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January 13, 2021

  • US CPI  rises 0.4% as expected

USDCAD open (6:00 am ET) 1.2733-37,  Overnight Range 1.2706-1.2743

FX Ranges at a Glance:

Source: IFXA Ltd/RP

FX Recap and Outlook:  US CPI rose 0.4% as expected.  The Bureau of Labor Statistics said the  increase was driven by an 8.4% rise in the gasoline index.  The US dollar inched lower on the news.

The new year is barely two weeks old, and already FX outlooks are being revised. The consensus was for a robust global, vaccine-fueled,  economic boom, as extremely low-interest rates drive stock markets higher, and the US dollar lower. 

Bond traders didn’t get the memo.  US 10-year Treasury yields climbed to 1.185% yesterday from 0.91% two weeks ago.  Analysts are predicting that the Fed will start tapering before the end of the year.

Stocks halted their rise, and the US dollar became bid.

Fed officials weren’t having any of that.  They seemed were miffed that a bunch of bond traders were usurping monetary policy and pushed back aggressively. Kansas City Fed President Ester George said, “it is too soon the speculate about the timing of any change” in the Fed’s policy stance.”  Her colleague Raphael Bostic was open to the possibility of tapering but thought it was a low probability.  Vic Chair Clarida said there was no need to adjust the terms or pace of policy.

US presidential politics will continue to be an entertaining sideshow for traders, who are patiently waiting for Joe Biden to unveil details of his “multi-trillion dollar” stimulus program, expected Thursday.

EURUSD traded in a 1.2162-1.2223.  Prices were steady in Asia but dropped to the low in  Europe after a headline quoted  ECB policymaker Francois Villeroy saying ““We are closely following the negative effects of the euro exchange rate.”  ECB President Christine Lagarde said that the year’s start has been more positive, and economic projections from December are still correct.  She also spoke about the currency, saying that they monitor it but do not target it.

GBPUSD extended yesterday’s gains and climbed to 1.3700 overnight, before inching down to 1.3670 in NY.  Prices continue to be supported by Bank of England Governor Bailey downplaying the risk of negative rates, in a speech yesterday.  However, the rally is dubious, as he also expressed concern about the health of the economy due to the latest coronavirus restrictions.

USDJPY is trading at the top of its 103.54-103.99 range, with price action tracking US Treasury yields. There are reports that the Bank of Japan may downgrade its economic view because of the latest coronavirus outbreak.

AUDUSD and NZDUSD gave back Asia gains during the European session and opened at session lows. Prices are supported by high commodity prices.

USDCAD is trading just above the bottom of its  1.2706-1.2743 overnight range.  WTI oil prices climbed to $53.90 overnight, rising from $52.40/b yesterday, in part to the 5.8 million /b drop in US crude inventories.  Traders are ignoring news of the latest COVID-19 lockdown measures.  They are also ignoring the risk that a domestic recovery may lag that of the G-10 nations due to the delay in vaccinating the population.

USDCAD Technicals:   The intraday USDCAD technicals are bearish below 1.2740, looking for a break of 1.2700 to extend losses to 1.2660.  The longer term technicals are bearish with the December downtrend intact below 1.2820. For today, USDCAD support is at 1.2700 and 1.2660.  Resistance is at 1.2740 and 1.2890.  Today’s Range 1.2670-1.2750

Chart: USDCAD daily

  Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank