“Canada inflation deflates Photo: Pikist
Source: Saxo Bank/IFXA Ltd
FX Recap and outlook: Statistics Canada reported the Consumer Price Index (CPI) rose a mere 0.1% y/y in July, well below the 0.7% increase in June. The slow growth in inflation was blamed on a broad-based slowdown in prices for goods and service.
The June Wholesale Sales were more impressive. They rose 18.5%, bringing the data close to pre-pandemic levels. USDCAD traders ignored the news.
USDCAD is underperforming against its antipodean currency peers. Domestic political drama may be playing a role, but not much. Back in the day, a minority government, massive budget deficits, weak oil prices, and massive budget deficits, would have sent USDCAD soaring. Firing the Finance Minister would have been gasoline on the fire.
FX markets do not care. Traders are focused solely on US stock markets and US interest rates.
The US dollar is modestly lower at the NY open as downward momentum wanes. Asia equities closed on a mixed note while European indexes inched higher along with S&P futures. The US election is on the home stretch with “Elderly Joe” Biden the Democrat candidate for President. It is a sad, sad state of affairs when a semi-senile, near-cadaver is considered an upgrade to the incumbent.
The release of the FOMC minutes is cited as the reason for the lack of market price action overnight. The minutes shouldn’t be a factor as the July meeting was benign. Fed Chair Jerome Powell said in his press conference opening statement: ” we remain committed to using our tools to do what we can, and for as long as it takes, to provide some relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.”
EURUSD trade quietly in a 1.1923-1.1952 range and inflation data was not a factor. Eurozone July CPI fell 0.4% compared to the forecast for a drop of 0.3% m/m. The emergency EU summit to discuss events in Belarus has begun. The intraday technicals are bullish with the break above 1.1910 and looking for a test and eventual break above resistance at 1.2010, although momentum indicators are waning.
GBPUSD is trading just above the bottom of the 1.3223-66 range. Sterling caught a bit of a bid when UK inflation surprised to the upside. July CPI rose 0.4% compared to forecasts for a 0.1% decline m/m. The rally quickly reversed as the gain was due to higher gasoline prices. The EU/UK trade discussions have started. The BBVC reports the government believes a deal is achievable by September.
USDJPY dropped to 105.11 from 105.60 and is trading at 105.29 in NY. Bearish US dollar sentiment and a drop in 10- US Treasury yields from 0.68% in Asia to 0.653% in NY weighed on prices.
AUDUSD and NZDUSD rallied, underpinned by broad US dollar weakness. AUDUSD made another 2020 high this morning.
USDCAD Technicals: USDCAD technicals are bearish below 1.3190 looking for a break below 1.3105 to extend losses to 1.3020, quickly. A break above 1.3170 would delay the downside but only a decisive break above 1.3210 would provide a short-term reprieve. However, Bollinger bands and momentum indicators suggest USDCAD is oversold and vulnerable to a rebound. For Today, USDCAD support is at 1.3130 and 1.3100. Resistance is at 1.3190 and 1.3330. Today’s Range 1.3110-1.3190
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank