May 27, 2025

USDCAD: open 1.3761, overnight range 1.3722.1.3775, close 1.3737,

USDCAD clawed back some losses overnight, but the rally is uninspiring.  The move was entirely due to US dollar demand after Japan’s Ministry of Finance hinted that they may reduce long-term JGB issuance. That news sent bond traders looking for alternatives which boost US Treasury demand and the US dollar. USDCAD rallied in sympathy.

The US dollar has come under pressure because Trump’s budget would boost government debt. So far, the Canadian dollar as escaped similar scrutiny even though the Liberal governments forecasted and campaign spending will mean the government will borrow about CAD $630 billion, (as per Reuters) which tops the record borrowing seen at the height of Covid.

WTI oil traded quietly in a 61.09-61.90 range ahead of the Opec meeting when another production increase is rumoured to be announced. The risk of a tariff exacerbated global economic slowdown, and increased supply should limit WTI gains in the foreseeable future.

US Durable Goods Orders fell 6.3% mainly due to a drop in Boeing orders and FX markets didn’t budge. US Conference board Consumer Confidence numbers could cause some excitement if it reflects consumer unhappiness.

USDCAD Technicals

The intraday USDCAD technicals are mildly bullish but the rally from 1.3687 yesterday is merely a correction while prices are below 1.3770. The bounce off the lower Bollinger band raises the odds for a mean reversion rally to 1.3873 supported by RSI data suggesting USDCAD remains oversold.

Longer term, USDCAD is bearish below 1.4000 and looking for a break below 1.3670 to target 1.3600

For today, USDCAD support is at 1.3720 and 1.3680. Resistance is at 1.3780  and 1.3830
Today’s Range: 1.3730-1.3830

Chart: USDCAD 4 hour

FX at a Glance

Japan Takes Center Stage

Japan’s MOF blinked and FX markets reacted. After a poor 20-year bond sale and a surge in long yields, Japanese authorities are hinting at tweaking long-end issuance to calm nerves. It managed to soothe global markets and knocked US Treasury yields lower. (Nevertheless, it doesn’t do anything to address Japan’s massive debt burden). The news fueled a broad-based US dollar rally which will last until Trump’s next TruthSocial rant about tariffs or until fresh reaction to the “Big Beautiful Bill.”

Federal Reserve Bank of Minneapolis President Neal Kashkari said he favoured looking through the inflationary impact of new tariffs which keeps Fed rate cut hopes alive.

Equities are in the Green

Asian traders were mostly positive and bought stocks. Australia’s ASX 200 closed with a gain of 0.56% while Japan’s Topix added 0.64%. Hong Kong’s Hang Seng index closed with a 0.43% gain.
European traders were happy about the improvement in the economic sentiment index and the German Dax index is up 0.67% while the UK FTSE 100 leads the way with a 0.73% gain—both are off their best levels. S&P 500 Futures are up by 1.41%. Gold (XAUUSD) dropped from 3344.38 to 3291.10 and the 10-year Treasury yield is 4.47%.

EURUSD

NY Open: 1.1348, Overnight Range: 1.1337-1.1408
EURUSD is trading defensively after failing to hold onto gains above 1.1400 yesterday but the single currency remains well above Friday’s low of 1.1279. Trump’s threat to increase EU tariffs to 50% motivated EU policymakers to accelerate trade talks while behind the scenes, it is preparing countermeasures if Trump follows through. EURUSD saw a bit of support after the Economic Sentiment Indicator (ESI) rose 0.6 to 95.2 in May.

GBPUSD

NY Open: 1.3543, Overnight Range: 1.3522-1.3587
GBPUSD continues to benefit from the chatter around EU and US tariffs. Sterling held on to yesterday’s gains which occurred after widespread US dollar selling when Trump backed away from his 50% tariff on EU imports as of June 1, delaying them until July 9. EURGBP downside risks are underpinning GBPUSD. The short-term GBPUSD technicals are bullish above 1.3440.

USDJPY

NY Open: 143.91, Overnight Range: 142.12-144.00
USDJPY snapped a week-long slide and rallied sharply after the Ministry of Finance (MOF) pushed back against rising JGB yields. The MOF is considering plans to reduce issuance of long bonds after a poor auction last week sent yields soaring. The yield on the 30-year Japanese government bond (JGB) fell from 3.026% to 2.834% and USDJPY soared. Traders ignored BoJ Governor Kazuo Ueda’s signal about higher rates from rising inflation as it is old news.

AUDUSD

NY Open: 0.6450, Overnight Range: 0.6445-0.6502
AUDUSD peaked at 0.6537 yesterday on the news that Trump would extend the 50% tariff deadline on the EU, then traded steadily lower overnight and into the NY open. Profit-taking, sparked by renewed demand for US Treasuries exacerbated the sell-off. However, further downside may be limited because of ongoing concerns around the US deficit.

NZDUSD

NY Open: 0.5959, Overnight Range: 0.5967-0.6007
NZDUSD erased all yesterday’s gains and opened in NY just above its session low. The reversal occurred on resurgent US dollar demand against the majors sparked by the Bank of Japan hinting that it is looking to push back against rising JGB yields. In addition, the Reserve Bank of New Zealand (RBNZ) is expected to cut rates by 25 bps to 3.25% tomorrow.

USDMXN
NY Open: 19.2632, Overnight Range: 19.2137-19.2869
USDMXN drifted higher overnight on a bit of profit-taking after yesterday’s holiday-thinned market decline. The downtrend remains intact while prices are below 19.3800. Today’s USDMXN direction will be determined by broad US dollar sentiment.

China Snapshot`

PBoC fix:  7.1876 vs exp. 7.1842 (Prev. 7.1833)

Shanghai Shenzhen 300 fell 0.54% to 3839.40

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

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

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