Photo: BingAI

July 20, 2023

  • China intervenes to boost CNY.
  • US quarterly earnings reports overshadows FX markets.
  • USD firm’s vs European currencies but drops vs. commodity block.

USDCAD Snapshot: open 1.3162-66, overnight range 1.3121-79 close 1.3164

USDCAD direction continues to be dictated by US dollar sentiment and that sentiment is being guided by Wall Street quarterly earnings reports and speculation about the Feds monetary policy intentions.  

USDCAD has drifted lower ever since peaking on Tuesday following the Canadian inflation report falling from 1.3238 to 1.3121 in Europe overnight, the rose rapidly after the better than expected weekly jobless claims report.

USDCAD is being undermined slightly by firmer oil prices.  WTI climbed to $76.90 after the US Energy Information Administration reported inventories fell 0.708 million last week.

USDCAD traders just don’t seem to want to get involved and are content to bide their time until next week’s FOMC meeting.

There are no Canadian economic reports of note today.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish after failing to break resistance in the 1.3240-1.3250 zone and while trading below 1.3190, are targeting the 1.3090-1.3100 support zone.  A break of this level will extend losses to 1.2970.  A break above 1.3190 shifts the focus to 1.3250.

For today, USDCAD support is at 1.3160 and 1.3100.  Resistance is at 1.3240 and 1.3305. Today’s range 1.3170-1.3260.

Chart: USDCAD 4 hour

 Source: Saxo Bank

G-10 FX recap

Last week’s US weekly jobless claims showed an improvement, falling by 9,000 to 228,000, which is good news for analysts who believe that the US will avoid a recession this year despite the high interest rates.

However, it’s important to note that the economic situation is not all positive. The Philadelphia Fed Manufacturing Index came in at -13.5 (forecasted to be -10), indicating that the Fed’s rate hikes are having an impact. As a result, Wall Street’s stocks opened on a mixed note.

EURUSD is currently trading defensively, having dropped from 1.1273 on Tuesday to 1.1173 in New York today. The euro suffered from the aftermath of yesterday’s UK employment data, which caused GBPUSD to decline. Moreover, somewhat dovish comments made by an ECB official, along with weaker than expected German producer prices data, have sparked discussions that the ECB may not be as hawkish as anticipated at their next meeting.

GBPUSD declined from 1.2963 to 1.2856, extending its losses from Thursday following weaker than expected inflation data. Traders now believe that the Bank of England (BoE) will adopt a less hawkish stance, leading them to revise their estimates for the peak interest rate down to 5.75% from 6.5%.

On a different note, USDJPY experienced a rally from 139.12 to 139.93, supported by comments from BoJ Governor Kazuo Ueda, who emphasized the necessity of the central bank’s ultra-easy monetary policy.

In the Australian market, AUDUSD rallied from 0.6767 to 0.6845 after a strong employment report. In June, Australia gained 39,600 new jobs (previously 69,200), and the unemployment rate decreased to 3.5% from 3.6%.

FX open, high, low, previous close as of 6:00 am ET

Source: Bloomberg

China Snapshot

Bank of China Fix: 7.1466 expected 7.2233, Previous 7.1486.

Shanghai Shenzhen CSI 300 fell 0.71% % to 3823.69.

PBoC and State Banks intervene to buy CNY and CNY and sell US dollars.

PboC leaves rates unchanged.  1-Year Loan Prime Rate 3.55% (Prev. 3.55%), 5-Year Loan Prime Rate 4.20% vs (Prev. 4.20%).

Chart: USDCNY 6 month

Source: Bloomberg