June 30, 2023
- RBA leaves rates unchanged-hawkish outlook.
- Friday’s BoC Business Outlook Survey supports unchanged rates.
- USD opens defensively.
FX at a glance: Friday-Tuesday NY open
Source: IFXA Ltd/
USDCAD Snapshot: open 1.3230-34, Mon-Tues range 1.3215-1.3270, close Friday-1.3248, Monday 1.3250
USDCAD dipsy-doodled in line with the prevailing US dollar sentiment. Monday, weaker than expected US ISM Manufacturing PMI data. However traders are more concerned with Friday’s US nonfarm payrolls report and the release of the FOMC minutes from the June 14 meeting.
The BoC released its quarterly Business Outlook Survey on Friday. Inflations expectations were lower but still above the BoC target, wage pressures eased expectations for price increases were softer, which suggests the BoC will leave rates unchanged on July 12.
WTI oil prices found a modest bid and rose from $69.90 to $71.68 on Monday, the traded in a $69.93/b-$70.80 overnight. The gains occurred after Saudi Arabia announced it would extend its 1 million barrel/day production cut in August while Russia said it would trim output by 500 b/day.
USDCAD Technical Outlook
The USDCAD technicals are bearish below 1.3270, looking for a move below 1.3205 to extend losses to 1.3100. A decisive move below 1.3100 suggests a sharp drop to the 1.2990-1.3000 area. A break above 1.3270 targets 1.3350, then 1.3500.
For today, USDCAD support is at 1.3220 and 1.3180. Resistance is at 1.3250 and 1.3280.
Today’s range 1.3180-1.3250.
Chart: USDCAD 4 hour
Source: Saxo Bank
G-10 FX recap
US traders are watching parades, attending BBQ’s, or hunkering down in bunkers to avoid gunfire. USA Today reported that the US has experienced an average of five mass shootings on Independence Day over the past ten years.
China is responding to the US’s bans on AI technology exports by restricting exports of gallium and germanium metals, which are crucial in semiconductor, telecom, and EV industries. Beijing toyed with the idea of renaming these metals unobtanium but feared reprisals from James Cameron or his Avatar.
European equity indexes are flitting around flat, and the US dollar has a negative bias.
EURUSD traded in a 1.0870-1.0930 range, supported by weaker than expected US ISM manufacturing data and expectations for higher ECB interest rates. Morgan Stanley has raised its forecast for the ECB terminal rate to 4.0% from 3.75% due to hawkish comments from policymakers and the anticipation of higher inflation. However, the topside was limited by weaker than expected Eurozone manufacturing activity.
GBPUSD has been trading without a clear direction within a 1.2656-1.27721 range since Friday’s close. Gains may have been curbed by concerns that the Bank of England’s hawkish interest rate outlook might be misguided, especially if crucial data, including inflation, turns out weaker than expected.
USDJPY is trading in the middle of its 144.18-144.90 range, with prices torn between demand driven by the rise in the US 10-year Treasury yield to 3.86% from 3.82% on Friday and selling pressure on USDJPY due to weak American data.
AUDUSD closed in NY at 0.6660 on Friday and then traded within a 0.6635-0.6690 range. Prices tested the bottom of the band twice, first on Monday after a weaker than expected Australian Manufacturing PMI report (actual 48.2 vs May 48.6), and then today after the RBA left its benchmark rate unchanged at 4.10%. Prices have since recovered to the top of the range. The RBA’s statement suggests that the next hike is data dependent, which is typical for central banks.
NZDUSD outperformed against its AUDUSD counterpart and traded with a bullish bias in a 0.6138-0.6689 range from Friday until today. Prices received a boost from broad US dollar weakness and China’s manipulation of the USDCNY fix lower.
The US is closed for a holiday today.
FX open, high, low, previous close as of 6:00 am ET
Bank of China Fix: July 4, 7.2046, July 3, 7.2157, June 30, 7.2258
Shanghai Shenzhen CSI 300 rose from Friday’s 3842.45 to 3899.01 today.
Caixin June Manufacturing PMI (released Monday) 50.5, May 50.9
Mizuho Bank Chief Currency Strategist Ken Cheung says the PboC is deliberately fixing USDCNY below market expectations describing it as a counter-cyclical factor to introduce a bias to the fixing.
Chart: USDCNY 6 month