USDCAD open: 1.3735, overnight range 1.3714-1.3748, close 1.3732

USD/CAD rallied yesterday and consolidated the gains overnight. The BoC left rates unchanged yesterday and delivered what many economists say was a slightly dovish statement. The BoC said that the risks to growth were to the downside, while inflation risks were higher. They admitted inflation risks were contained for now, but that would change if the Iran war dragged on.

Meanwhile, the FOMC statement and Powell’s press conference erred on the cautious-to-hawkish side, with the uncertainty blamed on “developments in the Middle East.”

Both those events were largely anticipated by markets, but Israel’s attack on the Iranian gas field and Iran’s retaliation on a Qatar LNG terminal were not. Global risk sentiment quickly soured, and USD/CAD rallied on safe-haven demand for greenbacks.

WTI oil spiked to 99.14 overnight before dropping to 94.93 just as NY opened. Prices are at 95.46 and underpinned by news that Iran attacked the Qatar energy facility again overnight and fears that other Gulf oil infrastructure could come under fire. Russian President Vladimir Putin is quietly thanking Trump for his Iranian attack, as Asian imports of Russian fuel are set to hit an all-time high this month.

US weekly jobless claims fell 8,000 to 205,000 and the Philadelphia Fed Manufacturing Survey rose to 18.1 from 16.3. Both results suggest the US economy remains resilient.

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish above 1.3690, with the break above resistance in the 1.3710-20 area targeting 1.3760 then 1.3790.  A move below 1.3690 suggests further 1.3640-1.3760 consolidation

The medium-term USDCAD technicals are bullish if prices can sustain the break above 1.3720.  A break above 1.3800 and the 200-day moving average at 1.3817, targets 1.3930.

For today, USDCAD support is at 1.3700 and 1.3660. Resistance is at 1.3760 and 1.3790.

Today’s Range: 1.3690–1.3790

FX Heat Map (6:00 am) one week

FX  open high low 6:00 am

Oil Shock

Brent oil, the European crude benchmark, spiked from110.82 to 118.73 this morning after Iranian drones struck Qatari LNG production for the second day in a row. It is a direct retaliation for Israel’s attack on Iran’s SouthPars Gas Field. Trump disavowed any pre-knowledge of Israels attack.

The spike is crude prices is already showing up at the pumps. Treasury Secretary Bessent is so spooked that he is floating the idea of sanctioning Iranian oil already on the high seas.  That means, American is rewarding Iran for attacking Qatar LNG infrastructure with sharply higher oil prices. Doh!

Powell Socks it to Trump

The Iranian Revolutionary Guard Corps and Fed Chair Jerome Powell are making Trump look more and more like an inept buffoon. Trump’s war that “was over, pretty much” two weeks ago is raging and expanding while he is getting pummeled in his war on Powell and the Fed.

The Fed not only defied Trump’s calls to lower rates, but the vote to leave them unchanged was nearly unanimous. The only dissent was Stephen Miran, a Trump lackey. Even worse, in his press conference, Mr. Powell said he had no plans to resign from the Fed when his term as President expired and would stay on as a governor until the DOJ investigation is finished.

Taking Stock

Asian equity traders reacted to spiking oil prices and the slightly hawkish Fed outlook by selling stocks. Japan’s Topix erased yesterday’s gains, dropping 2.91%. Australia’s ASX 200 fell 1.65%, and Hong Kong’s Hang Seng lost 2.02%.

As of 5:40 am, European bourses are deep in the red. The German DAX has plunged 2.90%, the UK FTSE 100 is down 2.74%, and the French CAC 40 has lost 2.10%. S&P 500 futures are down 0.63%, the 10-year Treasury yield is 4.313%, the DXY is 100.06, and gold (XAUUSD) is $4,549.42

EURUSD

EURUSD traded choppily in a 1.1443-1.1492 range after dropping from 1.1523 in the wake of the FOMC decision. The single currency was also pressured by rising Brent oil prices as Gulf oil infrastructure came under attack by Iran and Israel. EURUSD traders have ignored domestic data and are waiting for this morning’s ECB decision, although no change in rates is expected and forward guidance will be vague.

GBPUSD

GBPUSD dropped, then popped in a 1.3246-1.3310 range. The Bank of England left UK rates unchanged at 3.75%$ then offered a dire warning of “new shocks” to the economy from Trump’s war in Iran. The bottom was hit after the UK employment data was mixed. Employment rose 84,000 vs. the previous 52,000, and the unemployment rate dipped to 5.2% compared to 5.3% previously, while UK wage growth was at a five-year low.

USDJPY

USDJPY retreated from 159.87 to 159.04, partly because, although the BoJ left rates unchanged at 0.75%, the statement was moderately hawkish. The BoJ said policy rates would rise if the economy performed as it forecasted. One board member voted for a 0.25% rate hike. The proximity to 160.00 and potential intervention capped gains, but the rise in oil prices limited the downside.

AUDUSD

AUDUSD traded sideways in a 0.7021-0.7164 range due to mixed employment data, the lingering impact of this week’s RBA rate hike, a somewhat hawkish Fed, and the ongoing Iran war. Australia gained 48,900 jobs in February, but the unemployment rate rose to 4.3% from 4.1%.

USDMXN

USDMXN popped following the FOMC decision and consolidated the gains in a 17.7783-17.8744 range.

China

USDCNY Fix: 6.8975 (Prev. 6.8909)

Shanghai Shenzhen CSI 300 fell 1.61% to 4,583.25

Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics Tradingview