April 17, 2024

• NDP demands filter into Canadian budget.
• Powell stomps all over rate cut speculation.
• USD opens slightly lower due to profit taking.

FX at a Glance

Source: IFXA/RP

USDCAD Snapshot: open 1.3807, overnight range 1.3801-1.3838, close 1.3829.

USDCAD ignored the Canadian budget  news overnight. Unfortunately, Canadian’s do not have that luxury. The government’s spending plans were revealed by Finance Minister Chrystia Freeland, but a lot of the programs were concocted by Jagmeet Singh’s NDP party. In recent week’s Mr Singh has dusted off his copy of Karl Marx’s Communist Manifesto and blamed Canada’s woes on rich people.

WTI oil prices are with a negative bias in an 84.41-85.50/b range after API data showed US crude inventories rising 4.09 million barrels last week, on top of the 3.03 million rise the week before. That increase has not stopped speculation that the Biden Administration could release more crude from the Strategic Petroleum Reserves (SPR).

There are no US and Canadian economic reports today but there are plenty of Fed officials who will be talking about US interest rates.

USDCAD Technicals

USDCAD has risen steadily since breaking above resistance in the 1.3630-50 area on April 10. The rally appears to be losing momentum in front of resistance in the 1.3850-80 zone, which was the peak level in November 2023 and only briefly higher (1.3980 ish) in October 2022.

Longer term, the USDCAD uptrend line from January 1 is intact while prices are above 1.3510 and it is being guarded by  previous resistance, (now support) at 1.3620. A break above 1.3860 targets 1.4000.

For today, USDCAD support is at 1.3750 and 1.3710. Resistance is at 1.3850 and 1.3870. Today’s range is 1.3770-1.3840

Chart: USDCAD daily

Source: DailyFX
Read My Lips

Fed Chair Jerome Powell knocked rate cut hopes to the canvas yesterday, saying that, “The recent data have clearly not given us greater confidence and instead indicate that it is likely to take longer than expected to achieve that confidence.” There is a lot of talk that the Fed will only cut once, although the CME Fed watch tool suggests traders still expect two rate cuts.

Equities

Asian equity markets closed mixed to lower. Japan’s Nikkei 225 index lost 1.32% while Australia’s ASX 200 index was flat. Chinese indexes rallied. European bourses are rather perky with the French CAC 40 index rising 1.22% and the German Dax gaining 0.72%. S&P 500 futures are up 0.40%. Gold prices are marginally higher with XAUUSD rising to 3,394.34.

EURUSD

EURUSD traded in a 1.0606-1.0649 band in an uninspiring market. EURUSD gains are expected to be limited in light of Jay Powell reiterating that US rates will remain elevated for longer than expected, especially as the ECB is planning to cut rates in June. Eurozone inflation for March was as expected at 2.4% y/y.

GBPUSD

GBPUSD is choppy in a 1.2406-1.2481 range after UK inflation data muddied the interest rate outlook. CPI rose 3.2% y/y in March below the February reading but a tick higher than the 3.1% expected. That was all it took for analysts to dial back the timing of a rate cut, especially in light of Fed Chair Powell’s hawkish comments yesterday.

USDJPY

USDJPY inched higher in a 154.45-154.74 band as the US 10-year Treasury yield hovered around the 4.64% range. The allure of round numbers suggests that 160.00 may lure the Bank of Japan into the intervention arena.

AUDUSD and NZDUSD

AUDUSD is near the top of its 0.6400-0.6432 range due to a bit of profit-taking after falling sharply for the past week and a slight improvement in risk sentiment. NZDUSD squeezed higher, rising from 0.5861 to 0.5918 due to Q1 CPI rising 0.6% q/q compared to 0.5% previously. The result was expected but the news reduced the need for the RBNZ to cut interest rates in the near term.

USDMXN

USDMXN consolidated recent gains in a 16.9248-17.0950 range. Prices are supported by Powell’s hawkish comments and by news that the IMF cut its forecast for Mexican growth in 2024 to 2.4% from 2.7% previously. The IMF justified the action due to the weaker than expected finish to 2023 and a contraction in manufacturing.

Bitcoin (BTCUSD)

BTCUSD remained range-bound in a 61,751-64,534 range. Powell’s reiteration that there is no need to cut interest rates any time soon is weighing on prices. The intraday technicals are bearish below 65,500

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

Source: Investing.com

China Snapshot

PBoC fix: 7.1025 vs exp. 7.2404 (prev. 7.1028).

Shanghai Shenzhen CSI 300 rose 1.55% to 3565.4.

President Biden wants higher tariffs on steel and aluminum imports from China due to the need to attract votes in Pittsburgh. As the Chinese steel market in the US is a mere $1.7 billion.

Morgan Stanley and HSBC are slashing jobs in China and Hong Kong due to falling revenue in Asia. Deutsche Bank’s CEO for Asia is optimistic.  He said “We are firmly positive on China’s long-term growth prospects… China continues to offer attractive opportunities for investment.”

Chart: USDCNY and USDCNH 4 hour

Source: Investing.com