Traders cautiously awaiting US CPI and ECB, Thursday
Eurozone Q1 GDP better than expected
FX markets languish in well-defined trading bands
USDCAD open 1.2083-87, Overnight range 1.2075-1.2093, Previous close 1.2083
FX at a Glance
FX Recap and outlook
Asia equity indexes closed with losses except for Australia’s ASX 200, which closed modestly higher after setting a new intraday high. Better than expected Eurozone GDP data helped to lift European bourses, while S&P 500 futures are up 0.23% (at time of writing). Gold and oil prices have been nudged lower, and US 10-year Treasury yields dipped.
FX markets did not get any direction from last week’s NFP data and are now hoping that Thursday’s US CPI data will do the job. If not, there is always the FOMC meeting on June 16.
EURUSD traders are biding their time to Thursday’s ECB meeting. Analysts expect staff GDP projections to be unchanged, but inflation forecasts to rise. EURUSD is underpinned by data suggesting the Eurozone economy is recovering, but comments from ECB officials are dovish and limiting gains. The single currency barely reacted to news Eurozone Q1 GDP was a better than expected -0.3% q/q from -0.6% q/q. EURUSD is likely to trade in a 1.2130-1.2210 range until after the ECB meeting.
GBPUSD is trading at the bottom of its overnight 1.4131-1.4183 range. The EU and UK are sniping at each other over what the EU describes as unilateral changes to the Brexit deal about the Northern Ireland border, although that does not impact FX. The intraday technicals are bearish below 1.4190, looking for a break below 1.4080 to target 1.4000.
USDJPY rallied from 109.25 to 109.55 in Asia the dipped in Europe with prices weighed down by soft US Treasury yields. Q1 GDP fell 1.0% q/q, which was better than expected.
AUDUSD slipped from 0.7762 to 0.7737. Traders ignored NAB Business Survey results. Business Confidence was a tad lower than expected but it is still near last months record level, while Business Conditions rose to a new high.
USDCAD meandered in a 1.2079-1.2093 range with the low seen in early NY trading. Traders are awaiting direction from US inflation data. Even so, the USDCAD outlook is negative due to the improved domestic growth outlook, high commodity prices, and a somewhat hawkish BoC.
Canada’s trade balance improved from a $1.35 billion deficit in March to a small $0.59 billion surplus in April. The news did not have any bearing on USDCAD.
The Bank of Canada monetary policy meeting will be a snoozefest. They are hard pressed to top the April meeting when they upgraded their Canada growth projection to 5.8% from 4.3%. The bigger surprise occurred when they brought forward the timing of the first interest rate hike from 2023 to H2 2022. Wednesday’s meeting is a statement only affair, suggesting that even BoC officials cannot think of anything interesting to say.
USDCAD technical outlook
The USDCAD technicals are unchanged from yesterday. They are bearish below 1.2120 and looking to break support in the 1.1990-1.2000 area to extend losses to 1.1935. For today, USDCAD support is at 1.2040 and 1.2010. Resistance is at 1.2110 and 1.2140 Today’s range 1.2050-1.2110
Chart USDCAD 4 hour
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank