USDCAD open: 1.3890, overnight range 1.3867-1.3937 close 1.3930
USDCAD fell on the heels of this week’s second tame US inflation report. US PPI rose less than expected in July. The news followed on the heels of a soft CPI print the day before and last Friday’s weak nonfarm payrolls report.
Its crunch time for the 50% tariff that Trump threatened to impose on Canada on August 19 and US automakers. Negotiations are ongoing.
Trump is back to his belligerent best after being terrified by what US Intelligence officials described as a rather doubtful threat to target Airforce One. Trump’s reaction to make like a head of lettuce in a catering container suggests he would have been one of the guys dressing as a woman to ensure a seat in a lifeboat on the sinking Titanic.
WTI oil bounced in a 80.77-82.99 range. US VP Vance said low US gasoline prices are the top priority of the administration which is evidence of just how clued out Trump and his cronies are. Removing access to 20% of the worlds oil supply is hardly an oil price lowering action.
Canada June Manufacturing Sales rose 0.1% (forecast -0.1%, previous 1.6% and Wholesale Sales rose 2.8% m/m (forecast 2.7%, -0.3%).
USDCAD Technicals
The intraday USDCAD technicals are bearish below 1.3950, and looking for a break below 1.3855, which is also the 200-day moving average, to extend losses toward 1.3820. A move above 1.3920 targets 1.3960.
Longer term, USDCAD has fallen below the 100-day moving average at 1.3920 and the 0.5 Fibonacci retracement of the April-June range at 1.3903, which shifts the focus to the 200-day moving average at 1.3856. A break below that level opens the door to the 0.618 Fibonacci retracement at 1.3820, and a move below 1.3820 targets 1.3703, the 0.786 retracement. Note that the daily RSI is at oversold levels, warning that the downside may be limited in the short term.
For today, USDCAD support is at 1.3855 and 1.3820. Resistance is at 1.3920 and 1.3950.
Today’s expected range is 1.3855-1.3950.
FX Heat Map
FX open high low 6:00 am
FX Calm as Fed Rate Hike Odds Fall
A month ago the odds of a 25 bp Fed rate hike on September 16 were close to 60%, as per CME FedWatch. Today, after soft nonfarm payrolls data and two benign inflation reports (CPI and PPI), the odds for a rate hike have dwindled to 30%. Today, US Retail Sales put another nail in the rate hawk’s coffin. Retail and food-service sales fell 0.6% m/m in July, versus a 0.2% gain in June. That is the weakest monthly result since the spring and considerably softer than the previous month’s revised +0.2%. Sales were still up 5.0% y/y, so this isn’t a consumer collapse, but the direction of travel is softer.
Cleveland Fed President Beth Hammack did not get the memo. Yesterday, she repeated her comments that the Fed needs to tighten in order to achieve its 2.0% target. Her colleague, Chicago Fed President Austan Goolsbee, was a tad more upbeat with his remarks. He said, “If we can get some of this stuff into the rearview mirror then I think we get back on what I was calling the golden path, which is inflation heading back to 2%. The overall level being in the 3%, that’s too high; that’s not great. The good news is the new information that’s been coming in has been a little better.”
Still to come is Michigan Consumer Sentiment Index (forecast 54.5, July 55.2).
Taking Stock
Asian markets closed mixed. Japan’s Topix rose 0.51% while Hong Kong’s Hang Seng fell 1.10% and Australia’s ASX 200 lost 0.80%.
As of 5:30 am PT, the German DAX has gained 0.83% while the UK FTSE 100, the French CAC-40 indices, and S&P 500 futures are flat. The US 10-year yield is 4.644%, the DXY is 99.51, and gold is $4,373.81.
EURUSD | Range 1.1526-1.1578
EURUSD traded in a 1.1526-1.1557 range and is trading sideways, albeit with a modest bid, following today’s release of Q2 GDP, employment, and trade data. The trade balance surprised with an €8.6 billion surplus compared to the forecast for a €2.2 billion deficit. Employment and GDP were as expected. EURUSD intraday technicals are slightly bullish above 1.1524 but need a decisive break above 1.1590 to extend gains to 1.1660.
GBPUSD | Range 1.1526-1.1578
GBPUSD climbed steadily overnight rising from the Asia low to the session peak in NY trading. The gains were fueled by broad US dollar weakness after the risk that the Fed raises interest rates in September diminished sharply. GDPUSD technicals are bullish above 13470 and looking for a break above 1.3560 to extend gains to 1.3660.
USDJPY | Range 15860-159.55
USDJPY was adrift but still bid as prices approached the 160.00 area, the level that is expected to trigger BoJ intervention. Prices dropped to the session low after today’s US data. The BoJ is rumoured to be planning to raise rates by 25 bps in September and then announce an increase the pace of future rate hikes.
AUDUSD | Range 0.7054-0.7090
AUDUSD traded firmer with prices getting a lift from broad US dollar weakness and then added to the gains post-US retail sales. The downgraded odds for a Fed rate hike combined with the recent RBA hawkish bias, is underpinning prices.
USDMXN | Range 16.9842-17.0436
USDMXN extended this week’s losses and is trading just above the overnight low. The selling pressure is because Banxico has signalled it has paused his monetary policy easing program and with the reduced risk of a Fed rate hike. A break below 18.3300 targets 12.8000
CHINA
- PBoC Fix: 6.7878 vs exp. 6.7413 (prev. 6.7888)
- Shanghai Shenzhen CSI 300 rose 0.04% to 4,665.88
The US government has accused more than 40 countries of helping China to illegally dodge US tariffs, many of which, the US courts have deemed illegal.
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
