USDCAD open: 1.3857 overnight range 1.3847-1.3861, close 1.3855
USDCAD drifted aimlessly in a quiet overnight session, along with other G-10 major currencies, ahead of today’s speech by Fed Chair Kevin Warsh. Analysts appear to be confusing their wish for Powell-style monetary policy clarity as reality, much like Trump’s vision of his presidency.
Trump has diverted the full force of his office’s trade war with China to Canada. Trump attempted to crush China by escalating tariffs into triple digits. He got his ass kicked. China President Xi Jinping did not simply capitulate. He retaliated hard by restricting critical rare-earth supplies and using China’s position in global supply chains as leverage.
Now Trump is making nice. Jinping may be joined by a delegation of business leaders when he travels to the US in September. The trade war truce is expected to be renewed for another year.
Trump’s failure to beat China may have inadvertently made Canada more important to America. Canada supplies the United States with critical energy, minerals, agricultural products and manufactured goods, while its deeply integrated supply chains are essential to the U.S. economy. In other words, Canada has many of the things America needs. And Carney’s government is not facing mid-term elections.
Canada’s economy roared back in the second quarter, with real GDP expanding at an annualized 3.3%, a sharp reversal from the anemic 0.3% crawl in Q1.
Exports jumped 15.1% annualized while imports barely moved at 1.1%. Household consumption held up nicely too, rising 3.3%, so this wasn’t purely an export mirage. The catch is that a good chunk of that export surge likely reflects Canadian firms front-loading shipments ahead of the next round of Section 338 tariffs and whatever emerges from the collapsed CUSMA talks.
US Michigan Consumer Confidence and Chicago PMI data will be overshadowed by Warsh.
USDCAD Technicals
The USDCAD technicals are unchanged from yesterday. They remain bullish above 1.3840 and are looking for a break above 1.3910 to target 1.3940. A move below 1.3840 shifts the focus to 1.3810.
Longer term, USDCAD is bearish below 1.3970, a level guarded by resistance in the 1.3900-20 zone, and the 100-day moving average at 1.3916.
For today, USDCAD support is at 1.3840 and 1.3820. Resistance is at 1.3910 and 1.3940.
Today’s expected range is 1.3840-1.3920.
FX Heat Map
FX open high low 6:00 am
Kevin Warsh, C’mon Down
Global markets were sidelined overnight in anticipation of market-moving remarks from Fed Chair Kevin Warsh today. Two Fed officials (Hammack and Collins) argued for the need for restrictive rates, while Treasury officials are pointing out how bond yields will decline when inflation eases. Markets are hoping Warsh provides some clarity which is like hoping Trump has integrity.
The G-20 Finance Ministers meeting is in Asheville, North Carolina beginning Saturday. It is led by Treasury Secretary Bessent. He bungled his attempt to manipulate long bond yields and his tariff/sanction plan for Iran is mostly all bark, no bite. With his track record alongside America’s overt hostility toward almost every nation in the world, it suggests the meeting is a non-event. The real question is why any one is attending.
Taking Stock
Asian markets closed higher with Japan’s Topix rising 0.72%, Australia’s ASX 200 gaining 0.60% and the Hang Seng ending flat.
As of 5:30 am PT the French Cac-40 is leading the European bourses higher with a 1.01% gain. The German Dax follows with an increase of 0.61% while the UK FTSE 100 is up 0.14%. S&P 500 futures are flat, the US 10-year yield is 4.695%, the DXY is 99.22 and gold is $4,590.14.
EURUSD | Range 1.1639-1.1656
EURUSD idled in a narrow band, and even better-than-expected Business Climate data for August (actual 98.4 vs forecast 97.5, and previously 97.1) along with mixed Services Sentiment and Industrial Confidence barely caused a ripple.
GBPUSD | Range 1.3580-1.3599
Sterling traded quietly in line with the rest of the G-10 majors. The UK economic data calendar was bare, and the greatly diminished odds for the Bank of England to hike rates in September helped to cap gains.
USDJPY | Range 159.30-159.70
USDJPY caught a bid following hotter-than-expected Tokyo inflation (actual CPI 1.9% y/y vs 1.8% in July, ex-food and energy 2.0% y/y vs 1.8%). Prices were further underpinned by the lingering impact of hawkish comments from BoJ Deputy Governor Ryozo Himino calling for timely interest rate hikes.
AUDUSD | Range 0.7190-0.7205
AUDUSD squeezed out additional gains due to increased odds (about 40%) for a September rate hike, following a surge in the RBA’s preferred inflation measure earlier this week.
USDMXN | Range 16.9564-16.9850
USDMXN traded quietly as markets anticipated Federal Reserve Chair Kevin Warsh’s upcoming Jackson Hole address. The American hostility toward Canada should be a warning to Mexican trade negotiators.
CHINA
- PBoC Fix: 6.7811 vs exp. 6.7208 (prev. 6.7840)
- Shanghai Shenzhen CSI 300 fell 0.46%% to 4,609.18
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
