February 8, 2024

  • S&P 500 nearing 5000.
  • It’s another “date-lite” day- Wall Street will drive FX
  • US dollar opens mixed-Asia looking ahead to Lunar New Year break.

FX at a glance

Source: IFXA

USDCAD Snapshot: open 1.3469-73, overnight range 1.3448-1.3476, close 1.3464.

USDCAD testing support in the 1.3448 range overnight and it held which led to a profit-taking bounce to the overnight peak.

The BoC minutes from the January 24 meeting did not offer insight as Governor Macklem has been talking up a storm since then. To recap, the Bank has dropped its tightening bias but rates still need to remain in restrictive territory in order to cool inflation further. The BoC doesn’t expect much growth in Q1 2024 (0.5%).

 WTI oil inched higher and is near the top of its overnight range of $73.56- $74.56. However, USDCAD traders are mostly ignoring the moves.

There are no top tier Canadian economic reports today.

USDCAD Technicals

The USDCAD technicals are neutral within a 1.3450-1.3550  range and will remain that way until after tomorrow’s Canadian employment report. Today, the intraday USDCAD technicals flipped to bullish with the overnight failure to break below support in the 1.3440-50 area.  A move above 1.3510  will extend gains to 1.3550. A decisive break above 1.3560 or below 1.3440 will spark a 100 bp move, but it won’t be today.   

Longer term, the 2024 uptrend is intact above 1.3420.

For today, USDCAD support is at 1.3450 and 1.3410. Resistance is at 1.3510 and 1.3550. Today’s range is 1.3450-1.3520

Chart: USDCAD  daily

Source: Daily FX

G-10 FX recap

The roaring twenties are back for an encore-just like Donald Trump. One hundred years ago was a time of significant prosperity, societal changes, urbanization and a boom in consumerism. Wall Street started slow, then took off like a scared rabbit.

The 2024 remake is not a whole lot different. The US economy may not be quite booming, but it is certainly resilient and expected to grow between 0.9% and 2.0% in 2024. It’s not a bad performance after the Fed hiked rates by 500 bps. Wall Street is on a tear. The S&P 500 is up 4.72% YTD, and it lags the NASDAQ which has gained 5.52% 23-Skidoo, indeed, it’s the cat’s pajamas.

Fed officials are singing from the same song sheet. Yesterday, Richmond Fed President Thomas Barkin, and Governor Adrian Kugler suggested that although rates will be going lower there is a need for caution.

The S&P 500 index closed at 4996.06, up 0.82%. Asian equity indexes closed higher as well. Japan’s Nikkei 225 index soared 2.06% while Australia’s ASX 200 gained 0.37%. Hong Kong’s Hang Seng closed with a 1.27% loss. European bourses are treading water and S&P 500 futures are flat.

FX trading today will be a lot like yesterday. The only data of note is the US weekly jobless claims numbers (forecast 220,000, previous 224,000) which means that once again, Wall Street will dictate FX moves.

EURUSD traded uneventfully in a 1.0768-1.0789 range ahead of the NY open and is struggling to break above the 100 day moving average (1.0787) to extend gains to the 200 day moving average (1.0834). Traders are awaiting remarks from a couple of noted ECB hawks, Boris Vujcic and Pierre Wunsch, which could be the catalysts for an upside break.

GBPUSD traded sideways in a 1.2613-1.2639 range. There are signs that the UK economy is rebounding, which include rising housing prices, sharp gains in services activity, higher retail sales and improved business confidence. All of the above are underpinning GBP.

USDJPY rose to 148.90 from 149.26 and is near the top of that band in early NY trading. Prices were underpinned by the steady US 10-year Treasury yield which is at 4.11%, little changed from Wednesday’s close, and by comments from BoJ officials. Deputy Governor Shinichi Uchida through cold water on aggressive rate hike expectations. He said that raising rates to 0.1% would mean an end to its ultra-low interest rate policy.

AUDUSD traded cautiously in a tight 0.6505-0.6532 band. Steady to firm US Treasury yields and Chinese economic growth concerns served to limit the upside.

USDMXN traded narrowly in a17.0373-17.0694 range overnight. Banxico is widely expected to leave its benchmark rate unchanged at 11.25% due to stickier than expected inflation.

FX high, low, open (as of 6:00 am ET)

Source: Investing.com

China Snapshot

PBoC fix: today 7.1063, expected 7.1911, previous 7.1049.

Shanghai Shenzhen CSI 300 rose 0.64%  to 3364.93.

Chart: USDCNY and USDCNH 4 hour

Chinese markets will be closed all next week for Lunar New Year

January CPI fell 0.8% (forecast -0.5%y/y, previous -0.3% y/y)

Producer Prices fell 2.5% y/y (forecast -2.6%, December -2.7%.)

Today’s data reinforces calls for authorities to do more to boost the economy.

Source: Daily FX