April 8, 2024
- Traders looking ahead To US CPI Wednesday
- BoC rate decision and MPR due Wednesday.
- US dollar opens modestly higher-MXN outperforms.
FX at a Glance
Source: IFXA/RP
USDCAD Snapshot: open 1.3598, overnight range 1.3584-1.3617, close 1.3593
USDCAD soared then sank on Friday following robust US and a tepid Canadian employment reports. The March IVEY PMI index rose to 57.5 (forecast 54.2) which helped offset the negativity from the domestic jobs data.
Traders are looking ahead to the BOC monetary policy statement and quarterly MPR. The BoC is widely expected to be on track to cut rate in June. That may change Wednesday. Some economists are arguing that the BoC has greatly under-estimated the strength of the economy. Scotiabank economics suggest that Q1 2024 GDP is tracking at 3.5%. Even worse, the Liberal party, desperate for votes is pumping vast amounts of fiscal stimulus into the economy. National pharmacare, National dental care, breakfast plans, EV grants etc suggest that The government is easing rate for the BoC.
Oil prices are higher. WTI traded in a 54.69-86.47 range and is at the top of that band in NY. Geopolitical tensions exacerbated by Iran’s threat to strike Israeli embassy’s combined with Houthi rebel attacks on Red Sea shipping are keeping prices elevated.
USD/CAD Technicals
The intraday USDCAD technicals are bullish above 1.3540 and looking to test the 1.3630 area resistance again.
The longer term technical are unchanged. USDCAD is bullish above 1.3480 which also where 100 day(1.3482) and 200 day (1.3500) moving average support is clustered.
For today, USDCAD support is at 1.3550 and 1.3510. Resistance is at 1.3620 and 1.3650. Today’s range is 1.3550-1.3630.
Chart: USDCAD daily
Source: DailyFX
Total Solar Eclipse Takes Center Stage
Today’s focus is not data, but the total solar eclipse and people are in a party mood. The path of the eclipse passes over many cities in the US and Canada, and the best viewing areas (which include Niagara Falls) will experience a four-and-a-half-minute blackout. Hotels were booked solid despite inflated prices and some schools are closed. Niagara Falls Ontario has declared a state of emergency, Who’s afraid of the dark?
There is a rumour that when Canadian Environment Minister Steven Guilbeault found out that the eclipse would cost the U.S. at least 30 gigawatts of solar energy (enough to power 24.8 million houses for a day), he immediately proposed a planet-saving “dark tax.”
FOMC Forecasts in Question
The 10-year Treasury yield jumped to 4.408% from 4.316% on Friday, then climbed to 4.45% overnight. That’s an indication that traders expect the path to lower rates will take far longer than previously expected. The odds for a June rate cut are still around 50/50.
EURUSD:
EURUSD is looking resilient in a 1.0821-1.0844 range. Prices quickly recouped Friday’s post-NFP losses, and the focus has shifted to Wednesday’s US CPI report and Thursday’s ECB monetary policy meeting. The ECB appears on track to cut rates in June, which suggests EURUSD is vulnerable to the downside if Fed rates remain unchanged into Q4 2024. German Industrial Production rose 2.1% (forecast 0.3%) in February.
GBPUSD
GBPUSD plunged, then popped after Friday’s US jobs data, then traded sideways in a 1.2615-1.2640 range overnight. Traders are looking ahead to Wednesday’s US CPI data, which is forecast to rise to 3.4% y/y from 3.2% y/y. If so, the prospect of unchanged Fed rates for longer will limit GBPUSD gains.
USDJPY
USDJPY traded in a 151.57-151.93 range on the back of the US 10-year Treasury yield climbing to 4.45%. Japanese officials continue to threaten intervention, but the warnings are falling on deaf ears.
AUDUSD and NZDUSD
AUDUSD shrugged off Friday’s weakness and traded sideways in a 0.6560-0.6591 range. Traders are looking ahead to Tuesday’s Consumer Sentiment and Business Confidence reports. NZDUSD traded uneventfully in a 0.5999-0.6027 range ahead of Wednesday’s RBNZ monetary policy meeting.
USDMXN
USDMXN rallied after the US employment report but then retreated and traded defensively in a 16.4427-16.4941 range overnight. The peso strength is impressive as USDMXN has dropped despite a Banxico rate cut and the latest US data downgrading risk of Fed rate cuts in the near term.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.0947 vs exp. 7.2230 (prev. 7.0949).
Shanghai Shenzhen CSI 300 fell 0.88% to 3536.41
FX Reserves (March) $3.25 trillion vs February $3.23 trillion.
US Treasury Secretary Yellen threatens US sanctions on any Chinese bank that aids Russia. She said, “Any banks that facilitate significant transactions that channel military or dual-use goods to Russia’s defense industrial base expose themselves to the risk of US sanctions.”
Chart: USDCNY and USDCNH 4 hour
Source: Investing.com
