Photo: BingAI

June 26, 2023

  • German Ifo index points to weaker economic growth.
  • Searchers for Waldo, also looking for Putin.
  • US dollar opens lower except against JPY and AUD.

FX at a glance

Source: IFXA Ltd

USDCAD Snapshot: open 1.3165-69, overnight range 1.3138-1.3181, close 1.3182

USDCAD is trending lower but subject to a lot of chop, due to the ebb and flow of broad US dollar sentiment.

There is a domestic data void today but that changes later this week with inflation and GDP reports on tap.  In addition, the Bank of Canada quarterly Business Outlook Survey (BOS) is released on Friday, which also happens to be the start of a long weekend, and month, quarter, and half-year end.

The inflation data and the BOS survey will determine whether or not the BoC hikes rates again on July 12.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish below 1.3180 looking for a move below 1.3140 to extend losses to 1.3100, then 1.3000.

The downtrend from June 1 is intact while prices are below 1.3250 and USDCAD is no longer oversold according to Bollinger band and RSI studies.  

For today, USDCAD support is at 1.3140 and 1.3100.  Resistance is at 1.3180 and 1.3210

Today’s range 1.3110-1.3190.

Chart: USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

“Wagner Group is riding into town with armor. They come to grant you your rights. Hail to the king. Hail to the one.”

The 21st-century Russian Revolution didn’t change anything, but it changed everything. Putin fled Moscow in terror. Will he seek to be avenged sevenfold?

Global traders watched the Russian drama unfold as if it were a modern-day Game of Thrones. It was regional, contained, and therefore not a market factor.

What changed?

The health of the European economy took center stage when the German Ifo survey data for June was released. The statement noted that “the Business Climate Index fell to 88.5 points, down from 91.5 points in May. Expectations were markedly pessimistic, and companies’ assessments of their current situations were worse.”

Traders are keeping an eye on long USDJPY positions after comments from the Finance Ministry reiterated that authorities would respond to excessive FX moves.

Asian equity indexes closed with losses. Japan’s Nikkei 225 index lost 0.25%, and Australia’s ASX 200 fell 0.29%. Chinese markets reopened after an extended holiday and finished deep in the red.

European bourses are trading with small losses, while S&P 500 Futures are 0.33% lower.

Looking ahead:

The US economic data calendar is empty, leaving traders to look elsewhere for inspiration. They may not find it until this afternoon when a speech by ECB President Christine Lagarde kicks off the ECB forum on Central Banking in Sintra, Portugal.

There will be the usual parade of Fed speakers throughout the week, which will end with a flurry of portfolio rebalancing flows for the month, quarter, and half-year end.

EURUSD traded with a modest upside bias in a 1.0888-1.0919 range, with prices rebounding from Friday’s lows following soft PMI data. EURUSD quickly recovered losses from the weak German Ifo data. The intraday technicals are bullish above 1.0870 and looking to break above 1.0930 to extend gains to 1.0980.

GBPUSD inched higher in a 1.2712-1.2747 range in Europe before dipping to 1.2725 in early NY trading. The currency pair is enjoying some lingering support following last week’s Bank of England 50 bp rate with additional support from EURGBP selling. The intraday GBPUSD technicals are bullish above 1.2690 and looking for a break above 1.2750 to target 1.2740.

USDJPY traded defensively, falling from 143.71 to 142.95 as it retraces a large portion of Friday’s rally. The prospect of a more aggressive Fed and a dovish Bank of Japan is underpinning prices. However, the threat of FX intervention is capping gains.

AUDUSD is near the bottom of its 0.6670-0.6693 range. Prices are in a downtrend channel between 0.6740 and 0.6750, with losses fueled by divergent RBA and Fed monetary policy and disappointment from China’s slow post-Covid zero recovery.

FX open, high, low, previous close as of 6:00 am ET

Source: Bloomberg

China Snapshot

Bank of China Fix: 7.2056, previous 7.1795

Shanghai Shenzhen CSI 300 fell 1.41% to 3809.70.

Chart: USDCNY 6 month

Source: Bloomberg