July 21, 2025

USDCAD open 1.3725, overnight range 1.3714-1.3735, close 1.3726

USDCAD was largely ignored and drifted in a 1.3714-1.3735 range. Narrowing CAD/US 10-year interest rate differentials (actual -80.2 vs -91.0 a week ago) have weighed on US dollar demand modestly.

USDCAD downside is limited to increased tariff risks. US Commerce Muppet Howard Lutnick said “the president understands that we need to open the markets. Canada is not open to us. They need to open their market. Unless they’re willing to open their market, they’re going to pay a tariff.”

The BoC Business Outlook Survey is released today but the results are not likely to keep the BoC from leaving rates unchanged on July 30.

WTI oil opened lower in Asia and traded negatively in a 65.61-66.44 range partly due to the EU imposing fresh sanctions on Russian oil which now pegs the price of Russian crude at 15% below the prevailing price, beginning September 1.

Canadian Industrial Product Price index rose 0.4% in June (forecast 0.1%, previous -0.5%) while the Raw Material Price Index jumped 2.7% in June (forecast -0.2%). If the trend continues it doesn’t bode well for consumers as rising inflation means higher prices. It is another reason why the BoC will leave rates unchanged next week.

USDCAD Technical Outlook:

The intraday technicals are moderately bearish while trading below 1.3730 and are looking for a move below 1.3690 to target 1.3650.  A break above 1.3730 shifts the focus to 1.3790.

Longer term, USDCAD is rangebound in a 1.3560-1.3820 band with a bullish short-term ascending channel between 1.3690 and 1.3790.

For today, USDCAD support is 1.3690 and 1.3650.  Resistance is 1.3750 and 1.3790.  Today’s Range 1.3660-1.3750.

“Mondays are proof that weekends are way too short.” (anonymous)

It is a sluggish start to the week even as Japanese Prime Minister Ishiba lost his majority in Upper House elections on the weekend. Traders have turned a deaf ear to Trump’s tariff updates at least until later this week when EU officials meet to formalize a US tariff-retaliation plan. FX markets are plodding along with the US dollar index (DXY) a tad softer while the Japanese yen eked out a small gain.

Taking Stock

Asian equity indexes did not get off to a good start. Australia’s ASX 200 lost 1.02% despite a lack of a catalyst for the sell-off. Japan’s markets were closed for a holiday. Hong Kong’s Hang Seng index rose 0.68%.

European bourses opened mixed, but all are in the red as of 5:45 am PDT. The French CAC 40 index is down 0.43%, the German Dax is down 0.12% and the UK FTSE 100 index is flat. S&P 500 futures are up 0.22% ahead of hopes for robust tech company earnings reports this week. The US 10-year Treasury yield is lower at 4.36% while gold (XAUUSD) is 3385.74.

EURUSD

EURUSD traded in a 1.1614-1.1652 range with traders biding their time ahead of this week’s ECB monetary policy meeting and EU/US trade development news. Trump has promised a 30% baseline tariff on EU imports effective August 1, but he has been known to change his mind. The ECB is expected to leave rates unchanged on Thursday.

GBPUSD

GBPUSD recouped most of Friday’s losses and traded in a 1.3402-1.3466 range. Traders ignored Rightmove House Price data which showed a drop of 1.2% m/m compared to -0.3% in June.

USDJPY

USDJPY gapped lower at the Asia open, dropping from Friday’s close of 148.82 to 147.91. Prices rebounded to 148.65 before sliding steadily and hitting 147.69 just before NY opened. The impact from the news that Prime Minister Shigeru Ishiba lost his majority was muted as the result was not much of a surprise and because Japanese markets were closed for a holiday. Traders have shifted their focus to US/Japan trade talks.

AUDUSD

AUDUSD traded quietly in a 0.6498-0.6521 range with traders sidelined ahead of a US and China trade agreement. The minutes from the July 8 RBA meeting are released tomorrow.

NZDUSD

NZDUSD bounced in a 0.6498-0.6521 range and is trading near the top of the band in NY. New Zealand CPI rose 0.5% (forecast 0.6%, previous 0.9%) which ASB Bank said paves the way for an August rate cut.

USDMXN

USDMXN traded defensively in a 18.6938-18.7474 range. The US and Mexico are in a tiff over airlines after Mexico forced airlines to relocate to the newer Felipe Angeles International Airport due to over-crowding at the Benito Juarez International Airport.

USDCNY

PBoC fix: 7.1522 (Prev. 7.1498).

Shanghai Shenzhen 300 rose 0.67% to 4085.61

PBoC leaves 1-year Loan Prime Rate (LPR) unchanged at 3.0% and 5-year LPR unchanged at 3.5%

EU sanctioned Heihe Rural Commercial Bank and Heilongjiang Suifenhe Rural Commercial Bank as well as 5 Chinese companies for processing transactions or providing export financing to Russia to circumvent EU sanctions. Chinese authorities promised to respond.

FX High, Low, Open

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