- ECB meeting discusses next meeting
- New Zealand plans to tax cow farts
- US dollar steady ahead of Friday’s US inflation data
FX change at a glance
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.2560-64, overnight range 1.2551-1.2579, close 1.2558,
USDCAD failed to sustain the break below support at 1.2530 yesterday, even though prices dropped to 1.2517. Instead, prices rebounded to 1.2560, in tandem with the S&P 500 index sliding to its session low.
USDCAD continues to be undermined by Canada and US interest rate differentials and the prospect that the Bank of Canada may raise rates more aggressively than the Fed.
Oil prices are firm but below the overnight peak. WTI traded in a $121.37-$122.69/b range supported by fears demand will outstrip supply. Yesterday, the United Arab Emirates (UAE) oil minister said “we are nowhere near the peak because China is not back yet.
The Bank of Canada Financial system Review, released today, is a non-event for FX.
USDCAD technical outlook
The intraday USDCAD technicals are bearish. The currency pair is being guided lower by a two-week old, downtrend channel, between 1.2470 and 1.2680. Longer term, the uptrend line from September 2012 is intact while prices are above 1.2310 on a weekly chart.
For today, USDCAD support is at 1.2520 and 1.2490. Resistance is at 1.2580 and 1.2620. Today’s Range 1.2510-1.2590
Chart: USDCAD 4 hour
Source: Saxo Bank
G-10 FX recap and outlook
It’s a slow news day and markets reacted in kind. The US House of Democrats passed a gun control bill which is widely expected to be shot down in the Senate. Russia’s military is in a fierce battle for Sievierodonetsk, one of the last major cities in the Donbas region. China plans to lock down 2.7 million people in a region of Shanghai for Covid testing.
Asia stocks indexes closed in the red with a 1.42% plunge in Australia’s ASX 200 leading the way. Japan’s Nikkei 225 index finished nearly unchanged. European bourses are on the defensive ahead of today’s ECB monetary policy meeting. The German DAX lost 0.66%, while the French CAC index and the UK FTSE 100 fell 0.34%. US equity futures are modestly higher due to the US 10-year Treasury yield sliding from 3.05% to 3.02%.
Weekly Jobless Claims rose 27,000 to 229,000, which was higher than expected and weighed on S&P 500 futures prices.
EURUSD traded in a 1.0695-1.0733 range overnight then popped to 1.0767 after the ECB said they planned to raise the key interest rate by 25 basis points at the July and September meetings. In addition the ECB statement said “ a gradual but sustained path of further increases in interest rates will be appropriate.” So, why wait?
A cartoon by Scott Adams sums up the gist of today’s meeting.
GBPUSD traded in a 1.2494-1.2547 band. The UK economic data calendar was empty, shifting the attention to rising petrol prices and looming rail disruptions starting June 21, 23, and 25. Traders are marking time while awaiting the June 18 BoE monetary policy meeting.
USDJPY rallied in Asia, rising to 134.55, then dropped to 133.21 in NY, coinciding with the dip in US Treasury yields. Nevertheless, the Bank of Japan’s decision to adhere to their stimulus monetary policy as the other major central banks raise rates, underpins the currency.
NZDUSD traded in a narrow 0.6435-0.6459 range. Prices may have been supported by NZ government plans to tax sheep and cow farts. The NZ Climate Minister said, “There is no question that we need to cut the amount of methane we are putting into the atmosphere, and an effective emissions pricing system for agriculture will play a key part in how we achieve that.”
FX open, high, low, previous close as of 6:00 am ET
Today’s Bank of China Fix 6.6811, Previous 6.6634
Shanghai Shenzhen CSI 300 fell 1.05% to 4,175.68, Previous close 4,219.81
China Trade data improves after Shanghai ports reopened. May Exports rose 16% y/y (previous 3.9%) while imports rose 4.1% from 0.0%.
Chart: USDCNY 1 month
Source: Yahoo Finance