GBPUSD drops after BoE does nothing
US data has mixed results
US dollar steady, opens modestly lower
USDCAD open 1.2291-95, Overnight range 1.2285-1.2313, Previous close 1.2306
FX at a Glance
FX Recap and outlook
May Durable Goods orders rose 2.3%, higher than April’s drop of 0.8%, but a tad lower than the 2.7% increase expected. Weekly jobless were disappointing, rising 411,000 instead of the forecasted 380,000. Even worse, the previous weeks numbers were revised higher.
FX prices barely budged following the data.
That wasn’t the case following the Bank of England meeting. GBPUSD erased all of yesterday’s gains and a good part of Tuesday’s move after the Bank of England left monetary policy unchanged Most analysts expected a benign BoE meeting, but traders had bought GBPUSD in hopes the Bank would adopt a more hawkish stance. They didn’t, and GBPUSD dropped through the floor of its overnight 1.3950-1.3985 range to hit 1.3892, before profit-taking lifted prices to 1.3910.
The BoE maintained its cautious tone and policymakers are concerned about the impact on jobs after the government furlough scheme ends at the end of September. Officials were not concerned about inflation and expects increases to be “transitory.
GBPUSD technicals are modestly bearish below 1.3990
FOMC policymakers continue to yammer. Atlanta Fed President Raphael Bostic, a noted hawk, and voter said he was one of the dots suggesting a 2022 rate. However, he is not a voter in 2022. Governor Michelle Bowman, who has a vote, echoed Fed Chair Powell’s dovish view.
Optimism for more US growth got a bit of a lift following reports a bipartisan group of senators reached an agreement on an infrastructure spending bill.
EURUSD is trading at the top of its overnight 1.1919-1.1945 range. Prices were supported by a stronger than expected IFO Survey. Business Confidence, Current Assessment, and Expectations were higher than forecast. Even so, sentiment is bearish as the ECB is sticking to its dovish outlook even as the FOMC turns hawkish. EURUSD technicals are bearish below 1.1970.
USDJPY rallied to 111.11 in Asia, then drifted lower to 110.77 into the NY open, with prices supported by the prospect for two US rate hikes in 2023. BoJ Governor Kuroda delivered a mixed message, saying economic trends were improving but consumption was stagnating.
AUDUSD and NZDUSD traded with a positive tone but in narrow ranges. Australia is reporting 18 new COVID-19 cases in New South Wales, resulting in new restrictions in areas including Sydney. China is complaining to the WTO over anti-dumping measures to counter Australia’s complaint about tariffs on wine.
Oil prices are drifting lower, falling to $72.54/barrel, from $73.57/b in Asia. The Energy Information Administration reported US crude inventories fell 7.6 million barrels yesterday. The news helped traders ignore talk that Opec may be planning to increase supply in August due to forecasts for rising demand.
USDCAD traded quietly in a 1.2285-1.2213 range. Support from the hawkish FOMC shift is offset to a degree by steady to firm crude prices. The lack of domestic data leaves USDCAD direction at the mercy of broad US dollar sentiment.
USDCAD technical outlook
The intraday USDCAD technicals are bearish while trading below 1.2310, but need to break below 1.2250 to extend losses to 1.2150. A move above 1.2310 snaps the downtrend and shifts the focus to 1.2500. For today, USDCAD support is at 1.2250 and 1.2150. Resistance is at 1.2310 and 1.2400. Today’s range 1.2250-1.2310
Chart USDCAD 1 hour
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank