- No surprises in FOMC minutes
- Canada Retail Sales headline monthly data misses, big time
- US dollar slides across the board compared to Wednesday open
FX change at a glance: Friday-Monday NY open
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.2816-20, overnight range 1.2804-1.2847 close 1.2818,
USDCAD imitated a yo-yo yesterday and overnight as bulls and bears jockey for position. The Loonie’s direction continues to be tied to broad-risk sentiment as measured by S&P 500 price action. USDCAD tends to drop with S&P 500 gains and vice versa.
Statistics Canada reported Retail Sales were virtually unchanged in March which is one way to spin the data. Analysts expected a 1.4% m/m, but the result was 0.0%, a tad lighter than February’s upwardly revised 0.2% result.
The reality is the results were pretty good when you exclude auto’s. Retail sales, excluding autos and gas stations rose 1.5% in March.
Analysts are beginning to agree that the day’s of the US dollar’s dominance are numbered. They suggest that the outlook for US interest rates to rise to the 2.75%-3.0% area is already reflected in prices, while similar moves by other central banks have not been accounted for.
Bank of Canada rate hikes are expected to follow a similar trajectory as the Fed, but the BoC plans have been overshadowed by the focus on the Fed. Arguably, the 1.3030 area is the top for USDCAD with prices likely to retrace to 1.2420 in the next few months.
USDCAD technical outlook
The intraday USDCAD technicals are unchanged from yesterday; directionless inside a 1.2750-1.2900 band, which has contained price action for the past week. A break above 1.2890 targets 1.3030 while a move below 1.2790 suggests a retest of 1.2840. Fibonacci retracement analysis of the June 2021 –May 2022 range suggests a decisive move below 1.2800 will extend losses to 1.2640. A retest of 1.3030 cannot be ruled out while prices are above 1.2800.
For today, USDCAD support is at 1.2800 and 1.2760. Resistance is at 1.2870 and 1.2890. Today’s Range 1.2770-1.2870
Chart: USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
The FOMC minutes did reveal anything that markets didn’t already know. Since the May 4 meeting, a gaggle of Fed policymakers has delivered their outlooks about monetary policy and, if anything, managed to tamp down speculation of aggressive rate hikes beyond 0.50 basis points.
It’s time to move on. Wall Street did. The S&P 500 index rallied following the minutes and closed with a 0.95% gain. Asian equity traders were more cautious, and the major indexes closed modestly lower. European bourses are slightly higher, led by a 0.60% gain in Germany’s DAX index. S&P 500 futures are ticking higher, suggesting a positive Wall Street opening. Oil prices firmed why gold prices are marginally lower. The US 110-year Treasury yield is steady at 2.732%.
Today’s US data was mixed. Q1 GDP fell 1.5% y/y, a tad worse than the 1.3% drop expected. That news was offset by an 8,000 drop in weekly jobless claims to 210,000. The FX reaction to the data was muted.
EURUSD traded firmer post-FOMC minutes and is in the middle of its overnight 1.0664-1.0718 range in NY. Prices are supported by the view that the market has priced in the next round of US rate hikes while the ECB’s rate hike plans are not reflected in the single currency. The ongoing Russia/Ukraine war and the prospect of a total EU embargo of Russian oil will limit gains. The intraday EURUSD technicals are bullish above 1.0640, looking for a break above 1.0760 to extend gains to 1.0930.
GBPUSD rallied to 1.2618 from 1.2553, the dipped to 1.2570 in NY. Chancellor Rishi Sunak delivered what some described as a “mini-budget.” He announced a “25% wind-fall tax on energy company profits and promised a £650 cost-of-living payment to low income families. The news served to underscore the weakness of the UK economy and GBPUSD was sold. Novelettes, the intraday GBPUSD technicals are bullish above 1.2500, looking for a break above 1.2680 to target 1.2960.
USDJPY is clawing back overnight losses in NY and is in the middle of its overnight 126.56-127.57 range. Prices are being pressured by the recent slide in US Treasury yields. Japan is set to welcome tourists beginning June 6.
AUDUSD and NZDUSD are rangebound and both are close to their overnight lows.
FX open, high, low, previous close as of 6:00 am ET
Chart: Saxo Bank
China Snapshot –
Today’s Bank of China Fix 6.6742 Previous 6.6550
Shanghai Shenzhen CSI 300 rose 0.25%% to 3,993.04
Morgan Stanley downgrades 2022 GDP growth to 3.2% from 4.2%
Chinese Premier Li Keqiang said, “economic indicators in China have fallen significantly, and difficulties in some aspects and to a certain extent are greater than when the epidemic hit us severely in 2020.”
Chart: USDCNY 1 month
Source: Yahoo Finance