January 20, 2025
- US Markets closed-WEF in Davos begins
- US-Canada trade war kicks off today.
- USD trading with a modest bid.
FX at a Glance
USDCAD open 1.4470, overnight range 1.4443-1.4486, close 1.4477
UPDATE-6:00 AM PST
USDCAD plunged from 1.4470 to 1.4315 popped and then dropped to the low again, all within the span of 20 minutes, beginning at 5:30 am PST. There is no real explanation for the plunge except that USDCAD traders were very long US dollars. The FX market is thin due to the MLK holiday. A guess is that the report that Trump will declare a National Energy Emergency and roll back Biden-era climate change policies may have raised hopes that Canada’s oil export may be spared the 25% tariff. The drop below 1.4380 triggered stop-loss selling.
Nevertheless, the unsettled Canadian political situation complete with rising debt levels and a slumping economy suggests USDCAD is a buy while trading above 1.4280.USDCAD is the condemned man. It is shuffling toward the gallows, and President Trump is the hangman. Mr. Trump told a crowd at a rally on Saturday night that he would sign a slew of executive orders on Day 1, with media reports claiming the number will be 100. One of those 100 orders will include the immediate imposition of a 25% tariff on all imports from Canada.
And Canada is woefully unprepared to defend itself. Canada is the equivalent of the L.A. Fire Department—a virtue-signaling, woke-infested organization that focuses its efforts on everything but the job at hand. The country has a Prime Minister who has resigned—he just won’t leave. His party and the country do not want him around. Liberal leadership candidates are slamming his government’s record, accusing it of overspending and over-taxing the middle class.
The provincial premiers have a plan for retaliating, but Alberta Premier Danielle Smith won’t entertain any plan that includes export taxes on Alberta crude.
USDCAD traders have already lifted the currency pair to levels last seen in March 2020, and by the end of the day, those levels will look like the “good old days.”
Unfortunately, Canada’s focus on internal party politics has left the country vulnerable to Trump’s tariffs. The provincial premiers have created a list of counter-tariffs, which lame-duck PM Trudeau says he will announce in response to any U.S. actions.
The Bank of Canada Business Outlook Survey is released today, but it will be overshadowed by U.S. events.
Oil prices are torn between rising due to anticipated demand as a polar vortex engulfs most of the U.S. and Canada, and improved risk sentiment as Hamas releases hostages and Israel releases convicted murderers.
USDCAD Technicals
The intraday USDCAD are muddled. The early plung to 1.4315 smashed support levels in the 1.441 and 1.4380 levels leaving USDCAD to consolidate in a 1.4280-1.4380 range, with an upward bias.
The November uptrend channel remains intact between 1.4290 and 1.4670
For today, USDCAD support is 1.4280 and 1.4240. Resistance is 1.4410 and 1.4450
Today’s Range: 1.4280-1.4480
Today’s Range: 1.4440-1.4550
Chart: USDCAD daily
The President Trump Era Begins
US markets are closed to honor Martin Luther King Jr., a pivotal figure in the American civil rights movement.
But today, all eyes are on Washington, DC, where former President Trump becomes the current President Trump. He has learned from his four-year hiatus from the Oval Office. The kind and gentle real estate tycoon was a political neophyte when he first assumed the nation’s highest office in 2016. He has since mastered the Machiavellian art of political survival and policy manipulation from long-term swamp-dwellers, and the student is now the professor.
The Clock Keeps TikTok-ing
TikTok, a Chinese company with 170 million American subscribers, has been ordered to halt service due to national security concerns. The US government believes that Xi Jinping’s cronies use the app to track and propagandize users. Trump doesn’t share that belief and said he would likely grant TikTok a 90-day reprieve.
Davos Delegates Will Dance to the Trump Tune
The World Economic Forum in Davos (WEF) begins today. The entitled elite, who preach diversity, equality, and the dangers of climate change for the masses but not for themselves, will likely distance themselves from previous initiatives.
It has already started. The UN Special Envoy on Climate Change and Finance, Mark Carney, used his influence to create the Net-Zero Banking Alliance. Over 675 financial institutions from 50 countries signed on. However, since Trump’s win, the top banks in Canada and the US have bailed out of the program.
FX Markets in Park
The US dollar is bid and will stay that way for the rest of the day. The minute Trump signs an executive order about tariffs, all hell will break loose, even though it is expected. Until then, FX markets will trade sideways.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC Fix: 7.1886 vs exp. 7.3353 (prev. 7.1889)
Shanghai Shenzhen CSI 300 rose 0.45% to 3829.68
PBoC leaves rates unchanged
Chart: USDCNY
Sources: Yahoo Finance, Oanda, Investing.com, Google Finance
