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May 25, 2022

  • FOMC minutes ahead.
  • RBNZ hikes 0.50% as expected
  • US dollar opens modestly lower, CAD and EUR underperform

FX change at a glance: Friday-Monday NY open

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2836-40, overnight range 1.2812-1.2884, close 1.2821,

USDCAD traded sideways albeit with a modest bid in an uneventful overnight session.

Traders digested yesterday’s weak US data while ignoring geopolitical news as they awaited today’s release of the FOMC minutes from the May 4 meeting.

USDCAD inched higher in Asia and Europe after weaker than expected US data raised risks of a recession, which wouldn’t due the Canadian economy any favours.

Firmer oil prices were ignored. WTI climbed from $108.87/b yesterday to $111.63/b today. API weekly crude stocks data showed inventories fell 4.2 million barrels in the week ending May 20, which boosted prices. Saudi Arabia’s Foreign Minister said there was no shortage of oil, just shortages of refined products.

USDCAD direction is tracking S&P 500 futures. Futures dropped in early NY trading which boosted the US dollar across the board and lifted USDCAD from its overnight peak of 1.2848 to 1.2884.  The move was exacerbated by the weaker than expected April US Durable Goods Orders report.

USDCAD technical outlook

The intraday USDCAD technicals are bullish while prices are above 1.2780, looking for a break above 1.2900 to extend gains to 1.3030.  A decisive break above 1.3000 suggest USDCAD is embarking on a new uptrend leg with a target in the 1.3500 area. A move below 1.2750 suggests deeper losses to 1.2640

For today, USDCAD support is at 1.2810 and 1.2760.  Resistance is at 1.2890 and 1.2980.  Today’s Range 1.2820-1.2920

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

US April Durable Goods Orders were disappointing, rising just 0.4% rather than 0.6% expected and below the downwardly revised 0.6% (0.8% before revision) in March. The news isn’t all bad as Orders have increased for six of the last seven months. Nevertheless, the news did nothing to alleviate talk of a recession,

Equity traders were not impressed with yesterday’s Richmond Fed Manufacturing Index or New Home Sales which were weaker than expected. Stocks tumbled falling the release of the data but staged a recovery later in the day when traders remembered it was a slow news day and the reports were not very important.

Some world leaders are acting as if the USA is not very important. China and Russia sent bombers over the Sea of Japan and into South Korea, perhaps to wave at President Biden, who was winding up an Asia tour. North Korea saluted the American President with three ballistic missile tests. Meanwhile Saudi Arabia ignores Biden’s calls to boost oil production.

Asia equity indexes closed mixed. Japan’s Nikkei closed down a modest 0.25%, while Australia’s ASX 200 eked out a 0.37% gain. European bourses are hovering around unchanged while US stock futures are in negative territory. Oil prices climbed while gold slipped.

The US 10-year yield dropped from 2.871% on Friday to 2.724% in NY. Fed policymaker Raphael Bostic’s comments supporting two more 0.50% rate hikes before pausing in September, weighed on Treasury yields.

EURUSD dropped from 1.0738 in Asia to 1.0638 following the US data today. The gains were due to a spate of hawkish comments by ECB officials but rising Eurozone recession risks and a rebound in the US dollar ahead of the FOMC minutes reversed the move. Rabobank analysts predicted that a Eurozone recession would be unavoidable if the EU adopts a Russian oil embargo. EURUSD technicals are bearish below 1.0750.

GBPUSD traded in a 1.2483-1.2559 range with the low occurring immediately following today’s US data. Elevated UK recession risks are putting downward pressure on the currency with hopes of a bit of fiscal stimulus from the governments mini-budget (expected Thursday) providing a bit of support. GBPUSD is consolidating recent gains while prices are above 1.2470.

USDJPY traded in a 126.66 to 127.28 band as the drop in the 10-year US Treasury yield and ongoing safe-haven demand for yen, weighed on prices.

NZDUSD rallied from 0.6424 to 0.6512 after the RBNZ raised rates by 0.50% to 2.0%. The move was not a surprise, and the gains are close to being fully erased in NY trading.

The FOMC minutes will be scoured for clues as to the Fed’s view of recession risks and where they see the neutral rate for Fed funds.

Chart of the Day US 10-year Treasury yield since May 10


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

Chart: Saxo Bank

China Snapshot –

Today’s Bank of China Fix 6.6550 Previous 6.6566

Shanghai Shenzhen CSI 300 rose 0.61%% to 3,983.18

PBoC and Insurance and Banking Regulator urge banks to increase lending to SME’s.

Chart: USDCNY 1 month

Source: Yahoo Finance