Photo: pixabay

April 25, 2023

  • Biden announces re-election bid.
  • Hawkish ECB comments underpin EURUSD.
  • US dollar opens mixed-CAD underperforms.

FX at a glance

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3571-75, overnight range 1.3527-1.3600, close 1.3541

USDCAD is grinding higher due to a mix of domestic economic growth concerns, softer commodity prices, and bullish short-term technicals.

Commodity prices are slumping and WTI oil is down 0.74% overnight but remains in the middle of yesterday’s range. Oil traders are concerned about not seeing the surge in prices that was anticipated as China’s economy re-opened and sanctions on Russian crude lowered production, which is why WTI struggles above $80.00/b.

USDCAD may be supported due to fears a prolonged work stoppage by Federal employees, will negatively impact Q1 growth, which is already weak.

Canadian and US interest rate spreads have widened in favour of the US, with most analysts expected a 25 bp rate hike at next week’s FOMC meeting.

USDCAD Technical Outlook

The intraday USDCAD technicals are bullish. The break above resistance at 1.3560 overnight, targets 1.3620, then 1.3700.

However, there really isn’t a specific catalyst for further gains and with momentum indicators and Bollinger Bands suggesting USDCAD is approaching extreme overbought levels, a drop below 1.3560 would extend losses to 1.3490.

For today, USDCAD support is at 1.3560 and 1.3510.  Resistance is at 1.3620 and 1.3670

Today’s range 1.3560-1.3630

Chart: USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

The fall-out from the Silicon Valley Bank failure continues to ripple across the US banking sector.

Savers pulled deposits out of many smaller banks resulting in Moody’s downgrading 11 regional banks. However, it was Monday’s quarterly earnings data from First Republic Bank, which unnerved traders. FRB lost 40% of its deposits compared to December 31, and that is after JPMorgan and five other large banks deposited a total of $30 billion.

Can you stand another Biden-Trump election campaign. Most American’s can’t either. An NBC poll claims 60% of Americans are against Trump running and 70% do not want Biden in the race, either. Biden is going to ignore the polls and announce his re-election bid today.

US Housing price data showed prices climbing more than expected which provided some support for the US dollar.

EURUSD gave up overnight gains and dropped from 1.1066 to 1.1011 in NY after the housing data. The currency pair is consolidating gains from yesterday after hawkish comments from ECB officials. ECB Governing council member Isabel Schnabel said, “Data dependence means that 50 basis points are not off the table.” Chief Economist Phillip Lane, added “The current data are indicating that we should raise rates again” next week.”

GBPUSD hit the bottom of its 1.2412-1.2506 band after the US housing data and is tracking EURUSD moves. The topside may be limited due to fears the ECB will be more hawkish than the Bank of England, sparking EURGBP demand.

USDJPY is trading defensively in a 133.80-134.47 band weighed down by the sliding US 10-year yield which dropped to 3.428% in NY today after closing at 3.504%. Bank of Japan Governor Ueda reiterated his comments that monetary policy needs to be unchanged.

AUDUSD fell to 0.6644 from 0.6704 in the wake of the US data. Traders are looking ahead to tomorrows CPI data (forecast1.3% vs previous 1.9%) to determine if the RBA will hike rates or leave them unchanged next week.

Today’s US data includes Consumer Confidence and Richmond Fed Manufacturing Survey.

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

Source: Saxo Bank

China Snapshot

Bank of China Fix:  6.8847, Previous: 6.8835

Shanghai Shenzhen CSI 300 fell 0.50% to 3962.67.

Chinese authorities reportedly urging banks to cut deposit rates.

China purchases of Russian crude at 11-month high.

Chart: USDCNY 1 month

Source: Bloomberg