Photo: Rolling Stones

January 24, 2023

  • Euro area PMI data helps improve risk sentiment.
  • Traders leery of stock market volatility from quarterly earnings reports.
  • US dollar opens modestly firmer, GBP underperforms.

FX at a glance

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3365-69, overnight range 1.3349-1.3383, close 1.3368

USDCAD is directionless within the confines of a narrow 1.3340-1.3420 band but trading with a negative bias due to a modestly improved global risk tone.

USDCAD is seeing a bit of pressure from higher oil prices.  WTI rose from $80.78/b to $81.98/b overnight as traders embrace the prospect of lower production from Russia and higher demand from China .However gains were capped on fears that US crude inventories will continue to rise.

Traders are a little cautious ahead of the BoC monetary policy meeting tomorrow. The debate continues as to whether the BoC will hike by 25 bps or leave rates unchanged.

As usual, USDCAD direction will follow S&P 500 index moves.  The Canadian economic calendar is empty.

USDCAD Technical Outlook

The USDCAD technicals are bearish below 1.3440, looking for a move below 1.3340 to extend losses to 1.3310.A downside breech opens the door to a test of 1.3215, the 50% Fibonacci retracement level of the June-October range on a weekly chart.

A break above 1.3480 will target 1.3620.

For today, USDCAD support is at 1.3340 and 1.3310.  Resistance is at 1.3390 and 1.3420.

Today’s range 1.3320-1.3390.

Chart: USDCAD Weekly

Source: Saxo Bank

G-10 FX recap and outlook

Most Asian markets are still celebrating the Lunar New Year but the few that were opened, were mildly risk positive.

Japan’s Nikkei 225 index closed with a 1.46% gain while Australia’s ASX index finished 0.44% higher. European bourses are cautious ahead of US quarterly earnings reports and are all modestly lower. S&P 500 futures are down 0.23%.

 There will not be any comments from Fed officials as they are in the blackout period before the FOMC meeting.

EURUSD traded in a tight 1.0853-1.0897 range with prices underpinned by better-than-expected German and Eurozone PMI data. The statement noted that “the start of 2023 saw eurozone business activity rise marginally, according to flash PMI data from S&P Global, showing a tentative return to growth after six successive months of decline.”  EURUSD continues to be supported by hawkish comments from ECB officials including President Christine Lagarde. She said the ECB made if clear that rates will have to rise significantly. EURUSD technicals are bullish above 1.0790.

GBPUSD climbed in Asia reaching 1.2412 then dropped to 1.2304 in Europe. Traders were a tad unhappy with the weaker than expected UK Services PMI Index which at 48, was below the 49.9 forecast and according to S&P Global, “the sharpest drop in business activity for two years.”. However, on the bright side, CIPS Chief Economist John Glen wrote, “the downturn may not be as long and protracted as feared.” The GBPUSD technicals are modestly positive above 1.2310.

USDJPY sank in Asia, falling from 130.72 to 129.74 then clawed back some losses in Europe, rising to 130.35. Jibun Bank PMI index data was mixed to positive. An S&P Global Market Economist wrote: Japan’s private sector kicked off 2023 on a more positive note. USDJPY technicals are bullish above 129.50 looking for a break of 131.20 to extend gains to 132.90.

AUDUSD traded narrowly in a 0.7011-0.7048 range with peak seen following the NAB Business Confidence and business Conditions indices. NAB Chief Economist Alan Osler said, ”the main message from the December monthly survey is that the growth momentum has slowed significantly in late 2022 while price and purchase cost pressures have probably peaked.” 

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

Source: Saxo Bank

China Snapshot

Closed Lunar New Year Bank of China Fix: Jan. 20,2023, 6.7702, previous 6.7674.

Shanghai Shenzhen CSI 300 closed 4181.53. 20Jan23

Chart: USDCNH (off-shore) one month

Source: Bloomberg