January 13, 2025
- Oil prices rise on new US sanctions against Russia
- China Trade surplus soars.
- USD consolidating Fridays gains.
FX at a Glance
USDCAD open 1.4438, overnight range 1.4412-1.4447, close 1.4432
Canada gained 90,900 jobs in December which easily topped forecasts, and the news should have driven USDCAD lower. It didn’t. That’s because the US jobs data was even stronger, which fueled widespread US dollar demand.
The news led to many economists arguing that the odds for the Bank of Canada to pause cutting rates have increased. Really? The job details were weak, and the bulk of the gains are public sector hires which are not noted for increasing the countries productivity.
The federal government is in disarray, leaving provincial premiers scrambling to counter Trump’s 25% tariff threat. Unsurprisingly, the premiers are united in one thing: ensuring that someone else’s province takes the hit. Ontario flatly rejects the idea of imposing tariffs on auto or auto parts exports. Québec, equally protective, refuses to target its lucrative forestry, energy, or aluminum industries. Meanwhile, the premiers—except for Alberta’s Danielle Smith—are more than happy to slap tariffs on crude exports, conveniently shifting the burden onto Alberta’s oil sector.
WTI oil prices jumped to 77.48 from 76.30 following a new wave of US sanctions on Russia crude. The sanctions target around 160 oil tankers, two producers and a Chinese oil terminal operator. In addition, India will not permit oil ships into its ports.
There are no top-tier US or Canadian economic reports today.
USDCAD Technicals
The intraday USDCAD technicals are bullish above 1.4390, looking for a break above 1.4470 to target 1.4500 then 1.4550. a move below 1.4490 will extend losses to 1.4360.
Longer term, nothing has changed. The October uptrend line continues to guide prices higher while they are above 1.4300. However, RSI’s indicate the currency is off its peak overbought level.
For today, USDCAD support is 1.4390 and 1.4360. Resistance is 1.4470 and 1.4500
Today’s Range: 1.4390-1.4470
Chart: USDCAD 4 hours
America is on Fire
America is ablaze—both literally and figuratively. Wildfires in Los Angeles County have razed upscale neighborhoods, leaving destruction in their wake while residents hurl accusations of incompetence at every level of government. Meanwhile, outside California, critics gleefully brand the infernos as karmic retribution for the state’s so-called “woke” policies.
The US economy is also on fire. The economy created 256,000 jobs in December. Analysts quickly decided that the jobs data
EURUSD
NY open 1.0200, overnight range 1.0178-1.0250
The single currency is suffering from “strong dollar syndrome.” The US economy is robust and the latest NFP data suggests the Fed will not cut interest rates any time soon. The ECB doesn’t have the same luxury. Inflation is sticky and at risk of rising due to rising gas prices and the risk of higher prices means policymakers will stay on the easing rate path. However, EURUSD may consolidate gains today as it is oversold.
GBPUSD
NY open 1.2135, overnight range 1.2102-1.2210
Sterling is the proverbial “red-headed” stepchild in FX markets as it continues to be slapped silly as rising gilt prices evoke memories of the disastrous Truss/Kwarteng budget. The sell-off may continue on Wednesday if the UK CPI, PPI, and Retail Sales data disappoint traders. The GBPUSD technicals are bearish and targeting 1.2000 but the intraday RSI suggests that it is oversold.
USDJPY
NY open 157.43, overnight range 157.01-157.97
Japanese markets were closed today but prices slid ahead of the BoJ policy meeting on January 24. The odds slightly favour a 25 bps rate hike.
AUDUSD
NY open 0.6144, overnight range 0.6131-0.6163
AUDUSD is suffering from rate differential blues. The RBA is widely expected to cut rates in February while the next Fed rate cut is not projected until June. In addition, China’s economic growth woes continue to undermine the currency pair.
NZDUSD
NY open 0.5547, overnight range 0.5542-0.5572
Kiwi got spanked following the surge in China exports in December which suggests sharply lower results as the gains were due to front-loading shipments to beat Trump’s tariffs. In addition, the threat of another China/US trade war and Friday’s NFP data weighed on the currency.
USDMXN
NY open 20.7997, overnight range 20.6973-20.8445
USDMXN rallied post-NFP and continued to inch higher overnight. The gains are due to the increased odds for another Banxico rate cut while Friday’s NFP pushed out the odds for a Fed rate cut to June. Trump’s tariff plans are also underpinning the currency pair.
BTCUSD (Bitcoin)
NY open 91,775, overnight range 91,714-96,060
Bitcoin finished Friday’s session relatively unscathed but came under pressure in Asia. Prices fell steadily and are testing support in the 91,500 area. The mix of robust US dollar strength, poor risk sentiment, and bearish technicals, which target 85,000 on a move below 91,000, are driving prices lower.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC Fix: 7.1885 vs exp. 7.3442 (prev. 7.1891)
Shanghai Shenzhen CSI 300 fell 1.25% to 3732.48
Trade surplus surges to $104.84 billion (forecast $99.8b, November $97.4b) Exports rise 10.7% y/y in December while imports rose 1.0%.
“Tariff Man” is coming! Ship while you can” That was the motto for Chinese exporters in December as they appear to have front-loaded US bound shipments ahead of Trump’s inauguration.
PBoC attempting to strengthen yuan by raising the cross-border macro adjustment parameter to 1.75 which means companies can borrow 175% of their net assets in foreign debt, up from the previous 150%, in July 2023. The move means Chinese firms can borrow more foreign capital, boosting inflows, creating demand for yuan.
Chart: USDCNY and USDCNH
