August 23, 2024
- Canada June Retail Sales,ex-autos rebound from -1.2% in May to 0.3%m/m
- Markets on hold until Powell’s speech at 7:00 am PDT
- US rangebound but modestly firmer from yesterday’s opening levels.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3588, overnight range 1.3582-1.3618, previous close 1.3617
USDCAD is choppy in a downtrend channel with prices pressures exacerbated as stale long USDCAD positions are being unwound. Dovish comments from Fed Chair Powell today that suggest a need for more aggressive rate cuts would drive prices through support and put 1.3460 in play.
The great Canadian Railway strike came to abrupt end after the government ordered binding arbitration.
Headline Canadian retail sales fell as expected(-0.3% m/m) in June with retail sales, but retail sales, ex-autos rose 0.4% (forecast -0.2%m/m)but any traction to the data will be short lived, due to Powells upcoming speech. Even so, Retail Sales fell 0.5% in Q2. The data was largely ignored by FX traders.
Source: Statistics Canada
WTI oil has a small bid and rose from 72.83 to 73.92 and it is near the top of that range in early NY trading. Prices are underpinned by mildly improved global risk sentiment and also because of caution ahead of the weekend. Iran and Hezbollah continue to threaten more attacks on Israel.
USDCAD technicals
The intraday USDCAD technicals are bearish in a downtrend channel between 1.3620 on the top 1.3540 on the bottom. A topside break suggests further gains to 1.3660, then back to 1.3690.
Longer term, USDCAD iis probing support from the w00 day moving average at 1.3590 and prolonged price action below this levels suggests further losses to 1.3440.
For today, USDCAD support is at 1.3560 and 1.3510. Resistance is at 1.3620 and 1.3660. Today’s Range 1.3560-1.3640
Chart: USDCAD daily
Source: DailyFX
Reality Check From Jackson Hole
Bond traders have hammered Treasury yields since early July. The US 10-year Treasury yield dropped from 4.48% on July 1 to 3.67% on August 5, before rebounding slightly to 3.86% today. Meanwhile, the US dollar index (DXY) slid from 105.73 to 100.80 on Wednesday, and currently sits at 101.30. The S&P 500, unfazed by the mid-to-late July tech stock meltdown, has gained 1.75% since July 1. These market moves stem from traders and analysts, operating in thin liquidity, betting that the Fed will need to cut interest rates more aggressively and faster than previously expected.
Today, Fed Chair Jerome Powell is likely to say, “Give your head a shake.” He’s not about to let a bunch of greedy traders dictate monetary policy. A chorus of FOMC members seem to agree, suggesting that while it may be time to start easing, it’s best done gradually.
EURUSD:
EURUSD recovered most of yesterday’s losses, trading within a 1.1108-1.1132 range. Traders largely stayed on the sidelines, awaiting Jerome Powell’s remarks expected around 10:00 am EDT.
GBPUSD:
GBPUSD rallied within a 1.3085-1.3137 range as traders positioned for a dovish Powell speech. They seemed less concerned with Bank of England Governor Andrew Bailey’s upcoming speech at Jackson Hole. The UK GfK August consumer confidence index remained unchanged at -13, with no impact on trading.
USDJPY:
USDJPY see-sawed between 145.29 and 146.34. Prices found support after Bank of Japan Governor hinted at further rate hikes. He remarked that “Japan’s short-term rates are very low. If the economy is in good shape, they will move up to levels deemed neutral,” but added that “there is very high uncertainty about where rates will eventually settle.”
AUDUSD and NZDUSD:
AUDUSD consolidated recent gains in a 0.6702-0.6733 range, bolstered by modestly higher commodity prices. Similarly, NZDUSD edged up from 0.6133 to 0.6160. New Zealand retail sales fell 1.2% in Q2, keeping the possibility of further RBNZ OCR rate cuts alive.
USDMXN:
USDMXN is consolidating yesterday’s gains within a 19.4355-19.5430 band and is on track to close the week down 4.9% compared to last Friday. USDMXN remains supported by yesterday’s soft inflation and GDP data, which suggest Banxico may cut rates again in September.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1358 vs (prev. 7.1228).
Shanghai Shenzhen CSI 300 rose 0.42% to 3327.19
Bloomberg reports: China bond trading collapses after PBoC interferes in record rally. The average daily trading volume fell 90% from average volumes on August 7 and 8.
Chart: USDCNY and USDCNH
Source: Investing.com
