July 28, 2025
USDCAD open: 1.4116, overnight range 1.4104-1.4129, close 1.4123
USDCAD is drifting with a minor bullish bias, because of lower crude prices and wide CADUS 2- and 10-year interest rate spreads. Furthermore, traders are concerned about the outcome from the FOMC meeting with some worried that Chair Warsh will have a hawkish bias towards rates in a pretext of showing his “independence” from Trump.
That may be wishful thinking by those thinking Warsh will rely on Powell era inflation models and metrics. He is not a fan and he has said as much. The Cleveland Fed’s Median PCE inflation indicator and the Dallas Fed’s Trimmed mean PCE readings, are far lower than the preferred Powell era PCE -price index level suggesting inflation is not nearly as big of an issue.
WTI oil prices consolidated recent losses in a 79.81-82.42 range. Prices ticked up from the low, partly because Saudi Arabia is thinking of hiking oil prices to offset higher shipping costs.
Today US Wholesale Inventories rose 0.3% in June (forecast 0.2%). Still to come are Consumer sentiment and Case-Shiller Housing Price Index
USDCAD Technical Outlook
The intraday technicals are little changed from yesterday, but they are bid inside the well-defined 1.4050 and 1.4150 range. The momentum indicators have softened but are still mostly neutral.
Longer term, USDCAD is trapped in a 1.4000-1.4250 band. A topside break targets 1.4500 while a move below 1.400 suggests a test of 1.3860.
For today: USDCAD support is at 1.4080 and 1.4050. Resistance is at 1.4150 and 1.4190.
Today’s expected range is 1.4080-1.4150
FX Heat Map
FX open high low 6:00 am
Counting Down to the Fed
The dollar remained broadly bid as traders await Wednesday’s FOMC decision. The US dollar index (DXY) is hovering around the 101.50 level with traders fearing the Fed more than renewed US and Iran hostilities.
Markets are pricing around a 33% chance of a 25bp hike this week, which if it happened would certainly annoy Trump. Yesterday he told reporters about “a very good inflation report I read,” predicting quickly falling costs once the war in Iran concluded. He went on to complain that the FOMC board is “very political” figures who harbored “bad intentions” aimed at stalling economic momentum.
Imaginary Talks
President Trump commented that Iran is talking to the US “right now” about making a deal and that “very friendly talks are ongoing.” That is news to Iran’s Foreign Ministry spokesman Esmail Baghae, who said on Monday that although messages were still being passed between the sides through mediators, reports that it requested negotiations were “fabricated.”
Taking Stock
Asia equity indexes closed on a mixed note. Japan’s Topix lost 2.582%, while the Hong Kong Hang Seng rose 0.41% and Australia’s ASX 200 rose 0.61%.
As of 5:30 am PT, European bourses have given up earlier gains except for the UK FTSE 100 index which is up 0.51%. The German Dax is flat and the French CAC-40 is up 0.18%. S&P 500 futures have flipped to a 0.12% gain, the 10-year Treasury yield is 4.626%, the DXY is 101.59 and gold is 4,032.54.
EURUSD | Range 1.1353-1.1380
EURUSD added to yesterday’s losses in quiet trading with prices weighed down by broad US dollar demand ahead of tomorrow’s FOMC decision. On Monday, ECB board member Peter Kazimir said he was in favour of another rate hike but the words had little lasting impact.
GBPUSD | Range 1.3274-1.3305
Sterling is trickling lower as lower oil prices downgrade UK inflationary risks, which has helped drive gilt yields lower. Traders have two central bank meetings to worry about: the Fed tomorrow and the Bank of England on Thursday. The BoE is expected to leave rates unchanged. The BRC Shop price index rose 0.9% y/y, which was below the forecast and June’s result of 1.9%.
USDJPY | Range 163.60-163.95
USDJPY lacked direction but continues to be underpinned by concerns that the Fed may raise rates on Wednesday while the BoJ leaves its benchmark rate unchanged. Traders remained wary following PM Takaichi’s announcement that Japan must exit excessively tight fiscal policy beginning with a bill to lower the 8% sales tax on food.
AUDUSD | Range 0.6963-0.6999
AUDUSD traded lower partly because the market assessed a highly anticipated speech by RBA Governor Bullock as dovish after she implied policymakers were less likely to raise interest rates in the near term.
USDMXN | Range 17.4427-17.4926
USDMXN drifted aimlessly after falling oil prices improved risk appetite but caution ahead of the upcoming FOMC meeting limited the downside.
CHINA
- PBoC Fix: 6.7928 vs exp. 6.7730 (prev. 6.7911)
- Shanghai Shenzhen CSI 300 fell 2.83% to 4,569.92
The CSI got hammered by ongoing chip stock stress, which was exacerbated by news that China had started mass production of a homegrown immersion Deep Ultraviolet (DUV) lithography machine. These machines are a “semiconductor manufacturing system that shoots a 193 nm laser through a layer of highly purified water to shrink circuit pattern sizes and print dense microchips.”
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
