January 9, 2025

• US markets closed for National Day of Mourning
• There are plenty of Fed officials offering monetary policy views today.
• USD opens continues to grind higher in subdued trading

FX at a Glance

USDCAD open 1.4386, overnight range 1.4385-1.4405, close 1.4376

The US Day of Mourning may give the Canadian dollar a reprieve, at least until tomorrow’s Canadian and US employment reports.

Canada is expected to have added 25,000 jobs in December, but the unemployment rate is forecast to rise to 6.9% from 6.8%.

The Canadian government is not taking Trump’s tariff threats lying down. Despite the Federal Liberal Party being distracted with a leadership contest while most Liberal MPs are rewriting their resumes, they have come up with a tariff plan of their own. They plan to slap levies on imports of orange juice and toilets from the US. Perhaps they think taxing toilets will prevent the Canadian dollar from being flushed away.

WTI oil prices traded sideways in a 72.84-73.53 range, with short-term downside supported by a nasty cold snap impacting the Midwest and East Seaboard.

There are no actionable Canadian economic reports on tap today, and FX trading will be subdued due to events in the US.

USDCAD Technicals

The intraday USDCAD bias is bullish while trading above 1.4340, looking for a break above 1.4450 to extend gains to 1.4500. A move below 1.4340 targets support at 1.4280.

The October uptrend line is intact above 1.4250, which is guarded by the bottom of the 2 STD Bollinger Band at 1.4315, while the top of the Bollinger Band at 1.4450 improves double top resistance.

For today, USDCAD support is 1.4360 and 1.4340. Resistance is 1.4410 and 1.4450.

Today’s Range: 1.4270-1.4360

Chart: USDCAD daily

R.I.P Jimmy Carter

The 39^th President of the United States, James Earl Carter Jr will be laid to rest today. His one-term presidency led to the Camp David Accords, the peace treaty between Egypt and Israel and the transfer of the Panama Canal to Panama. President Joe Biden (or whoever is pulling his strings) declared a Day of Mourning today.  That means the NYSE and Nasdaq are closed as are Federal offices and most banks.  The bond market will close at 2pm.

FOMC Minutes Reveal Turmoil from Trump

Donald Trump trashed  the Federal Open Market Committee. The stewards of the American (and by default global) economies admitted that they did not have much of a clue as to how monetary policy will unfold under President Trump. However, they masked their befuddlement by describing the current environment as one of elevated uncertainty, which helps explain why they opted for a slower pace of policy easing.

EURUSD
NY open 1.0303, overnight range 1.0284-1.0352

EURUSD is struggling to stay afloat, and yesterday’s release of the FOMC minutes from December 19 didn’t help. The single currency is suffering from contrasting monetary policy outlooks between the ECB and the Fed. Yesterday, ECB policymaker and Bank of France President François Villeroy said rates should reach 2.0% by the summer, assuming inflation is as expected. German industrial production jumped to 1.5% in November (October 0.4%), which helped to limit EURUSD losses today. EURUSD technicals are bearish, with a decisive break below 1.0220 targeting 0.9950.

GBPUSD
NY open 1.2284, overnight range 1.2239-1.2367

GBPUSD is getting pummeled by UK budget concerns, which have been exacerbated by the surge in Gilt yields. The move is compounded by broad US dollar strength due to higher US Treasury yields, FOMC caution, and Trump’s tariff threat. GBPUSD dropped below its 2024 low, and while prices are below 1.2430, the risk is for further losses to 1.2190.

USDJPY
NY open 1.5801, overnight range 157.76-158.40

USDJPY chopped about in a similar range to yesterday. Prices continue to be supported by firm US 10-year Treasury yields (4.68%) and expectations for the Fed to slow its pace of rate cuts. However, gains were capped by recent Finance Ministry and BoJ intervention threats and today’s higher-than-expected wage growth data. Labour Cash Earnings jumped to 3.0% in November compared to 2.2% in October, which raises the risk of a BoJ rate hike in January.

AUDUSD
NY open 0.6197, overnight range 0.6172-0.6218

AUDUSD remains under duress due to fear of a global trade war and China’s ongoing economic slump. In addition, the RBA is expected to start easing on February 18.

NZDUSD
NY open 0.5593, overnight range 0.5572-0.5611

NZDUSD is trading negatively in the wake of the somewhat hawkish-sounding FOMC minutes, global trade uncertainties, and a broadly firmer greenback.

USDMXN
NY open 20.4385, overnight range 20.3905-20.4998

USDMXN drifted higher due to broad US dollar strength following the release of the FOMC minutes. Traders are looking ahead to today’s inflation data. Core inflation is expected to have firmed to 0.45% from 0.5% m/m in December, while Headline inflation eased to 4.28% y/y from 4.55%. Prices continue to be supported by Trump’s threat of 25% tariffs, effective January 20, 2025.

BTCUSD (Bitcoin)
NY open 93,607.0, overnight range 92,540-96,510

Bitcoin retreated due to renewed uncertainty around the Fed after the FOMC minutes reminded traders that the pace of rate cuts would be slowing. Nevertheless, the downside appears limited due to hopes of an improved crypto regulatory environment with a Trump administration.

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

China Snapshot

PBoC Fix: 7.1886 vs exp. 7.3159 (prev. 7.1887)

Shanghai Shenzhen CSI 300 fell 0.25% to 3779.88

China December  CPI 0%, forecast 0%, November -0.6%m/m, 0.1% y/y, November 0.2% y/y

China December PPI -2.3% y/y, forecast -2.3%, November -2.5%.

The year over year increase in inflation suggests that the Chinese economy continues to face challenges. Even worse, the risk of another US trade war may offset benefits from earlier announced stimulus packages.

Chart: USDCNY and USDCNH

Sources: Yahoo Finance, Oanda, Investing.com, Google Finance