January 31 2025

  • Trump threatens BRICS if they attempt to replace US dollar
  • Loonie on a Knife-edge
  • USD trades climbs on tariff threats

 FX at a Glance

USDCAD open 1.4489 overnight range 1.4431-1.4511, close 1.4492

USDCAD spiked to 1.4595 late yesterday afternoon following a Bloomberg headline t A reporter asked if he would go ahead with 25% tariffs. Trump responded “ Tariffs are coming on Saturday, the first.“  He wouldn’t commit to including tariffs on oil. We’ll be announcing the tariffs on Canada and Mexico for a number of reasons. Mexico and Canada have never been good to us on trade. They’ve treated us very unfairly on trade and we will be able to make that up very quickly because we don’t need the products that they have. We have all the oil that you need, we have all the trees you need – meaning the lumber. We have more than almost anybody in those two categories,” 

USDCAD soared from 1.4410 to 1.4595 in a heart-beat then dropped to 1.4500 just as quickly on hopes that Trump was just blustering.  Maybe he was.  The Wall Street Journal reported that aids were scrambling to find “off-ramps” and the tariff levy may be more strategic rather than on everything.

The threat of tariffs will limit USDCAD downside. USDCAD direction will be determined by headlines

US PCE Price index data cam out as expected -Core PCE 2.8% y/y, unchanged from November.

USDCAD Technicals

The intraday USDCAD technicals are bullish above 1.4440 and looking for a break above 1.4595 TO target 1.4700. A move below 1.4440 targets1.4380 targets.

USDCAD broke the top of the December 18, 1.4250-1.4515 range in spectacular fashion  late Thursday afternoon.  The subsequent retracement to 1.4500 suggests a lack of conviction for the rally, especially as it occurred in a time when liquidity was poor. The longer term technicals are bullish while trading above 1.4310 and looking for a  decisive break above 1.4520 to kick off the next leg of the rally with a target of 1.5000.

For today, USDCAD support is 1.4440and 1.4410. Resistance is 1.4520 and 1.4595

Today’s Range: 1.4460-1.4550

Chart: USDCAD 4 hour

 

    Tariff Man Strikes Again

    President Trump sounds like a broken record. He cannot go more than a few hours without threatening tariffs on any and every country that hits his radar screen. It would be funny if millions of jobs around the world were not in peril from his actions.

    Last night at 8:30 pm, he decided that he couldn’t stand the idea of BRICS (Brazil, Russia, India, China, and South Africa) countries seeking to replace the US dollar with a BRICS currency. He wrote on TruthSocial: “We are going to require a commitment from these seemingly hostile Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy.”

    Widespread Lunar New Year holidays limited the impact from his rant.

    EURUSD
    NY Open: 1.0376
    Overnight Range: 1.0366-1.0413

    EURUSD is trading with a negative bias following yesterday’s ECB decision to cut rates by 25 bps. That statement and press conference did not offer any surprises either and reiterated that they were on a meeting-by-meeting, data-dependent path. Apparently, someone leaked that at the March meeting, the ECB may drop the reference to “restrictive” in the statement. German inflation and Retail Sales numbers did not have much impact.

    GBPUSD
    NY Open: 1.2416
    Overnight Range: 1.2401-1.2440

    GBPUSD drifted, albeit with a slight negative bias, with a lack of actionable UK data encouraging traders to sit on the sidelines. The Bank of England meeting is next week, but like all the G-10 currencies, the Trump tariff story requires a degree of caution.

    USDJPY
    NY Open: 154.70
    Overnight Range: 153.92-154.93

    USDJPY is trading with a modest bid after BoJ Governor Kazuo Ueda appeared to show some reluctance about hiking rates at the next meeting. He expressed concern that recent inflation increases were affected by transitory factors and would likely dissipate later in the year. He also said that rate hikes would happen if the economy and prices move in line with their forecasts.

    AUDUSD
    NY Open: 0.6215
    Overnight Range: 0.6204-0.6238

    AUDUSD consolidated losses which occurred following Trump’s latest tariff rant aimed at China. Holidays across Asia reduced FX volumes.

    NZDUSD
    NY Open: 0.5644
    Overnight Range: 0.5624-0.5663

    NZDUSD traded in a similar fashion as its antipodean cousin and for the same reason.

    USDMXN
    NY Open: 20.7345
    Overnight Range: 20.5828-20.7369

    USDMXN rallied sharply on the heels of Trump’s threat to levy 25% tariffs on Mexican imports starting tomorrow. Nothing else matters, and the currency pair is at the mercy of tariff headlines.

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

    China Snapshot

    Closed Lunar New Years

    PBoC Fix: 7.1698  (prev. 7.1705) as of January 27, 2025

    Shanghai Shenzhen CSI 300 rose 0.41% to 3817.08-close January 27

    Chart: USDCNY