traders Driving Up US Rates
US Republicans are proposing what Trump describes as a “big, beautiful bill,” which is a massive package of legislation that, in a nutshell, will slash taxes to the tune of $4.5 trillion and boost the deficit by about $3.0 trillion. Concerns over the deficit increase have lifted the US 10-year Treasury yield from 4.12% on May 1 to 4.55% yesterday.
US Data Overshadowed by Trump
American consumers stocked up in March ahead of Trump’s planned tariffs. That suggests they spent all their money, which was reflected in today’s Retail Sales Ex-autos which rose 0.1%m/m (forecast 0.3% m/m vs 0.5% in March). Producer prices were lower than expected, falling by 0.5% in April (forecast 0.2%) while initial jobless claims were unchanged at 229,000..
Equities Marking Time
Asian equity indexes had another mixed session. Australia’s ASX 200 rose 0.22%, while Japan’s Topix fell by 0.88%, and the Hong Kong Hang Seng lost 0.79%.
European bourses opened negatively, and the German Dax is down 0.22%, while the UK FTSE 100 index is flat. S&P 500 futures are off by 0.43%. The 10-year Treasury yield is 4.52%, while gold (XAUUSD) sits at 3177.98.
EURUSD
NY Open: 1.1202, Overnight Range: 1.1172-1.1228
EURUSD traded choppily in a narrow range. Eurozone employment data was positive, with employment rising 0.3% q/q compared to 0.2% previously. Industrial Production rose 2.6% m/m. The only downer was Q1 GDP rising just 0.3% q/q compared to 0.4% expected.
GBPUSD
NY Open: 1.3266, Overnight Range: 1.3258-1.3305
GBPUSD traded quietly despite a flurry of economic data. UK GDP rose 0.7% in Q1 and 0.2% in March, winning the prize as the fastest growing G-7 country in the first quarter. Weaker-than-expected Manufacturing Production in March (actual -0.8% vs -0.5%) and Industrial Production (actual -0.7% vs forecast -0.5%) took the bloom off the rose.
USDJPY
NY Open: 145.95, Overnight Range: 145.48-146.75
USDJPY traded uneventfully in the absence of key drivers. Notably, USDJPY is ignoring the surge in US 10-year Treasury yields. The big issue is the impact of US tariffs on Japan’s auto industry. Bloomberg reported that Japanese auto manufacturers face at least a $19 billion hit. USDJPY traders are concerned that the exchange rate will factor into the US/Japan tariff talks.
AUDUSD
NY Open: 0.6418, Overnight Range: 0.6415-0.6459
AUDUSD peaked following a better-than-expected unemployment report. Australia added 89,000 jobs in April, which easily beat forecasts for a 20,000 increase, while the unemployment rate remained unchanged at 4.1%. The strength in the job numbers will make the RBA monetary policy decision a bit thornier, as a tight labour market may keep inflation from falling.
NZDUSD
NY Open: 0.5885, Overnight Range: 0.5882-0.5917
Kiwi traded defensively, tracking AUDUSD moves and due to the fading euphoria of the China/US tariff retreat.
USDMXN
NY Open: 19.3728, Overnight Range: 19.3601-19.4029
USDMXN traded sideways ahead of today’s US data. The Banxico rate decision of a 50 bp rate cut today is fully priced in.
China Snapshot`
PBoC fix: 7.1963 vs exp. 7.2217 (Prev. 7.1956)
Shanghai Shenzhen 300 fell 0.91% to 3907.20
FX high, low, open (as of 6:00 am ET)
Sources: Yahoo Finance, Oanda, Investing.com, Bloomberg.
