- Stocks and oil rise, bonds dip
- ECB wakes up to inflation
- US dollar retreats as risk sentiment turns positive
FX change at a glance
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.2833-38, overnight range 1.2821-1.2877, close 1.2874
USDCAD traded sideways in Asia, then dropped through support at 1.2850 in Europe on the back of rising equity markets and oil prices.
WTI oil rallied from $105.63/b yesterday to $111.68/b after G-7 leaders discussed capping Russian oil prices via an insurance scheme to limit oil tanker coverage over a certain value. If enacted, it would be a boon to China and India as those nations are Russia’s biggest customer. WTI got an added boost after French President Emmanuel Macron said, “Saudi Arabia’s Oil Minister Sheik Mohammed bin Zayed claimed to have reached maximum oil production.”
USDCAD dipped as the antipodean currencies higher. All three were underpinned by firming equity prices. Monday’s modestly better than expected US Durable Goods Orders data contributed to a rise in the Atlanta Feds’ GDPNow forecast, which rose to 0.3% from 0.0% helping to ease recession fears.
USDCAD technical outlook
The intraday USDCAD technicals are bearish with the overnight move below the 1.2840-50 support zone suggesting further losses to 1.2710 on a 4hourly chart. It is only a minor downtrend channel which disappears on a retracement above 1.2880. The daily chart continues to suggest 1.2500-1.3070 consolidation.
For today, USDCAD support is at 1.2810 and 1.2770. Resistance is at 1.2880 and 1.2930. Today’s Range 1.2790-1.2890
Chart: USDCAD 4 hour
Source: Saxo Bank
G-10 FX recap and outlook
Traders are focused on month, quarter, and half-year end portfolio rebalancing flows while keeping a cautious eye on geopolitical noise, US recession risks, and the interest rate outlook in the Eurozone and US. Canadian and American traders are looking forward to the long weekend.
Asia equity indexes closed in a good mood with the major indexes deep in the green. European bourses have followed suit, with the UK FTSE 100 and the French CAC leading the pack with 1.22% gains. DJIA and S&P 500 Futures have risen 0.50%, but further gains may be curtailed if the US 10-year Treasury yield, which has climbed to 3.236%, moves even higher.
EURUSD rallied to1.0605 supported by remarks by policymakers attending the ECB annual holiday in Sintra, Portugal. President Christine Lagarde reiterated plans to raise interest rates by 0.25% at the July 21 monetary policy repeated that the ECB would develop a tool to combat fragmentation in the EU debt market. The gains faded into the New York session and EURUSD is revisiting intraday support at 1. 0550..
GBPUSD underperformed, trading in a 1.2240-1.2290 band. Remarks by BoE Deputy Governor Jon Cunliffe suggesting a pause in raising interest rates weighed on prices. He said, “we do have to look at what’s happening with domestic inflation pressures and on the data, we have at the moment, which gives us a bit of time to see how this evolves.”
Brexit issues will continue to flare in coming months after the UK government passed the Northern Ireland Protocol bill.
GBPUSD technicals are bearish below 1.2400.
USDJPY rallied from 135.12 to 136.19 due to the rebound in US Treasury yields and the dovish BoJ monetary policy outlook.
AUDUSD rallied from 0.6917 to 0.6973 due China easing coronavirus restrictions and firmer commodity prices. But those gains have faded in early NY trading. Australia Retails sales are due tomorrow (forecast 0.4% m/m vs 0.9% m/m in April).
Today’s US data includes Case-Shiller Home Prices and Consumer Confidence.
FX open, high, low, previous close as of 6:00 am ET
Source: Saxo Bank
Today’s Bank of China Fix 6.6930, Previous 6.6850
Shanghai Shenzhen CSI 300 rose 1.04% to 4,490.52
China eased some Covid rules which included a 50% reduction in the isolation time for returning travellers, which underpinned stocks.
PBoC Governor Yi Gang says inflation outlook is stable and policy will continue to be accommodative
Chart: USDCNY 1 month
Source: Yahoo Finance