July 11, 2024
- US Core CPI surprises to the downside
- Weekly jobless claims fall 17,000 to 222,000
- US dollar sinks, post CPI.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3631, overnight range 1.3590-1.3640, previous close 1.3621
USDCAD traded sideways in an uninspired overnight session, then dropped from 1.3630 to 1.3590 on the heels of the US CPI data. Comments by Fed Chair Jerome Powell on Tuesday and Wednesday have raised hopes for an earlier than expected Fed rate cut. However, he cautioned that it is data dependent. He was heartened by signs that the labor market which was cooling. Today’s US jobless claims data contradicts that view.
WTI oil traded in a 82.14-82.87 range overnight and popped to 82.55 after the US data. Oil garnered bit of support after the Energy Information Administration (EIA) reported a 3.44 million barrel drop in US crude inventories for the week ending July 5.
USDCAD Technicals
The intraday technicals are neutral inside a 1.3590-1.3650 band. A break above 1.3660 targets 1.3690 while a move below 1.3590 targets 1.3550.
USDCAD remains below the 100-day moving average (1.3639) which suggests a test of the 200-day moving average at 1.3590. That level is also the 38.2% Fibonacci retracement level of the 2024 range, A break below 1.3590 puts the 50% Fibonacci level (1.3515) in play.
For today USDCAD support is at 1.3590 and 1.3550. Resistance is at 1.3650 and 1.3690. Today’s range is 1.3550-1.3650
Chart: USDCAD Daily
Source: DailyFX
CPI has that Boom Boom.
Today’s inflation data meant different things to different markets. Headline CPI rose3% y/y, below the 3.1% predicted and the 3.3% seen in May. Core CPI rose 3.3%, a tick below 3.4% forecast and the May result. The US dollar dropped across the board and the US 10-year Treasury yield dropped to 4.194% from 4.29% pre-data. But it was not all sunshine and unicorns. Weekly jobless claims fell by 17,000 which is more important than usual after Fed Chair Powell comments this week. He pointed out that a cooling labour market helped reduce a key source of sticky inflation. However today’s weekly jobless claims data suggests the labour market may not have cooled as much as anticipated.
China Behaving Badly
Taiwan’s Ministry of National Defense reported that “66 PLA aircraft and 7 PLAN vessels operating around Taiwan were detected up until 6 a.m. (UTC+8) today. 56 of the aircraft crossed the median line and entered Taiwan’s northern, southwestern, and southeastern ADIZ. The intimidation is because Taiwan President Lai Ching-te may be planning a visit to the US. How would US inflation react to China invading Taiwan?
EURUSD
EURUSD traded calmly in a 1.0827-1.0853 range than accelerated to 1.0898 following the US CPI data which stoked hopes for earlier than expected Fed rate cuts. German inflation numbers did not spark a similar action as the results were as expected.
GBPUSD
GBPUSD rallied to1.2882 from 1.2848 after an upside surprise to UK GDP in May (actual 0.4%, forecast 0.2%, April 0%).The results raised questions about how motivated the Bank of England would be to cut rates if the economy continues to expand.
USDJPY
USDJPY plunged to 158.38 from 161.76 in a sharp sell-off triggered by the US CPI data supporting an earlier than expected Fed rate cut. The steep sell-off smells like the BoJ intervention with the US inflation report providing camouflage.
AUDUSD and NZDUSD
AUDUSD rallied from 0.6744 in Asia to 0.6499 in NY , post CPI. Australian CPI did not have much impact (actual 4.3% y/y vs 4.4% in June) NZDUSD traded in a 0.6079-0.6799 range overnight then rallied to 61.35 in NY. Traders seem to have forgotten that the RBNZ adopted a slightly dovish tone just yesterday.
USDMXN
USDMXN consolidated recent losses in a 17.8168-17.8729 range then fell to 17.7071 after today’s US data.
Bitcoin (BTCUSD)
BTCUSD rallied from 57,237 to 59,654 on the back of improved risk sentiment stemming from earlier than expected Fed rate cut speculation.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1339 vs exp. 7.2730 (prev. 7.1342).
Shanghai Shenzhen CSI 300 rose 1.14% to 3468.17.
Chart: USDCNY and USDCNH
Source: Investing.com
