May 20, 2025

USDCAD: open 1.3962, Monday and overnight range 1.3918-1.3978,  Friday close 1.3967, Monday close 1.3950

Canadians are returning to their desks after a somewhat soggy, windy and chilly May long weekend that affected the entire country. Leaf fans continue to drown their sorrows after playoff failures extend to 58 consecutive years.

Yesterday, USDCAD dropped due to broad US dollar selling pressure yesterday after Friday’s news that Moody’s downgraded it US debt rating by one notch to Aa1 from Aaa. They are a little late to the party considering that S&P downgraded US debt 14 years ago in Q2 2011. It consolidated the losses overnight.

Canada headline inflation rose 1.7% y/y, a tick higher than the 1.6% expected but well below the March level of 2.3%. Statistics Canada said the decline was due to the 12.5% drop in energy prices. Excluding energy, CPI rose 2.9% in April, following a 2.5% increase in March. The results ar e a wash but USDCAD dipped to 1.3930 from 1.3965 in the wake of the data.

WTI oil prices traded sideways in a 61.00-62-62.67 range with traders assessing the implications of Iran US nuclear talks and a possible Russia Ukraine ceasefire against the backdrop of global trade uncertainty.

USDCAD Technicals

USDCAD is struggling to gain traction after stalling at double top resistance in the 1.4010 area last week. Price action has been uninspired, grinding sideways in a narrow 1.3930-1.3980 range. A break above1.4010 or below 1.3910 should trigger a 75 bp move.

The momentum indicators are indecisive. The MACD is flatlining, the RSI (5) is drifting lower from 51.5, and the ADX at 22.7 highlights a lack of conviction.

For today, USDCAD support is at 1.3915 and 1.3880. Resistance is at 1.4010 and 1.4060
Today’s Range: 1.3915–1.4015

Chart: USDCAD daily    

FX at a Glance

Keep Them in the Dark

Trump is making America great again. He said so. But it comes at a cost and Trump does not want Americans to know the cost. When Walmart announced that Trump’s tariffs are too high and that the company would be forced to raise prices, Trump lost it. He took time out from berating Bruce Springsteen, Beyoncé and other critics to demand
“Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain. Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should, as is said, “EAT THE TARIFFS,” and not charge valued customers ANYTHING. I’ll be watching, and so will your customers!!!”

Equities Shrug off Moody’s US Downgrade
Wall Street recovered from its initial wobble following the news of Moody’s US debt downgrade and closed with small gains. Asia grabbed the ball and ran with it. Australia’s ASX 200 closed with a gain of 0.58% and Hong Kong’s Hang Seng rose 1.49%. Japan’s Topix was flat.
European bourses are higher across the board led by a 0.53% rise in the German Dax, but S&P 500 futures are down by 0.28%. The US 10-year yield peaked at 4.58% yesterday but retreated to 4.458% today.

EURUSD
NY Open: 1.1257, Overnight Range: 1.1218-1.1278

EURUSD gapped higher at Monday’s open, rallied to 1.1289 then consolidated the move overnight. The Eurozone economic calendar was light. ECB speakers offered contrasting opinions with Belgium’s Central Bank Governor Pierre Wunsch suggesting rates may need to fall below 2.0%. ECB board member Isabel Schnabel warned that new challenges around a global trade war could push prices higher. German PPI index fell 0.6% m/m which was a minor improvement from the -0.7% result in March.

GBPUSD
NY Open: 1.3373, Overnight Range: 1.3345-1.3395
GBPUSD surged from Monday’s low of 1.3251 to 1.3404 on the back of broad US dollar selling on the back of the Moody’s US debt downgrade and then they consolidated the gains overnight. BoE Chief Economist Huw Pill did his part to stem the rally. He said that the pace of rate cuts has been too fast given wage price inflation pressures. He qualified his comment by saying his vote to leave rates unchanged was a skip, not a halt.

USDJPY
NY Open: 144.46, Overnight Range: 144.09-145.51
USDJPY was choppy but traded with a negative bias. Prices closed at 145.64 on Friday, gapped lower at the Asian open and fell to 144.54 yesterday. The gap was filled overnight before prices resumed falling and hit 144.09 with a surge in the Japanese government bond spreads which jumped to 3.13% from 2.97% on Friday. Japan’s Economy Minister said that there was no change to the government’s position of demanding the elimination of US tariffs.

AUDUSD
NY Open: 0.6418, Overnight Range: 0.6408-0.6459
AUDUSD surged on widespread US dollar selling pressures Monday and peaked at 0.6465. The gains were not sustained. The RBA cut rates by 25 bps as was widely expected and said that the outlook was uncertain. Governor Michele Bullock left the door open to further rate cuts which weighed on the currency.

NZDUSD
NY Open: 0.5917, Overnight Range: 0.5911-0.5932
Kiwi rallied Monday and consolidated the gains overnight supported by widespread US dollar weakness and better than expected China Industrial Production data.

USDMXN
NY Open: 19.2650, Overnight Range: 19.2568-19.3314
USDMXN tumbled in the wake of the US debt downgrade, falling from Friday’s peak of 19.5665 to a low of 19.2568 today. The sustainability of the move is suspect as Banxico Governor Victoria Rodríguez warned that inflation declines are slowing while economic growth remained sluggish.

China Snapshot`

PBoC fix:  Monday 7.1916 vs exp. 7.2057 (Prev. 7.1938). Tuesday: 7.1931 vs exp. 7.2112 (Prev. 7.1916)

Shanghai Shenzhen 300 rose 0.54% to 3898.17

PboC trims rates.  1-year Loan Prime Rate (LPR) falls to 3.0% from 3.10%. 5-yer LPR3.50% from 3.60%.

Aprill Industrial output 6.1% y/y vs. forecast, 5.5% previous 7.7%. April Retail Sales 5.1% y/y vs forecast 5.5%, previous 5.9%.

FX high, low, open (as of 6:00 am ET)

Sources: Yahoo Finance, Oanda, Investing.com, Bloomberg.