July 23, 2024
- The Harris/Trump contest begins.
- Data void makes for dull markets.
- US dollar inches higher overnight, but mixed compared to yesterday.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3765, overnight range 1.3752-1.3773, previous close 1.3758
USDCAD drifted higher in a subdued overnight session. European and North American markets are in full summer mode and the latest wrinkle in the US presidential race added another reason to sit on the sidelines.
The Bank of Canada monetary policy meeting tomorrow is the highlight of the week even though a 25 bp rate cut is fully priced in. Even so, rate cut expectations are continuing to underpin USDCAD and only the size of speculative long USDCAD positions is preventing a sharp rally.
WTI oil prices are rangebound in a 78.11-78.72 range. Concerns about an oversupply in 2025 and bearish forecast are weighing on prices.
Today’s data includes US existing home sales and Richmond Fed Manufacturing index but the results will not have any impact on FX markets.
USDCAD Technicals
The intraday USDCAD technical are bullish above 1.3730, looking for a move above 1.3790 to extend gains to 1.3850. A move below 1.3730 suggests further 1.3650-1.3790 consolidation.
Longer term, the monthly chart reveals a long term USDCAD uptrend from June 2021 that remains intact while prices are above 1.3340. It suggests that a decisive break above 1.3900 sets the stage for further gains to 1.4650.
For today, USDCAD support is at 1.3730 and 1.3710. Resistance is at 1.3790 and 1.3830. Today’s Range 1.3720-1.3790.
Chart: USDCAD monthly
Source: DailyFX
From Back-up to Center Stage
US Vice President Kamala Harris is on track to become the Democrat candidate for President even without receiving the blessing of former President Barack Obama. Ms. Harris wasn’t even on the radar pre-Biden/Trump debate, and her list of achievements as Vice President can be written on a stamp, with room for the entire Harry Potter series. Desperate Democrats have given her a “David Ayres” moment. Remember Dave? He was a 42-year-old Zamboni driver sitting in the stands watching the Toronto Maple Leafs play the Carolina Hurricanes. Both Carolina goalies got hurt, and Mr. Ayres went from the seats to the ice and became the oldest goalie in NHL history to win his regular season debut. Then he disappeared from the public eye, which is probably Ms. Harris’s fate as well.
Summer Markets Muddle
The US economic calendar is very light and Fed officials are quiet. Traders are struggling to make heads or tails of the latest macroeconomic and political developments, which is made more difficult in thin summer markets. FX markets are rangebound but seem to be in a “when in doubt, buy US dollars” mood. The NASDAQ is in negative territory for the month as a wave of profit-taking knocks the “Magnificent Seven” from their lofty perches. Alphabet and Tesla report after the close today, and traders are hoping positive news from these companies ends the slide and lifts global markets.
Equities are Mixed
Asian traders ignored the rout in Chinese markets, which is due to President Xi Jinping’s mismanagement of the economy. Australia’s ASX 200 rose 0.50% while Japan’s TOPIX rose 0.21%. European bourses are in the green, led by a 0.99% gain in the German Dax. S&P 500 futures are flat. The US 10-year Treasury yield slid from yesterday’s peak of 4.28% to 4.232% today.
EURUSD
EURUSD traded sideways in Asia, then dropped from 1.0897 to 1.0857, where it sits in NY. ECB Vice President Luis De Guindos admitted that the central bank doesn’t like to work in the summer, pointing out that by September policymakers have more data to make informed decisions.
GBPUSD
GBPUSD is consolidating its July gains and remains in a short-term uptrend while prices are above 1.2850. It’s a slow day, and traders are mulling over the impact of the Labour government’s plan to give civil servants large pay increases, which are above the rate of inflation. Traders are debating whether the move will prevent the BoE from cutting rates any time soon.
USDJPY
USDJPY attempted to rally in Asia and rose to 157.11 before being hammered down to 155.82 in early NY. The US 10-year Treasury yield retreat from yesterday’s peak combined with fears of further BoJ intervention are weighing on prices. The BoJ monetary policy meeting is July 31.
AUDUSD and NZDUSD
AUDUSD is on the defensive and dropped from 0.6646 to 0.6621 due to recent inflation data that suggests the RBA could cut rates far earlier than expected and poor economic growth in China.
NZDUSD is also suffering from China worries and traded negatively in a 0.5969-0.5982 range with broad US dollar demand adding selling pressure.
USDMXN
USDMXN traded sideways in a 17.9297-17.9955 range with traders trying to figure out what Kamala Harris’s election prospects mean to the currency.
Bitcoin (BTCUSD)
BTCUSD traded negatively, falling from 68,393 to 66,400 before bouncing back to 67,035 in NY. Cryptocurrency traders are just as confused as fiat currency traders.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1334 vs exp. 7.2746 (prev. 7.1335).
Shanghai Shenzhen CSI 300 fell 2.13% to 3439.88.
Chinese stocks plunge on disappointment from the latest round of interest rate cuts and from the governments lack of a clear vision to stimulate growth. BCA Research wrote: “The Plenum confirmed… that Beijing is more interested in containing social and economic instability than in promoting near-term growth.” And then there is the second-coming of Trump.
Chart: USDCNY and USDCNH
Source: Investing.com
