July 26, 2024
- Core-CPI unchanged at 2.6%
- Global risk sentiment improves marginally.
- US dollar gives back some of this weeks gains.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3815, overnight range 1.3807-1.3827, previous close 1.3826
USDCAD retreated from yesterday’s peak, but the decline was underwhelming. The price action is being dictated by whatever US dollar sentiment is prevailing, and that sentiment is determined by US election headlines and Fed comments, which exaggerate price movements due to thin summer markets.
The strength of the US economy compared to Canada’s, combined with the Federal government’s latest “anti-business, anti-investment” capital gains tax increase, is one issue. The biggest concern is the government’s misguided focus on transitioning Canada from fossil fuels, a proven technology and one where Canada has over $13 trillion in proven reserves, to a carbon-zero economy, which exists only in words from virtue-signalling whack-jobs. The technology and infrastructure required for a mass conversion to EVs do not work, and studies prove that EV batteries and their components do as much or more damage to the environment as oil. In that environment, the lack of foreign investment flows will underpin USDCAD.
USDCAD Technicals
The intraday USDCAD technical are bullish while prices are above 1.3805, but upward momentum appears to be fading. The failure to break above 1.3850 risks a return to 1.3730 in the short term.
Longer term USDCAD is trapped in a 1.3580-1.3850 box but with an upside bias due to the 2024 uptrend line that comes into play in the 1.3580-1.3610 zone.
For today, USDCAD support is at 1.3780 and 1.3750. Resistance is at 1.3850 and 1.3890. Today’s Range 1.3760-1.3850.
Chart: USDCAD daily
Source: DailyFX
Taming the Beast
US Core Personal Consumption Expenditures-Price Index rose 2.6% y/y in June, unchanged from May. from 2.6% y/y. Personal spending ticked down too 0.2% (forecast 0.4%) and the May results were revised down to 0.4% from 0.5% m/m. However that result was offset because although personal spending was unchanged at 0.3%, the May numbers were revised up to 0.4% from 0.2%.
The data shows that inflation is moving in the right direction but just not quickly it does support a number of economists and ex-Fed officials suggesting the Fed should cut rates August 1 or risk doing unnecessary damage to the economy.
“We Love You, Kamala”
Former President Barack Obama and his wife added their blessing to the Democrat Party’s anointing of Kamala Harris as their sacrificial lamb on the altar of Donald Trump. Someone has to lose, and she is the designated victim. The media have recruited all the same pollsters that predicted a landslide victory for Hillary Clinton in 2016, and it would the latest polls for the 2024 race may be just as accurate.
EURUSD
EURUSD traded in a 1.0842-1.0861 band with traders focused on US political developments and today’s PCE-Price Index data. The EURUSD uptrend from the beginning of the month is intact while prices are above 1.0820.
GBPUSD
GBPUSD drifted higher in a narrow range, rising from 1.2851 to 1.2873 with gains capped by concerns about next week’s statement by UK Chancellor of the Exchequer Rachel Reeves, which may include tax hikes that could spook foreign investment. EURGBP selling due to the risk that the Bank of England cuts rates on August 1 is also limiting gains.
USDJPY
USDJPY is near the top of its 153.38-154.45 overnight range in early NY. Prices got a bit of a lift after Tokyo CPI data came in on the soft side. Nevertheless, the prospect of a BoJ rate hike on July 3, the ongoing risk of BoJ intervention, and the sheer size of short yen/long everything trades suggest further downside risk.
AUDUSD and NZDUSD
AUDUSD has had a bad week, falling from 0.6701 on Monday to 0.6516 yesterday. Prices edged higher overnight and traded cautiously in a 0.6535-0.6567 range. Broad-based US dollar demand, AUDJPY selling, and a poor economic growth outlook for China fueled the losses. If today’s US PCE-Price Index data surprises to the upside like yesterday’s Q2 GDP number, AUDUSD will head toward 0.6450.
NZDUSD traded poorly for all the same reasons as AUDUSD. Traders ignored the ANZ-Roy Morgan Consumer Confidence data (actual 87.9, June 82.9). The gains were attributed to the future outlook.
USDMXN
USDMXN traded sideways and a tad lower in an 18.3274-18.4810 range, starting the week at 17.8900. Prices rallied due to US electioneering. Headlines suggesting that Trump threatened 100% tariffs on Chinese cars made in Mexico caused a bit of a stir, but an RBC analyst suggested it was the unwinding of MXNJPY trades that drove USDMXN higher.
Bitcoin (BTCUSD)
BTCUSD caught a bid in Asia and rallied non-stop, rising from 63,532 to 67,529 just before NY opened. There is no specific catalyst for the gains, but some analysts suggest traders are hoping Donald Trump will speak positively about cryptocurrency in a speech tonight. Others attribute the rally to chunky buying from “whale” investors. Essentially, the rally occurred because there were more buyers than sellers
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1270, forecast 7.2229 (prev. 7.1321).
Shanghai Shenzhen CSI 300 rose 0.29% to 3409.29.
Apple’s iPhone not longer in China’s top 5 handset makers.
China’s 10 year government bond fell to 2.17% as rate cuts and a sluggish economy weigh on yields.
Chart: USDCNY and USDCNH
Source: Investing.com
