January 15, 2024
- BOC Business Outlook Survey due today
- US closed Monday for MLK Day.
- US dollar edges higher in quiet trading.
FX at a glance
USDCAD Snapshot: open 1.3415-19, overnight range 1.3382-1.3428, close 1.3410.
USDCAD direction continues to be determined by broad US dollar sentiment and, at the moment, the sentiment is slightly bullish. That’s because of speculation that Red Sea shipping interruptions may reignite inflationary pressures.
Weak oil prices are also underpinning USDCAD. WTI peaked at $74.88 on Friday then gave back all of those gains overnight as prices dropped to $71.80. It seems that concerns about slowing global demand have more than offset fears of supply disruptions from the Middle East conflict.
The Bank of Canada Business Outlook Survey (BOS) is due today with a focus on inflation expectations. If they are expected to remain high, it will reduce the odds of a March BoC rate cut.
Manufacturing Sales roes 1.2% m/m in November while Wholesale Sales climbed 0.9% from -0.3% in October.
The intraday USDCAD technicals are bullish above 1.3390, looking for a break above 1.3470 to target 1.3320. A topside break will extend gains to 1.3620 while a move below 1.3390 targets 1.3350.
For today, USDCAD support is at 1.3380 and 1.3350. Resistance is at 1.3440 and 1.3470. Todays range 1.3370-1.3440.
Chart: USDCAD 4 hour
G-10 FX recap
It’s a rather slow start to the week. Many traders, especially those heating their workspaces with solar panels and heat pumps, are bundled in parkas and mittens, trying to scrape the ice off their monitors. The Americans are enjoying a long weekend courtesy of Martin Luther King Jr., and many of them will be using the extra day to shovel snow. Buffalo, NY, residents may see up to 70 mm (27.5 inches).
The annual meet and gloat gathering of the world’s elite starts today. Yadda, yadda, yadda, blah, blah, blah.
William Lai won the Taiwan election and received a congratulatory call from US Secretary of State Antony Blinken. China responded by probably paying the Republic of Nauru (population 13,000) to sever ties with Taiwan, a practice Xi Jinping calls “unTaiwaning.”
Yemen Houthis fired an anti-ship cruise missile at a US destroyer in the Red Sea despite the US delivering a “private message” to Iran about the Houthi actions. There is no proof to the rumor that Uncle Sam showed a picture of Hiroshima on August 9, 1945, that was labeled Tehran January 2024.
The Houthis may not be successful in blowing up Red Sea shipping, but they have blown up hopes for a more rapid drop in global inflation. That’s because many cargo ships have been diverted around the Cape of Good Hope, which adds 10-14 days to travel time.
Atlanta Fed President Raphael Bostic is one policymaker who seems concerned about the issue. He said he expects to see a much slower progression of inflation moving forward and there were risks that progress could stall out altogether.
EURUSD drifted in a 1.0934-1.0968 range with negative pressure seen after Eurozone industrial production fell 0.3%. Traders are awaiting more insight from the Eurozone and German ZEW Surveys tomorrow.
GBPUSD traded in a 1.2713-1.2716 range overnight, with traders content to await UK employment data on Tuesday.
USDJPY traded steadily higher after closing at 144.82 on Friday and rose to 145.91 overnight. USDJPY is bid because expectations that the BoJ will begin tightening are fading.
AUDUSD traded negatively in a 0.6652-0.6705 range after analysts suggested that last week’s drop in inflation confirmed that the RBA was finished raising interest rates.
FX high, low, open (as of 6:00 am ET)
PBoC fix: today 7.1054, expected 7.1684, previous 7.1050.
Shanghai Shenzhen CSI 300 fell 0.10% to 3280.92.
PBoC leaves Loan Prime Rate unchanged at 2.5%
Chart: USDCNY and USDCNH 1 year.