April 11, 2023

  • Bitcoin rally shows traders embracing risk.
  • European stocks, and US equity futures rise.
  • US dollar opens mixed from Monday but lower from the NY close.

FX at a glance

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3499-03, overnight range 1.3484-1.3511, close 1.3510

USDCAD continues to spin its wheels in the 1.3400-1.3560 range that has contained price action since March 31. Gains continue to be capped by hopes that WTI oil prices will rise towards $90.00/barrel and by the latest bout of positive risk sentiment. The downside is supported by bullish USDCAD technicals, and lingering concerns that US interest rates have further to go while Canadian rates remain unchanged.

The Bank of Canada is widely expected to leave interest rates unchanged at 4.5% tomorrow.  The strong domestic employment picture will be acknowledged, but it won’t change the outcome. The accompanying Monetary Policy Report should see an increase in the Q1 GDP growth forecast while inflation heads to 3.0%.

The Canadian economic data calendar is empty.

USDCAD Technical Outlook

 The intraday technicals are mildly bullish inside a 1.3400-1.3560 range, with the intraday uptrend intact while trading above 1.3480. A topside break targets 1.3650 while a move below 1.3480 puts the 1.3390-1.3400 area in play.

The uptrend line from June 2022 is at 1.3390 and it guards the long term uptrend from June 2021 at 1.29037

For today, USDCAD support is at 1.3480 and 1.3430.  Resistance is at 1.3540 and 1.3540.

Today’s range 1.3470-1.3540

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

The Easter eggs have been eaten, the bunny has returned to its burrow, and Europeans have returned from their four-day Easter break in a perky mood. “rah-rah, sis-boom-ba. Stocks are rising, Hurrah, Hurrah.”

Traders have largely dismissed the war in Ukraine as just an expensive nuisance, recent bank woes as a tempest in a teapot, and higher interest rates as “transitory.”

China continues to taunt Taiwan (and Uncle Sam) with its recent military drills, and reportedly blew off calls from US Secretary of Defense Lloyd Austin. The news didn’t put a dent in positive risk sentiment.

The evidence is in bitcoin. BTCUSD rallied from $27,836.40 on Good Friday to $30,089.62. The rally is due to a bit of a short squeeze in the face of speculation that the Fed is close to lending rate hikes.

Gold is another beneficiary of the “Fed pausing” story. XAUUSD began its latest rally on March 9, and has climbed from $1811.80 to $2031.35 on April 5.  Prices have slipped to $2002.84 in NY today.

World Bank economists are doing their bit. They raised their 2023 global growth outlook to 2.0% from 1.7% due to an improved outlook for China’s economic recovery.

The US 10-year Treasury yield is languishing around 3.40%, well below its beginning of March peak of 4.05% due to a mix of traders betting the Fed tightening cycle is close to ending and demand from investors seeking to lock in relatively “high” yields.

EURUSD jumped aboard the rally price overnight, rising from 1.0860 to 1.0919 in early NY trading. The Sentix April Investor Confidence Survey showed an improvement to -8.7 from 11.1 and helped support prices. The technicals are bullish above 1.0850, looking for a break above resistance at 1.1000.

GBPUSD is trading at the top of its 1.2381-1.2450 range due to improved risk sentiment.  The intraday technicals are bullish above 1.2350, looking for a break above 1.2550 to target 1.2700.

USDJPY traded in a 133.00-133.68 range and is trading just above the low in NY, partly because the US 10-year yield rally stalled.

AUDUSD traded in a 0.6640-0.6678 range. The currency got a boost from improving consumer confidence, which surged to 9.4% in April, from 0% in March. Prices are supported by the mildly positive risk tone and the RBA’s tightening bias, even after they left rates unchanged. Economists are debating the prospect that 3.60% is the terminal rate.

NZDUSD drifted in a 0.6211-0.6232 band as the impact of the 0.50 bp rate hike faded, partly because analysts believe rates may be close to topping for this cycle. NZDUSD continues to be supported by the rate differential between NZ and Australia.There are no notable US economic reports today but Fed officials, Harker and Goolsbee (both voters) are speaking.

Chart of the Day Bitcoin (BTCUSD)

Source: Coindesk

FX open, high, low, previous close as of 6:00 am ET

Source: Saxo Bank

China Snapshot

Bank of China Fix:  6.8882, Previous: 6.8764

Shanghai Shenzhen CSI 300 fell 0.11% to 4100.15.

March CPI 0.7% (forecast, 1.0%, February 1.0% m/m), CPI -2.5% y/y vs Feb. -1.4% y/y/.

ING analysts suggest the weak inflation reading is evidence the economy recovery is sluggish.

Chart: USDCNY 1 month

Source: Bloomberg