July 19, 2024

• Buggy tech update wreaks havoc world-wide.
• Negative risk sentiment permeates global markets.
• US dollar gains and safe-haven currencies outperform.

FX at a Glance

Source: IFXA/RP

USDCAD open 1.3720, overnight range 1.3701-1.3721,  previous close 1.3705

USDCAD rallied due to broad-US dollar strength and a sharp drop in the CAD/US 2-year yield spread which widened to -46.2 today from -33.8 on Wednesday. Prices may have got a bit of support after San Franciso Fed President Mary Daly did not sound overly enthused about the need to cut interest rates any time soon.  She said “We’re not there yet. We don’t have price stability right now and we need to be very confident that we’re on a sustainable path to achieve it.”

Canadian Retail Sales were weaker than expected, falling 0.8% (forecast -0.6%, while retail sales-ex-autos fell -1.3% m/m compared to a gain of 1.6% in April. Raw Materials and Industrial Product prices fell, which further supports calls for the BoC to cut rates next week.

WTI oil prices are steady in a 80.49-81.34 range. The downside is supported by increased middle east tension after Houthi rebels fired missiles at Tel Aviv.

USDCAD Technicals

The USDCAD technicals are bullish with the uptrend line from last week intact while prices are above 1.3680 on an hourly chart. A decisive breech of the 1.3730-50 area sets the stage for a retest of the 1.3850 area.

Longer term, the uptrend that began in early January  remains intact above 1.3590 which is an area protected by a cluster of support points. Also, 1.3750 represents the 78.6% Fibonacci retracement level of the October-December 2023 range. A move above that level argues for a 100% retracement which is 1.3900.

For today  USDCAD support is at 1.3680 and 1.3640. Resistance is at 1.3730 and 1.3760. Today’s range is 1.3680-1.3730

Chart: USDCAD daily

Source: DailyFX

Unsurprisingly, Trump Accepts GOP Presidential Nomination

He may be down one ear (temporarily), but Donald Trump demonstrated a capacity to walk and talk and stay awake past 8:00 pm. It was a performance that was reminiscent of President Biden in his prime, circa 1984, which, coincidentally, was also when Hulk Hogan, the man who introduced Trump to convention goers, was relevant. Meanwhile, President Joe Biden’s handlers are ready to put an end to the “Weekend at Bernie’s” facade and admit Mr. Biden is not fit to run the country.

When Updates Go Rogue

A wave of negative risk sentiment washed over global financial markets overnight. Concerns about a return to trade wars and tariffs under another Trump presidency, combined with another negative close on Wall Street and slumping commodity prices, were exacerbated by major worldwide IT outages. An update to Crowdstrike, a cybersecurity service designed to protect against internet breaches and used by many of the world’s largest companies, unleashed, according to the Daily Mail, “a death spiral of reboots and the so-called ‘blue screen of death,’ with the error message: ‘DRIVER_OVERRAN_STACK_BUFFER.’” The outage has disrupted air travel and banking, to name a few.

Stocks Prices Fall

Asian equity indexes closed with losses, led by a 0.81% drop in Australia’s ASX 200. European bourses are bleeding red, led by the German Dax, which is down 0.64%. S&P 500 futures are flat. The US 10-year Treasury yield is steady at 4.196%.

EURUSD

EURUSD peaked at 1.0937 when the ECB announced no change to interest rates, then slid steadily lower to close at 1.0897. Prices moved marginally lower overnight, with EURUSD trading in a 1.0876-1.0902 range. Traders were a little put out when the ECB President refused to give any signals about future decisions. Where once two more rate cuts were a sure thing, now traders are not so sure a cut will even happen in September.

GBPUSD

GBPUSD is weak. Prices fell from 1.2955 to 1.2901 due to a mix of weak data and elevated global risk aversion. UK retail sales fell 1.2% m/m in June (forecast -0.4%), with poor weather being blamed for the slump. On the plus side, the GfK Consumer Confidence index ticked up to -13 from -14.

USDJPY

USDJPY climbed from 156.95 to 157.88, with prices supported by broad US dollar strength and mixed inflation data. National CPI was unchanged at 2.8% y/y in June, but CPI-exfresh food rose to 2.6% from 2.5%.

AUDUSD and NZDUSD

AUDUSD traded poorly in a 0.6687-0.6710 range due to a mix of global risk aversion and slumping commodity prices. The downside was contained due to rising fears that the RBNZ may raise rates in August.

NZDUSD traded in a 0.6018-0.6058 range due to both negative risk sentiment and AUDNZD demand.

USDMXN

USDMXN drifted higher in a 17.9460 to 18.0342 range as it consolidated gains from yesterday’s rally from 17.7000. Prices are supported by fears of renewed trade wars and tariffs between the US and Mexico under another Trump presidency.

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

Source: Investing.com

China Snapshot

PBoC fix: 7.1315 vs exp. 7.2715 (prev. 7.1285).

Shanghai Shenzhen CSI 300 rose 0.51% to 3539.02.

Chinese rulers ended their Third Plenum promising “a new development philosophy centered on high-quality growth, a promise to boost technological advancements and a promise to create a fairer and more dynamic financial market.

Chart: USDCNY and USDCNH

Source: Investing.com