Photo: Coca Cola

July 7, 2022

  • FOMC minutes note “a more restrictive stance could be appropriate”
  • Boris Johnson takes long walk off short pier
  • US dollar opens on mixed note, AUD outperforms

FX at a glance:  

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3002-06, overnight range 1.2982-1.3054, close 1.3035

USDCAD is drifting lower. The jury is still out as to whether it is a tactical retreat or merely repositioning for another attempt to storm the ramparts.

WTI oil is attempting to find support after its plunge from $111.20/b on Monday to $9528/b yesterday.  Oil traders were spooked by talk of a global recession.  Analysts are suggesting the oil price drop is mostly due to technicals and stop-loss hunting, as the the Russian and Ukraine war ensures oil demand will outstrip supply and underpin prices.

USDCAD gains may capped in the 1.3080 area due to anticipation that the BoC will not only raise rates by 0.75% but deliver a hawkish monetary policy statement, thereby negating the US dollar advantage from Fed actions.

USDCAD technical outlook

The intraday USDCAD technicals are flitting between bullish and bearish.  This morning they are mildly bearish following the failure to break above resistance in the 1.3080 area and the subsequent drop below minor support at 1.3010.  That drop suggests further losses to 1.2920. However, the uptrend line from June remains intact while prices are above 1.2890.

For today, USDCAD support is at 1.2950 and 1.2910. Resistance is at 1.3020 and 1.3080. Today’s Range 1.2950-1.3030

Chart: USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

The US dollar opened on a mixed note as traders adjusted positions ahead of Friday’s nonfarm payrolls report. The FOMC minutes, released yesterday, did not offer anything new, but that didn’t prevent traders from reacting to the statement that “participants recognized that a more restrictive monetary policy stance could be appropriate.”

The US 10-year yield jumped from 2.757% Wednesday to 2.957% this morning. Traders got antsy when the 10-year, 2-year yield curve inverted, but that has corrected.

Gold bulls are sideswiped by the surging US dollar which has driven XAUSUD from its March 19 peak of $1988.00 to $1734.00 yesterday. Prices are consolidating losses near the bottom. The long term uptrend from June 20, 2019, comes into play at $1720.00.

GBPUSD got a bit of a “Boris Bump”.  The beleaguered UK Prime Minister’s didn’t resign but ascended into the heavens, at least that’s what his remarks outside of No. 10 Downing Street sounded like. They were more flowery and grandiose than any “Best Actor” speech at the Academy Awards.  GBPUSD rallied from 12.1911 to 1.2022 before retreating to 1.1960 in NY.

EURUSD is consolidating this week’s losses in a 1.0176-1.0220 band but remains on the defensive. The elevated risk of a Eurozone recession and dovish ECB monetary policy continues to weigh on prices. The technical picture remains negative while prices are below 1.0370

USDJPY bounced in a 135.56-136.21 range. Prices are underpinned by the jump in the 10-year US Treasury yield. The BoJ is reportedly planning to raise its CPI outlook to above the 2.0% target while trimming its GDP growth target.

AUDUSD soared from 0.6766 to 0.6832, powered by a surge in the Australian Trade surplus, which jumped to 15.965 million from 13.248 million in June. Exports rose 9.5% m/m (May 5.0%) while imports were 5.6% m/m (May -0.8%).

NZDUSD lagged AUDUSD gains but rallied from 0.6142 to 0.6193.

Chart of the Day:  Gold XAUUSD

Source: Saxo Bank

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

Source: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.7143, previous 6.7246

Shanghai Shenzhen CSI 300 rose 0.44% to 4,443.47

China FX Reserves dipped to $3.071 trillion in June. (May $3.128 trillion)

Chart: USDCNY 1 month

Source: Yahoo Finance