January 22, 2025

  • Trump has plans for the US to be the AI leader.
  • Risk sentiment improves on lack of tariff news
  • USD opens with losses across the board.

 FX at a Glance

USDCAD open 1.4320, overnight range 1.4301-1.4354, close 1.4325

USDCAD retreated due to broad-based US dollar weakness after President Trump failed to act on his tariff threats. FX traders appear to believe tariffs are scrapped rather than merely delayed, though they may face a reality check on February 1. For now, Trump seems to be driving the USDCAD bus.

The Bank of Canada is expected to cut rates by 25 bps next week, even with the looming risk of economic disruption from a potential Canada-U.S. trade war.

Canadian inflation cooled slightly in December, but this is seen as a “tax-holiday illusion.” BMO economists note that CPI rose 0.2% m/m in seasonally adjusted terms, while the three-month trend in the BoC’s inflation measures “picked up noticeably.”

Today’s Canadian Raw Materials and Industrial Product Price data are unlikely to impact FX markets, and the U.S. economic calendar is devoid of top-tier releases.

USDCAD Technicals

The intraday USDCAD technicals flipped to bearish with the move below 1.4390 yesterday  and while prices are below 1.4360,  losses may extend to 1.4290. A move above 1.4360 suggests continued 1.4300-1.45 consolidation.

USDCAD is locked in a 1.4260-1.4480 box, albeit with a bullish bias due to the uptrend line that is intact while prices are above 1.4290.  A break below targets 1.4100 while a topside break suggests further gains to 1.4550.

For today, USDCAD support is 1.4310 and 1.4290. Resistance is 1.4360 and 1.4410.

Today’s Range: 1.4310-1.4410

Chart: USDCAD 4 hour

Stargate 2025

The 1994 movie Stargate introduced the idea of a wormhole created by aliens. Now, President Trump envisions the U.S. leading in artificial intelligence with his own “Stargate” initiative. Whether this project uncovers a wormhole to new opportunities or opens a can of worms remains uncertain. So far, it has attracted $100 billion in investment from major players like Masayoshi Son of SoftBank, Sam Altman of OpenAI, and Oracle’s Larry Ellison. Plans are underway to quickly increase investment to $500 billion.

Risk On (For Now)

President Trump has yet to back tariff threats with action, giving markets a temporary reprieve. However, if his rhetoric is to be taken seriously, this calm may be fleeting. Trump’s AI plans, combined with Netflix’s upbeat quarterly earnings, boosted global stock markets. Japan’s Topix rose 0.87%, Australia’s ASX 200 gained 0.33%, and European indices climbed, with the German DAX leading at 1.20%. U.S. S&P 500 futures are up 0.42%, and the 10-year Treasury yield remains steady at 4.56%.

EURUSD

NY Open: 1.0354
Overnight Range: 1.0393-1.0458

The euro rallied on broad U.S. dollar weakness, though sustaining gains may be difficult. ECB officials, including Bundesbank Governor Joachim Nagel, are signaling more rate cuts, with another 25 bps likely. President Trump criticized EU trade practices, saying, “The EU will be in for tariffs.” Yesterday, the EU President highlighted risks to the eurozone, limiting EURUSD upside. The downtrend from October remains intact as long as prices stay below 1.0510.

GBPUSD

NY Open: 1.2250
Overnight Range: 1.2312-1.2377

An improved risk tone, spurred by the absence of new tariff announcements, lifted GBPUSD, but challenges persist. Rising UK inflation, slowing growth, a deteriorating labor market, and expected BoE rate cuts suggest this rally is corrective, with prices capped below 1.2510.

USDJPY

NY Open: 155.98
Overnight Range: 155.36-156.11

USDJPY traded in a narrow range ahead of Friday’s BoJ monetary policy decision. The BoJ is expected to hike rates by 25 bps to 0.50%. Analysts are eager for clarity on future policy moves in the accompanying statement.

AUDUSD

NY Open: 0.6223
Overnight Range: 0.6253-0.6294

AUDUSD is benefiting from improved risk sentiment, trading near the top of its range. Traders ignored the Leading Index report, which showed a decline (-0.2%, previous 0.06%).

NZDUSD

NY Open: 0.5626
Overnight Range: 0.5649-0.5687

NZDUSD followed broad U.S. dollar weakness higher. Lower-than-expected Q4 core inflation (+3.1%) had little impact. ANZ economists predict a 50-bps OCR cut by the RBNZ in February, bringing the rate to 3.75%.

USDMXN

NY Open: 20.7501
Overnight Range: 20.5477-20.6778

USDMXN drifted lower, starting the session near its overnight low. The pair retreated after President Trump delayed tariff implementation. Traders are eyeing tomorrow’s Mexican inflation data, with core inflation expected at 0.23% (prior: 0.5%).

BTCUSD (Bitcoin)

NY Open: 108,000
Overnight Range: 102,680-107,360

Bitcoin traded with a mixed tone, consolidating recent gains amid a lack of crypto-specific developments. Trump’s campaign pledge to create a Bitcoin Strategic Fund and improve regulatory clarity remains in focus.

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

China Snapshot

PBoC Fix: 7.1696 vs exp. 7.2642 (prev. 7.1703)

Shanghai Shenzhen CSI 300 fell 0.93% to 3797.02

Trump hinted at 10% tariffs for China as part of his America First Policy, including an analysis to see if China fulfilled the terms of the previous trade agreement.

Chart: USDCNY

Sources: Yahoo Finance, Oanda, Investing.com, Google Finance