January 17, 2025
- Carbon-Tax Carney joins Liberal Leadership race
- China GDP beats forecasts-some traders believe its accurate.
- USD opens with tiny gains.
FX at a Glance
USDCAD open 1.4411, overnight range 1.4389-1.4441, close 1.4394
The Loonie is on life-support, and on Monday night, incoming President Donald will pull the plug. He promised to slap 25% tariffs on all Canadian imports on Day 1, and showman Don has proven he prefers the “big splash” to a small ripple. USDCAD positions are very long, but there is still plenty of room to add to them before they reach extreme overbought status.
Former Bank of Canada Governor, Bank of England Governor, and most recently Chair and Head of Transition Investing at Brookfield Asset Management wants to lead the Liberal party. He plans to complete Trudeau’s economic destruction of the country by continuing carbon taxes and destroying the oil business.
His main competition (although she has not declared) is former Deputy Prime Minister and Finance Minister Chrystia Freeland. She claims she will scrap the current carbon tax and replace it with a rebranded version that ultimately achieves the same outcome.
Regardless of who wins this contest, the Liberals are in a race for second place.
Unfortunately, their focus on internal party politics has left Canada 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 US actions.
The outlook for the Loonie is grim. The economy is already flirting with a recession, unemployment is rising, and foreign investment has dried up. The Loonie may not be going extinct, but it is certainly on the endangered species list.
USDCAD trading may be messy around the 10 am NY option expiry window. There are reportedly $2.35 billion of strikes in the 1.4370-1.4400 area rolling off, as well as another $713 million of 1.4415 strikes.
USDCAD Technicals
The intraday USDCAD are bullish while trading above 1.4330 looking for a break above 1.4470 to extend gains to the 1.4510 area. A decisive break above this level targets 1.5000. A break below 1.4270 suggests a period of 1.4340-1.4470 consolidation.
The long term technicals are bullish with a break above 1.4500, the 23.6% Fibonacci retracement level of the 2002-2007 range and targets a 100% retracement to the 1.6160 area.
For today, USDCAD support is 1.4370 and 1.4340. Resistance is 1.4450 and 1.4510
Today’s Range: 1.4370-1.4450
Chart: USDCAD daily
Monday, Monday
Traders have already placed their bets ahead of the Trump inauguration on Monday and they don’t have any incentive to get active today. China’s better than expected, albeit very dubious GDP growth rate of 5.4% did create much of a stir. However, the FOMO (fear of missing out) trade is prevalent in equities.
European bourses are sharply higher led by a 1.16% rise in the UK FTSE 100. S&P 500 futures are up 0.33% and the US 10-year Treasury yield is down 3 ticks to 4.58%.
EURUSD
NY open 1.0303, overnight range 1.0278-1.0310
EURUSD is treading water. Headline HiCP was 2.7% y/y in December, unchanged from October. Core-CPI was also unchanged at 2.4%. There is a mess of option expiries at 10 am NY time with $11.0 billion of strikes in the 1.0270-1.0305 area rolling off.
GBPUSD
NY open 1.2199, overnight range 1.2161-1.2245
Sterling was already on the defensive before December retail sales data was released and the results did nothing to change the outlook despite the headline number being much better than in November. Retail Sales rose 3.6% y/y (forecast 4.2%, previous 0). The dovish outlook for the BoE and Trump are weighing on prices.
USDJPY
NY open 155.78, overnight range 154.98-158.95
USDJPY declined in Asia then rallied in Europe with price action tracking broad US dollar sentiment. The dip in US Treasury yields and the outlook for a Bank of Japan rate hike is weighing on prices. However, Trump is the wild card.
AUDUSD
NY open 0.6202, overnight range 0.6195-0.6220
AUDUSD remains inside yesterday’s trading band and it could not sustain gains following the above target China GDP data because of uncertainty around the new US administration.
NZDUSD
NY open 0.5598, overnight range 0.5584-0.5616
NZDUSD is tracking lower despite a higher than expected Business NZ PMI reading of 45.9 (previous 45.3) because the result is still in contraction territory.
USDMXN
NY open 20.8372, overnight range 20.7668-20.9393
USDMXN has a bid and it’s mostly due to the incoming Trump administration. Trump has singled-out Mexico (like Canada) for special tariff attention and said he would levy a 25% fee on all imports from Mexico.
BTCUSD
NY open 102,260, overnight range 97,381-102,590
BTCUSD inched higher fueled by optimism over the Trump administration and higher equity prices.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC Fix: 7.1889 vs exp. 7.3275 (prev. 7.1881).
Shanghai Shenzhen CSI 300 rose 0.31% to 3812.34
China GDP jumps to 5.4% y/y (forecast 5.0%, previous 4.6%), Industrial Production rose 6.2% y/y (forecast 5.4%, previous 5.4%) Retail Sales 3.7% y/y (forecast 3.5%, previous 3.0%.
Global markets reacted positively to news that China’s economy grew faster than expected and surpassed Xi Jinping’s target. And that is the issue. Bureaucrats do not want to risk the wrath of Jinping and publish numbers based on exceeding Xi Jinping’s goals, not data.
Chart: USDCNY
Sources: Yahoo Finance, Oanda, Investing.com, Google Finance
