Photo: Pixabay

July 26, 2021

China crackdown spooks equities

German IFO data disappoints

US dollar drifts lower at NY open, AUD, NZD underperform

USDCAD open 1.2548-52, Overnight range, 1.2547-1.2589  Previous close 1.2565

FX at a Glance

Source: IFXA/RP

FX Recap and outlook

Equity traders are cautiously optimistic as this is a big week for Q2 earnings reports. Tesla releases results at the end of today and Apple, Alphabet, and Microsoft on Tuesday.  The caution stems from China added educational companies to the list of industry’s that regulatory authorities are cracking down on.

China Vice Foreign Minister Xie Feng chastised the US when he spoke to Deputy Secretary of State Wendy Sherman.  Mr Feng described US/China relations as a stalemate, saying, “It seems as if by making China an “imagined enemy”, a national sense of purpose would be reignited in the U.S.. The hope may be that by demonizing China, the U.S. could somehow shift domestic public discontent over political, economic and social issues and blame China for its own structural problems.”

Bitcoin (BTCUSD) got a boost.  Someone spotted an Amazon job posting.  It sought a candidate to “leverage your domain expertise in Blockchain, Distributed Ledger, Central Bank Digital Currencies and Cryptocurrency to develop the case for the capabilities which should be developed, drive overall vision and product strategy, and gain leadership buy-in and investment for new capabilities.”

They concluded Amazon would soon accept cryptocurrencies, and BTCUSD soared from $33,890.03 to $38,181.82.

EURUSD chopped around in a 1.1765-1.1800 band, as bulls and bears battle for supremacy.  German IFO index decline in July.  The IFO statement said “companies surveyed were significantly less optimistic for the coming months due to supply bottlenecks and concerns over rising COVID-19 infection rates.  Traders are hoping a dovish FOMC statement on Wednesday will offset the latest ECB outlook.

GBPUSD is near the top of its 1.3739-1.3798 range.  Prices are supported by improved risk sentiment and reduced fears of rising COVID 19 infections in the UK.   However, gains are capped due to fears the pace of economic growth will slow.  The intraday GBPUSD technicals are bullish above 1.3730, looking for a break above 1.3810 to extend gains to 1.3900.

USDJPY is trading defensively in a 110.13-110.58 range.  A bout of risk aversion drove USDJPY to session lows in Asia, but prices rebounded in Europe.  Prices were under pressure as  US 10-year Treasury yields slid from 1.28% to 1.245%.

AUDUSD and NZDUSD dropped in Asia on a wave of risk aversion sentiment stemming from China’s domestic actions.  Most of the losses were recovered by the NY open.

USDCAD dropped below 1.2670 last Wednesday, and prices have traded sideways in a 1.2528-1.2600 range since.  USDCAD direction will continue to be dictated by broad US dollar sentiment, with WTI oil prices playing a secondary role, while they remain in a $70.00-$75.00 range.   Canada inflation is due Wednesday and GDP on Friday.

US new Home Sales for June are due today.

USDCAD technical outlook

The intraday USDCAD technicals are bullish inside the uptrend channel from June 14, with the bottom at 1.2510 and the top at 1.2800.   For today, USDCAD support is at 1.2530 and 1.2510.  Resistance is at 1.2590 and 1.2670.   Today’s range 1.2530-1.2590

Chart USDCAD daily

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank