January 2, 2025
- S&P 500 futures point to positive open on Wall Street.
- Markets are still in “holiday mode”
- USD starts 2025 with a bid.
FX at a Glance December 23 NY open to January 2, 2025 NY open
Source: IFXA/RP
USDCAD open 1.4426, range Dec.23-Jan 2,1.4325-1.4402, close 1.4450
USDCAD is starting 2025 on a bullish note. Broad US dollar strength ahead of Trump’s inauguration combined with divergent monetary policies between the Fed and Bank of Canada are supporting prices. In addition, Trump’s threat of 25% tariffs on Canadian imports is fueling USDCAD gains. Furthermore, investors are avoiding Canada after the federal government increased the budget deficit by around 50% in an attempt o buy votes. The strategy failed miserably, and the latest Angus Reid poll suggests that if a vote were held today, Trudeau’s Liberals would lose official party status
WTI oil prices are above its December peak and traded in a 71.79-72.88 range overnight with gains fueled by speculation of shrinking crude inventories in the US. EIA Crude stock change data is expected to show a decline of 2.75 million barrels, on top of the 4.23 million barrel drop in the previous week.
US weekly jobless claims fell 9,000 to 211,000, Construction spending is ahead.
USDCAD Technicals
The intraday USDCAD technicals are unchanged. They are bullish while prices are trading above 1.4380 and looking for another test of resistance at 1.4450. A break below 1.4380 targets 1.4330 while a topside break targets 1.4500..
The uptrend from the beginning of October is intact while prices are above 1.4150 and looking for further gains to 1.4500. A downside break targets 1.4090.
For today, USDCAD support is 1.4370 and 1.4330. Resistance is 1.4450 and 1.4500
Today’s Range: 1.4390-1.4450
Chart: USDCAD daily
Source: Oanda.com
Loonie Outperforms G-10 Currencies in 2024
The New Zealand dollar wins the gold medal for being the worst-performing G-10 currency in 2024, losing 11.82%, while the British pound finished as the best, with just a 1.45% loss. The bulk of the gains occurred in the second half of the year, with Donald Trump’s election fueling the US dollar rally. More of the same is expected in the first part of 2025.
Geopolitical Uncertainty Supports Greenback
It is only the second day of the New Year, and China celebrated by bullying Taiwan with air and sea military patrols around the island. In Europe, Ukraine shut down Russia’s gas pipeline to European customers. Israel continues to bomb targets in Gaza and Yemen. In the US, a Tesla Cybertruck exploded outside a Trump hotel in Las Vegas.
Global Equities Retreat
Wall Street finished 2024 with hefty gains, led by a 30.78% gain in the Nasdaq and a 24.01% surge in the S&P 500. S&P 500 futures are up 0.86%, suggesting a positive start to 2025. That wasn’t the case in Asia. Hong Kong’s Hang Seng index plunged 2.18%, while Japan’s Topix lost 0.60%. Australia’s ASX 200 was the outlier, rising 0.52%. European bourses are trading negatively except for the UK FTSE 100 index, which is up 0.12%.
EURUSD
EURUSD closed at 1.0354 on December 31, then traded in a 1.0314-1.0375 range overnight. The currency pair is under pressure due to the dovish ECB monetary policy outlook, concerns around the Ukraine/Russia war, and added negativity from weaker-than-expected Eurozone manufacturing PMI for December (45.1 vs. forecast 45.2, previous 45.2).
GBPUSD
GBPUSD closed at 1.2509 on December 31 and is now near the bottom of its 1.2435-1.2540 overnight range. GBPUSD is weighed down by contrasting Fed and Bank of England monetary policy outlooks and Trump tariff threats. The BoE is expected to be more dovish than the Fed after Governor Andrew Bailey said that a gradual approach to interest rate cuts appeared right. Traders ignored higher-than-expected Nationwide Housing Price data and the weaker-than-forecast Manufacturing PMI report.
USDJPY
USDJPY closed at 157.17 on December 31 and bounced around that level in a 156.44-157.78 range overnight. Prices are underpinned by Japan/US interest rate differentials, with the US 10-year Treasury yield sitting at 4.535%, a tad below its December 31 close of 4.565%. Prices are further supported by speculation that the BoJ will not raise rates in January.
AUDUSD and NZDUSD
AUDUSD inched higher overnight, rising from 0.6187 at the December 31 close to 0.6223 overnight. The gains followed on the heels of the Chinese PMI data, which showed that although manufacturing slowed, it remained in expansion territory.
NZDUSD markets were closed, and the currency pair traded quietly in a 0.5593-0.5625 range. The NZDUSD downtrend from September 30 remains intact while prices are below 0.5715.
USDMXN
USDMXN closed 2024 at 20.8160, just about its highest level for 2024, and spent its first day of 2025 in a 20.7212-20.8658 band. The USDMXN gains are a result of Trump’s 25% tariff threat for all Mexican imports. In addition, the Mexican government’s judicial reforms spooked global investors, which is an ongoing factor underpinning the currency pair. Mexican markets are closed today.
BTCUSD (Bitcoin)
BTCUSD started the New Year trading in a 93,582-97,009 range, with the few traders that were around biding their time until Trump’s inauguration. Optimism is rampant, with analysts forecasting an end-of-2025 price somewhere between $100,000 and $300,000, partly on speculation that the US establishes a Bitcoin reserve fund
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC Fix: 7.1879 vs exp. 7.2916 (prev. 7.1884)
Shanghai Shenzhen CSI 300 fell 2.91% to 3820.40
Caixin Manufacturing PMI rose 50.5 in December, (forecast 51.7, previous 51.5)
China President Xi Jinping said China’s economy is expected to have grown around 5.0% in 2024. He said “The current economy faces new challenges, including uncertainty in the external environment and the pressures from the transition between old and new energies.”
USDCNH (off-shore yuan) closed 2024 at a two-year high thanks to incoming US President Trump’s plans to kickstart another China-US trade war. The PBoC manipulated the on-shore yuan USDCNY) to keep it steady.
Chart: USDCNY and USDCNH -Daily 1 year.
Sources: Oanda.com, Investing.com
