Photo:Capital Records/Beach Boys

May 9, 2023

  • Weak China trade data gives greenback a small boost.
  • Markets spinning its wheels until Wednesday’s US inflation data.
  • US dollar opens mixed from Monday but grinds out small gains overnight.

FX at a glance

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3368-72, overnight range 1.3367-1.3383, close 1.3373

USDCAD traded quietly in a tight range. USDCAD continues to be undermined by Friday’s strong domestic employment report and by concerns that the Bank of Canada’s next move could be a rate hike.  Governor Tiff Macklem’s suggested as much when he warned that inflation could get stuck above the BoC’s inflation target.

WTI oil prices have not been much of a factor for USDCAD trading. Prices have fallen sharply in the past three weeks, but the decline did not have much impact on USDCAD. WTI climbed from $72.16 to $73.05/b overnight, supported by supply disruptions in Alberta, due to wildfires. The Canadian economic calendar is empty.

USDCAD Technical Outlook

USDCAD is consolidating its losses after falling below the 200-day moving average last Thursday, while failing to move below the April 17 low. The gains are merely a correction while prices are below the 1.3405-1.3440 level.

The April 2022 uptrend line (weekly chart) comes into play at 1.3290.

For today, USDCAD support is at 1.3330 and 1.3290.  Resistance is at 1.3390 and 1.3440

Today’s range 1.3320-1.3410

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

It is probably a good thing that Fed policymakers opted for “data dependent” decision making, as the alternative looks to be a tad sketchy. 

Case in point, Chicago Fed President Austan Goolsbee told Yahoo Finance “I am certainly getting vibes … in the market and in the business context that a credit crunch or, at least, a credit squeeze, is beginning.” Help me Rhonda!

The Fed’s Senior Loan Officer Opinion Survey (LOOS) suggested that Goolsbee’s vibes may have had something to do with reading the survey. The LOOS data said requirements for commercial and industrial loans got tougher.

Russia held its annual Victory over Nazis parade in Moscow, prompting German Chancellor Olaf Scholz to say “We must not be intimidated by such power plays! Let’s remain steadfast in our support for Ukraine – for as long as it takes! He may have misspoken. Cynics believe he meant to say, “at least as long as there are Ukrainians to do the fighting.”

The US debt ceiling talks drag on and on. If Democrats and Republicans cannot agree on a deal, the ensuing government shutdown would be another negative for the US dollar. It would also pose risks to the global financial system.

The US dollar caught a bit of a bid in Asia after Chinese trade data showed exports fell 7.9% suggesting the global economic slowdown is impacting China. However Goldman Sachs economists said the results were in line with historical patterns.

European equity indexes and S&P 500 futures are down following Chinese trade data, debt ceiling headlines, and positioning ahead of Wednesday’s US inflation report. Oil prices retreated but gold prices inched higher in subdued trading.

EURUSD traded in a 1.0960-1.1004 range with the low occurring in NY trading. The price action is merely positioning ahead of Wednesday’s US inflation data. 

ECB Chief Economist Philip Lane believes European inflation will slow sharply this year. He said, “We’re still (seeing) a lot of momentum in inflation… there’s still momentum in food and core inflation,” according to Reuters. The EURUSD uptrend from October 2022 is intact above 1.0840.

GBPUSD traded in a 1.2589-1.2639 range with prices tracking EURUSD moves. Prices climbed then sank following Halifax April House Prices data (actual -0.3% m/m vs forecast 0.2%). GBPUSD technicals suggest an upside bias while prices are above 1.2520.

USDJPY traded choppily in a 134.73-135.32 range with prices rebounding from the low to 135.15 in NY. Bank of Japan Governor Kazuo Ueda testified before parliament but said nothing new.

AUDUSD is at the bottom of its 0.6754-0.6785 range after disappointing Australian retail sales and Chinese trade data limited upside gains.  

There are no US economic releases of note today.

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

China Snapshot

Bank of China Fix: 6.9255, previous 6.9158

Shanghai Shenzhen CSI 300 fell 0.86% to 4027.88.

Trade surplus widens to $90.21 billion from $88.19b in March.

 Steep drop in Exports (actual 8.5% y/y vs 14.8% in March, Imports fell 7.9% vs previous -1.4%).

Chart: USDCNY 1 month

Source: Bloomberg