USDCAD open: 1.3723, overnight range 1.3700-1.3743, close 1.3740

Spring has sprung, and Canadians and the Canadian dollar are in a good mood, relatively speaking.

Canada’s abundance of oil and natural resources has helped the Loonie finish the week with gains against all the major currencies, including the US dollar. However, that performance masks a very weak domestic outlook. Unemployment is rising, and Trump’s tariff war isn’t helping. The government continues to spend money like the magic money tree is in full bloom.

Wednesday, the Bank of Canada said, “Governing Council is considering both the most likely path for the economy and inflation, and the risks to our outlook. Uncertainty is acute. Trade and geopolitical uncertainties remain, and the conflict in the Middle East has broadened the range of possible outcomes.” That suggests a rate hike is not as far-fetched an idea as it was before Trump attacked Iran.

WTI oil prices are bouncing in a 92.48-96.40 range and sit at 95.56 in NY. Optimistic traders believe that America’s latest effort to reopen the Strait of Hormuz will succeed. Saudi Arabia warned that oil could hit $180.00/b if the Strait remains blocked by the end of April.

Canadian retail sales rose 1.1% m/m (forecast 1.5%) and ex autos rose 0.8% m/m in January (forecast 1.2%.  The New Housing Price Index rose 0.3% m/m (forecast -0.3%) and the Industrial Product Price Index rose 0.4% compared to expectations for a 2.4% increase.

USDCAD Technical Outlook

The intraday USDCAD technicals are unchanged.  They are bullish above 1.3690, with the and looking for a break above 1.3760 for a test of resistance at 1.3790.  A move below 1.3690 suggests further 1.3640-1.3760 consolidation

The medium-term USDCAD technicals are also unchanged.  They are bullish if prices can and expect that a break above 1.3760 would extend gains to 1.3820.

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

Dire Straits

The brain-trust directing the US war on Iran is tearing out its orange hair to find a way to reopen the Strait of Hormuz to US and its allies’ shipping. Saudi Arabia is predicting oil prices at $180.00/b if the situation hasn’t improved by the end of April.
Trump has talked about sending mine sweepers (they only have four, and they are deployed to Sasebo, Japan) or using navy ships to act as escorts. He is also thinking about putting marines on the ground to secure the areas bordering the waterway.
Oh, what to do, what to do? Doh! The simplest, most obvious solution to open the Strait is to stop bombing Iran.

Unleashing the Hawks of War

The dogs of war are already barking mad throughout the Middle East after Trump leveraged his casino management skills to orchestrate a war with Iran, while knocking his involvement in the Epstein files from the news and social media feeds.
The hawks of war are the central bankers. Six out of seven G-7 central banks feared the economic and inflationary fallout from Trump’s war on Iran and adopted a hawkish bias, with Australia’s RBA hiking rates by 25 bps. The Fed was also mildly hawkish, but policymakers still have one rate cut pencilled in for 2026.

Tarnishing the Shine

Gold (XAUUSD) prices have lost a lot of support from safe-haven demand and dropped 8.25% to $4,667.45 in the past 5 days. Iran’s attack on a Qatar LNG facility knocked out 17% of Qatar’s LNG capability, which could take up to 5 years to repair, according to one Qatari spokesperson.
The spike in oil prices since Operation Epic Fury was launched has shifted the focus to inflationary worries and drove the US 10-year Treasury yield to 4.30% today, from 4.13% on Wednesday.

Taking Stock

Asian equity traders traded poorly due to hawkish central banks and ongoing geopolitical issues. Japan’s Topix fell 2.91%, Hong Kong’s Hang Seng lost 0.88%, and Australia’s ASX 200 fell 0.82%.

As of 6:50 am, European bourses have flipped between positive and negative and are posting tiny gains.  The German DAX is up 0.14%, the UK FTSE 100 has gained 0.18%, and the French CAC 40 has gained 0.22%. S&P 500 futures are down 0.36%, the 10-year Treasury yield is 4.30%, the DXY is 99.34, and gold (XAUUSD) is $4,671.22.

EURUSD

EURUSD traded in a 1.1535-1.1595 range overnight and is at the bottom of the band in early NY. Yesterday, ECB President Christine Lagarde expressed elevated concern about upside risks to inflation. The possibility that the ECB could raise interest rates fueled a rash of short-covering, and EURUSD soared from 1.1443 to 1.1619. German PPI data was weaker than expected (actual -0.5% m/m, forecast 0.3% and actual -3.3% y/y, forecast -2.7%).

GBPUSD

GBPUSD traded negatively in a 1.3364-1.3443 band and is near the session low, after peaking at 1.3465 yesterday following a surprisingly hawkish outcome from the Bank of England monetary policy meeting. There was no dissent. The decision to leave rates unchanged was 9-0, and even the most dovish members were talking about a rate hike.

USDJPY

USDJPY traded with a bid in a 157.64-158.90 range as it attempts to claw back yesterday’s losses, when prices plunged from 159.89 to 157.52. Traders feared intervention when prices were flirting with 160.00, but it was talk that Israel would refrain from bombing Iran’s energy infrastructure, and concerns that inflation fears would force the BoJ to hike rates, which weighed on prices. Today’s rebound is due to caution ahead of the weekend and worries that persistently higher oil prices would negatively impact economic growth.

AUDUSD

AUDUSD is consolidating yesterday’s gains in a 0.7053-0.7098 range. The greenback is trading somewhat defensively after G-7 banks, except the Fed, adopted a hawkish bias.

USDMXN

USDMXN traded erratically in a 17.7092-17.8573 range and is near the top in NY trading. Prices are supported by the cautious to hawkish Fed interest rate bias.

China

USDCNY Fix: 6.8898 vs exp. 6.8773 (Prev. 6.8975)

Shanghai Shenzhen CSI 300 fell 0.35% to 4,567.02

PBoC leaves 1-yr and 5-yr Loan Prime Rates unchanged at 3.0% and 3.5% respectively.

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