January 2, 2024

  • Weak PMI data weighs on EUR and GBP.
  • Oil prices are rangebound despite rising geopolitical tensions.
  • US dollar opens mixed compared to Dec 22 close-GBP underperforms.

FX year at a glance

Source: IFXA

USDCAD Snapshot: open 1.3273-77,  range Dec.26-Jan. 1, 1.3177-1.3292, close December 22- 1.3267

It’s the start of the year and “what do you get? Another day older and deeper in debt.”  Tennessee Ernie Ford has a point.  Canadian’s and the Canadian government are spending more of their income on debt servicing giving Canadians the dubious honour of being ranked “Number 1” for being the most indebted in the G-7.

USDCAD is at the top of its range since the close on December 22 which is mainly due to broad-based demand for US dollars sparked by soft Euro area and UK data.  The greenback is enjoying a bit of a safe-haven bid due to the rising tensions between the US and Iran and from Russia’s carpet bombing of Ukraine targets.

WTI oil prices are rangebound and are in the middle of the $71.07-$76.02 band that has been intact since the December 22 close.  Concerns of slowing Chinese demand and high US production have offset supply disruption concerns from the middle east.

USDCAD Technicals:

The intraday USDCAD downtrend that was intact since December 13 snapped in thin trading on December 28.  A minor base has formed at 1.3175 (hourly and 4 hour chart)  that suggests a decisive move above 1.3290 will extend gains to 1.3370. A move below 1.3210 negates the rally and suggests a retest of 1.3175.

For today, USDCAD support is at 1.3250 and 1.3210. Resistance is at 1.3330 and 1.3360. Today’s range 1.3250-1.3330.

Chart: USDCAD  daily

Source: Daily FX

G-10 FX recap

Traders have started the new year cautiously, as they usually do, and Friday’s US nonfarm payrolls data has given them additional incentive to start slowly. Month-end and year-end flows played a large role in the FX volatility between Christmas and New Year’s, but those flows should disappear shortly.

Traders are keeping a watch on developments in the Middle East. The US Navy destroyed three Houthi speedboats that were attacking a Danish container ship. In response, Iran dispatched a navy vessel to the Red Sea, which the US Navy considers a Mickey Mouse threat. (Disney lost the copyright to the 1928 Mickey Mouse, which expired on January 1.)

Asian equity markets closed on a mixed note. Australia’s ASX gained 0.49%, Hong Kong’s Hang Seng index dropped 1.52%, and Japan’s Nikkei 225 index was closed.

EURUSD traded in a 1.0979-1.1142 range since December 22, with the low occurring in the wake of another dismal Euro area Manufacturing PMI report. The report said, “Eurozone manufacturing sector remained stuck in contraction at the end of 2023, with output continuing to fall and factory job losses extending into a seventh successive month.”

GBPUSD traded in a 1.2663-1.2828 range since December 22 and is sitting at 1.2679 in early NY trading today. Prices tumbled from 1.2758 to 1.2674 today after weaker than expected Manufacturing PMI data (actual 46.2 vs forecast 46.4, November 46.4). It is the 17th consecutive decline.

USDJPY traded in a 141.03-142.85 range since December 22 and is trading at 141.69 in NY. Prices are trading defensively due to some analysts predicting that the BoJ will end tighten monetary policy this month, but losses have slowed as the US year Treasury yield decline has stalled.

AUDUSD traded in a 0.6772-0.6872 range since the December 22 close and is in the middle of that band in early NY. Sentiment is positive following the 8.1% increase in house prices in 2023 and with forecasters predicting a record high for Australia’s ASX 200 index in 2024.

There are no notable US or Canadian economic reports today.

FX high, low, open (as of 6:00 am ET)

Source: Investing.com

China Snapshot

PBoC fix: today 7.0770, previous 7.0827

Shanghai Shenzhen CSI 300 fell 1.30% to 3386.35.

NBS December Non-Manufacturing PMI 50.4 (forecast 50.5, November 50.2.

Manufacturing PMI 49, forecast 49.5, previous 49.4.

Caixin December Manufacturing PMI 50.8, forecast 50.4, previous 50.7.

US pressure forces Netherlands company ASML Holding NV to cancel shipments of three top of the line deep ultraviolet lithography machines to China.

Chart: USDCNY and USDCNH 1-year

Source: Investing.com