July 8, 2024

  • Fed Powell speaks Tuesday-Inflation Thursday.
  • Euro reaction to French election fades
  • US dollar opens slightly softer compared to Friday

FX at a Glance

Source: IFXA/RP

USDCAD open 1.3632, overnight range 1.3628-1.3648,  previous close 1.3641

USDCAD traded sideways but with a minor bid overnight and a total absence of domestic data releases this week leaves its direction determined by the US interest rate outlook.

The Canadian employment report was soft.  The job vacancy rate is below pre-pandemic levels and the unemployment rate rose 0.2% to 6.4%. The data is even worse when you consider that immigration added 1.11 million people to the population in the past year, while the economy only added 345,000 jobs. By that measure alone, the BoC should cut rates on July 24.  They won’t because they do not want to get too far ahead of the Fed.

WTI oil prices traded lower, falling from 83.32 to 82.11.  That move my be temporary as Hurricane Beryl, a category 1 storm disrupts production in the Gulf of Mexico.

USDCAD Technicals

The intraday technicals are  bearish while trading below 1.3650 and looking to test support in the 1.3590-1.3600 area. A break above 1.3650 targets 1.3690, then 1.3750.

Longer term, price action below the 1.3633 area (100-day moving average) sets up a test of  twin supports at 1.3590, the 200-day moving average and the 38.2% Fibonacci retracement level of the January -April range. A decisive breech of of this area targets 1.3510.

For today  USDCAD support is at 1.3590 and 1.3550. Resistance is at 1.3650 and 1.3680. Today’s range is 1.3590-1.3660

Chart: USDCAD daily

Source: DailyFX

Far Right, Left, Left, Far Left.

The French election was chock full of surprises.
Last week, Marine Le Pen’s right-wing National Party (NP) stunned France and the rest of the world after winning the most seats. The left were horrified, and multiple parties banded together to prevent the NP from winning a majority. They succeeded. The NP finished third and the multiple egos will compete for influence going forward.

Powell, Inflation and Bonds
The bond traders are at it again. They are convincing themselves that the Fed will be cutting rates in September and that sentiment was bolstered by Friday’s nonfarm payrolls report. Analysts are ignoring the higher-than-expected job gains (actual 206,000 vs forecast 190,000) and pointing to the rise in unemployment to 4.1% as evidence that the labour market is cooling and that the economy is slowing. Bond traders agreed and knocked the US 10-year Treasury yield down to 4.30% today from 4.37% on Friday. Tuesday, markets will find out if Fed Chair Jerome Powell agrees when he testifies before Congress.

Prepare for President Trump, Round 2
American voters are facing a Hobson’s choice for president. President Biden refuses to step aside, believing that his mentally diminished state is not a problem if he goes to bed at 8:00 pm. The other is a convicted felon and pathological liar. The polls suggest voters prefer a living breathing liar over a cadaver that is looking for a coffin.

EURUSD had a bit of a wild overnight session. Prices gapped lower in Asia after the French far-left parties surprised with a big win, falling from 1.0939 to 1.0802. The entire move was reversed by the time NY opened. Traders are cautious and the upside may be limited until the new government’s spending plans are revealed.

GBPUSD traded with a bid in a 1.2789-1.2823 range. The UK election is in the rearview mirror and traders are focused on the interest rate outlook for the UK, ECB, and the Fed.

USDJPY traded choppily in a 160.26-161.12 range with prices at the top of that band in NY. The increase in speculation of a Fed rate cut in September combined with risk aversion following the French election results drove prices lower. The move didn’t last but the risk of dovish comments from Fed Chair Powell on Tuesday may limit gains.

AUDUSD couldn’t get any traction as it traded in a 0.6735-0.6762 range and dropped to 0.6742 in early NY. Nevertheless, the currency pair has a bullish bias as the RBA is expected to leave interest rates elevated while traders are increasing hopes for a Fed rate cut in September.
NZDUSD traded in a 0.6132-0.6154 band with traders awaiting the RBNZ monetary policy decision on Wednesday. The RBNZ is expected to leave rates unchanged, but the risk is they adopt a more dovish bias due to rising recession risks. ASB Bank is forecasting a 25 bp rate cut in November.

USDMXN is near the bottom of its 18.0294-18.2005 range. The currency pair is under pressure due to the widening of US and Mexican 10-year interest rate spreads in favor of Mexico after Friday’s US NFP data raised the odds of a Fed rate cut in September to 72.2%.

Bitcoin (BTCUSD)
BTCUSD traded in a 54,500-58,350 range with price pressures stemming from Mt. Gox bankruptcy distributions and from the German government unloading confiscated bitcoin.

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

Source: Investing.com

China Snapshot

PBoC fix: 7.1286 vs exp. 7.2640 (prev. 7.1289)

Sanghai Shenzhen CSI 300 fell 0.85% to 3401.76


Source: Investing.com