January 7, 2025
- Markets ignoring Trump denial of Washington Post report on tariffs
- US ISM Services PMI expected at 53.3 ca 52.1 in November.
- USD opens soft, consolidating yesterday’s losses.
FX at a Glance
USDCAD open 1.4305, overnight range 1.4298-1.4350, close 1.4331
USDCAD is consolidating yesterday’s losses sparked by Washington Post story about Trump paring back tariffs (Trump denies it) and Trudeau’s sort-of resignation. Mr Trudeau said he was resigning but would stay on until a new leader was chosen. Then he announced that parliament was being prorogued. Shutting down the government until March 24 leaves a lame duck administration to deal with Trump and his tariffs. A host of polls show that Canadian’s do not want a Liberal government and the current MP’s do not have a mandate to negotiate with the new president.
The domestic political dysfunction is a Canadian dollar negative and will put a floor under USDCAD
WTI oil is near the top of its 73.11-74.20 range due to the recent US dollar weakness and the report that Trump and Xi Jinping are talking which suggests a possible thaw in trade hostilities.
USDCAD Technicals
The intraday USDCAD are turning bullish and breaking yesterday’s hourly downtrend line with today’s move above 1.4310. If sustain, USDCAD should extend gains to 1.4340. A move below 1.4270 would shift the focus to support in the 1.4250 zone.
The October 2024 uptrend line is intact above the 1.4220-30 area and guarded by Fibonacci retracement support 1.4238. In addition, the RSI has retreated from overbought to neutral.
For today, USDCAD support is 1.4280 and 1.4250. Resistance is 1.4340 and 1.4380.
Today’s Range: 1.4270-1.4350.
Chart: USDCAD daily
Come on Feel the Noise
Global stock indexes are mostly higher, S&P 500 futures are flat, and the US dollar is sliding on day two of the first full week of trading in 2025. It’s just noise. Traders are reacting to headlines about tariffs and the escalating problems of leftist governments around the world. It helps to fill the void of actionable top-tier US economic data, which, for the most part, is all that matters. Today’s US ISM services PMI data could underpin the US dollar ahead of the release of the FOMC minutes from the December 19 meeting tomorrow.
Musings from the Mar-a-Lago White House
The anti-Trump media is losing its stuff as Trump lobs verbal bombs willy-nilly from Palm Beach. He continues to stir the pot with tweets from TruthSocial about Greenland joining the US or Canada becoming the 51st State. The Washington Post wrote that Trump would pare back his tariff policy, which weighed on the US dollar yesterday. Trump had this to say: “That is wrong. The Washington Post knows it’s wrong. It’s just another example of Fake News.”
In addition, China confirmed that President Xi Jinping and Donald Trump have been chatting. China’s Foreign Ministry spokesman said, “China stands ready to work with the US under the principles of mutual respect, peaceful coexistence, and win-win cooperation to advance the stable, healthy, and sustainable growth of China-US relations for the benefit of the two countries and the world.”
EURUSD
EURUSD rallied yesterday and consolidated the gains in a 1.0376-1.0435 range. Prices are underpinned partly because Eurozone inflation rose 2.4% y/y in December. The result was expected, but it was higher than in November and helped to temper calls for aggressive ECB easing.
GBPUSD
GBPUSD climbed on the back of broad-based US dollar selling pressures yesterday, then traded in a 1.2040-1.2576 range overnight. The move may not last as traders ignored a report that UK retailers will lay off thousands of employees after poor Christmas sales. The BRC reported that “For 2024 overall, UK Total Retail sales increased by 0.7% from 2023. Food growth was 3.3%, and the Non-Food decline was 1.5% for the year. For the three months to December (the Golden Quarter), sales growth was 0.4% year on year.”
USDJPY
USDJPY rallied to 158.42 in early Asian trading, then dropped to 157.38 after verbal intervention by Finance Minister Katsunobu Kato. He claimed that the government has been alarmed by foreign exchange developments, suggesting BoJ intervention could be imminent. Even so, USDJPY gains are being driven by widening Japan/US interest rate differentials.
AUDUSD and NZDUSD
AUDUSD is near the top of its 0.6239-0.6289 range due to the generally soft US dollar profile. Prices remain supported on hopes that Trump backs off on his tariff threats, despite his remarks to the contrary.
NZDUSD climbed from 0.5635 to 0.5693 as it tracked AUDUSD moves.
USDMXN
USDMXN embraced hopes of a more moderate US tariff regime and dropped to 20.3130 overnight from yesterday’s peak of 20.6669. It is trading near its session low ahead of today’s ISM Services PMI, which could give the greenback a boost.
BTCUSD (Bitcoin)
BTCUSD rallied yesterday and then traded in a 98,751-102,760 range overnight, with the gains fueled by broad US dollar weakness.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC Fix: 7.1879 vs exp. 7.2994 (prev. 7.1876)
Shanghai Shenzhen CSI 300 rose 0.72% to 3796.11
Chart: USDCNY and USDCNH -daily 1 year.
Source: Investing.com, Oanda.com
