July 20, 2023ll
- USDJPY soars on dovish BoJ outlook.
- Canadian retail sales lower than expected.
- USD firms on soft stocks, pre-weekend caution
USDCAD Snapshot: open 1.3171-73, overnight range 1.3155-1.320, close 1.3172
USDCAD drifted sleepily in an uneventful overnight session then popped from 1.3170 to 1.3220 after disappointing economic data.
Canadian Retail Sales rose just 0.3% m/m in May, and core-Retail Sales were flat. Analysts were expecting a gain of 0.5 and 0.3% respectively. The FX impact from the data will fade quickly as the BoC has already reacted by raising rates last week.
West Texas Intermediate is trading at the top of its $75.874-$76.83 overnight range. Lower US crude inventories, expectations for increased demand and broad USD strength are underpinning prices.
USDCAD direction continues to be dictated by US dollar sentiment and that will be the case today.
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish. Yesterday’s failure to break below the 1.03090-1.3100 level, followed by the rally above 1.3160 has shifted the focus to another topside test in the 1.3260 area.
A decisive break above 1.3360 suggests more prolonged trading in the 1.3100-1.3660 range that has contained price action since the end of March.
For today, USDCAD support is at 1.3160 and 1.3100. Resistance is at 1.3240 and 1.3305. Today’s range 1.3140-1.3240
Chart: USDCAD 4 hour
Source: Saxo Bank
G-10 FX recap
Yesterday, quarterly earnings data from Tesla and Netflix injected some anxiety into equity markets, while a drop in weekly jobless claims spooked US dollar bears.
Markets traded cautiously, with traders looking ahead to next week’s central bank meetings, which include the FOMC, ECB, and Bank of Japan.
The US dollar is giving back some of its overnight gains in early NY trading as prices track a 0.42% gain in S&P 500 futures and a dip in the US 10-year Treasury yield to 3.82% from 3.85% at yesterday’s close.
EURUSD is currently in the middle of its 1.1118-1.1144 range. Prices retreated from this week’s peak of 1.1222 to the overnight low because some analysts suggested that rates may not need to rise much further and due to profit-taking as positions had become stretched.
GBPUSD traded in a 1.2817-1.2903 range. Prices are under pressure due to recent economic reports that suggest the Bank of England may reduce the number of future rate hikes. However, today’s Retail Sales were better than expected, rising 0.7% month-on-month in June.
USDJPY traded choppily in a 139.76-140.30 range. Prices were supported by the rise in US Treasury yields and the news that core CPI remained unchanged at 3.3%. Prices rallied further after Reuters reported that 77% of respondents to a survey believe that the BoJ will leave policy unchanged at next week’s meeting.
AUDUSD suffered from the US dollar’s strength, and it is currently at the bottom of its 0.6733-0.6786 range.
Bank of China Fix: 7.1456 vs forecast. 7.1965, prev. 7.1466.
Shanghai Shenzhen CSI 300 rose 0.10% % to 3827.52.
PboC intervenes in USDCNY by setting the fix rate well below expectations FX Regulators says the will prevent sharp volatility in the yuan exchange rate and will keep yuan basically stable at balanced levels.
A Chinese government hacker hacked the US Ambassador to China’s email account, which won’t do a lot to ease US/China tensions.
National Development Agency announced targeted stimulus plans aimed at bolstering auto purchases and another plan for the electronics industry.
Chart: USDCNY 6 month