July 29, 2024
- Coven of Cash Wizards meet this week.
- FOMC trumps NFP
- US dollar opens with gains across the board compared to Friday
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3831, overnight range 1.3816-1.3845, previous close 1.3838
USDCAD has rallied non-stop since July 14, then got further support after Bank of Canada Governor Tiff Macklem cut interest rates to 4.50% on July 1 and indicated that more rate cuts were to come. Meanwhile, the Fed is also expected to cut interest rates, with some analysts suggesting a cut could occur on August 1, but most certainly in September. The timing gap has resulted in the CAD/US 10-year yield spread widening to 85.5, which is underpinning USDCAD.
The economic fallout from Canada’s misguided, poorly managed, and expensive Energy Transition policy continues to wreak havoc. Environment Minister Steven Guilbeault and Parks Canada ignored dire warnings that urged controlled burns to deal with hectares of dead trees that over time became matchsticks awaiting a spark. The town of Jasper’s devastation is the result. But that’s ok, as the Environment Minister can blame the fire on climate change and justify another carbon tax hike.
There are no top-tier US or Canadian economic releases today.
USDCAD Technicals
The intraday USDCAD technical are bullish. The post-BoC rate cut uptrend line is intact above 1.3820 and looking for a decisive break above 1.3850 to extend gains to 1.3890. A move below 1.3820 suggests a retest of 1.3760. The daily RSI studies show USDCAD is very overbought and vulnerable to a correction.
The 2024 USDCAD uptrend comes into play at 1.3610, which is guarded by support in the 1.3750 area.
For today, USDCAD support is at 1.3820 and 1.3770. Resistance is at 1.3850 and 1.3890. Today’s Range 1.3820-1.3850.
Chart: USDCAD daily
Source: DailyFX
Team Cheats-Only Coaches Blamed
Canada’s National Women’s soccer team disgraced the entire country when they were caught cheating. The coach fell on her penknife and volunteered to ban herself from coaching the game against New Zealand. Canada Soccer, the governing body, had other ideas and banned her and her assistant coaches from the entire Olympics. FIFA went one better. Canada is fined $313,000 and stripped of six points but is still in contention in Group A. Soccer Canada wants you to believe that the players are entirely innocent, sort of like the getaway car driver who didn’t know his friends were robbing the bank.
Hezbollah Punishes Israeli Soccer Kids
It may have just been the reaction of a cranky neighbor upset with the squeals of delight from youngsters playing soccer on the other side of the fence. But it wasn’t. It was another mass murder by Hezbollah, organized by Iran, that left 12 Israeli children dead in a rocket attack. Global diplomats expressed outrage but urged Israel to show restraint. Hezbollah, looking at the remnants of Hamas leadership cowered in their bunkers, said, “It wasn’t us.”
Middle East Drama Fatigue
Global markets were rather blasé in the wake of the latest Iran-sponsored atrocities against Israel and Russian President Putin’s promise to kick off another cold war. Safe-haven currencies were modestly bid, Treasury yields slipped, but oil prices remained steady, suggesting traders are more concerned about US, UK, and Japanese monetary policy decisions this week than an expanding Middle East war.
Global Equities are Steady
Asian equity indexes closed higher, led by a 2.233% rally in Japan’s Topix and a 0.88% gain in Australia’s ASX 200. European bourses are posting modest gains except for the French CAC, which is unchanged. S&P 500 futures are up 0.34%. The US 10-year Treasury yield has dropped from 4.255% on Friday to 4.162% today.
EURUSD
EURUSD traded defensively in a 1.0826-1.0870 range overnight due to an abundance of caution ahead of this week’s Euro-area data, which includes GDP on Tuesday and inflation on Wednesday, along with the FOMC meeting. If Fed Chair Powell leaves a September rate cut on the table, EURUSD may retest the 1.0910-20 area.
GBPUSD
GBPUSD is trading defensively in a 1.2807-1.2887 range due to rising expectations that the Bank of England will cut rates by 25 bps to 5.00% on Thursday. That sentiment is fueling EURGBP demand, which is also weighing on prices. The break below 1.2850 today risks further losses to 1.2770.
USDJPY
USDJPY is trading negatively in a 153.03-154.36 range due to a mix of safe-haven demand due to geopolitics and expectations by some economists, including JP Morgan, that the Bank of Japan hikes its benchmark rate to 0.25% from 0.10% on Wednesday. It is not the consensus outcome, which explains recent USDJPY volatility.
AUDUSD and NZDUSD
AUDUSD traded in a 0.6540-0.6569 range. Selling pressure from concerns about global economic growth and falling iron ore prices is being offset by increased hopes for a dovish FOMC outcome. NZDUSD drifted in a 0.5875-0.5901 band ahead of the upcoming FOMC meeting, which will provide direction.
USDMXN
USDMXN traded in an 18.4158-15.5091 range overnight. The upcoming FOMC meeting is key; however, traders are keeping a close watch on the US presidential race as Trump is not considered “peso-friendly.”
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1316 vs exp. 7.2522 (prev. 7.1270).
Shanghai Shenzhen CSI 300 fell 0.54% to 3390.74.
Chart: USDCNY and USDCNH
Source: Investing.com
