Photo: creazill..ccom

June 21, 2023

  • Fed Powell’s testimony may be a non-event.
  • Canada Retail Sales rise more than expected in April.
  • US dollar mildly firmer in quiet FX session-GBP underperforms.

FX at a glance

Source: IFXA Ltd/

USDCAD Snapshot: open 1.3221-25, overnight range 1.3210-1.3244, close 1.3234

USDCAD attempted to rally yesterday after robust US housing starts data knocked the S&P 500 index lower, but the rally failed at the downtrend channel line.

USDCAD saw additional pressure and dropped below its overnight low after Canada’s April Retail Sales rose 1.1% m/m (forecast 0.2%) while  rose 1.5% m/m. Core-Retail sales (ex fuel and motor vehicles).

USDCAD is closely tracking US dollar moves and risk sentiment as measured by the S&P 500 with traders fading most Canadian data and comments by Bank of Canada officials.

Rising WTI oil prices helped cap USDCAD gains after WTI climbed from yesterday’s low of $69.55/b to $71.70/b overnight mostly due to hopes that China will announce a new host of fiscal stimulus measures.

USDCAD Technical Outlook

The intraday USDCAD technicals are bearish below 1.3260, looking for a move below 1.3200 to extend losses to 1.3150.  A break above 1.3260 would target 1.3340. A break below 1.3150 sets up a test of 1.3000.

For today, USDCAD support is at 1.3180 and 1.3150.  Resistance is at 1.3240 and 1.3270

Today’s range 1.3170-1.3240

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

“It is officially summer in the Northern Hemisphere, and while we are still twelve days away from the start of the ‘dog days of summer,’ the hounds are already howling at the gates.

The greenback drifted higher in a quiet overnight session due to a mild bout of ‘risk aversion’ sentiment trickling through markets ahead of Fed Chair Jerome Powell’s 10:00 am testimony to the House Financial Services Committee. He is unlikely to deviate from his post-FOMC press conference remarks because nothing has changed.

US Secretary of State Antony Blinken’s China trip was derailed yesterday after his boss, President Biden, called Chinese President Xi Jinping a dictator. Officials in the Chinese Foreign Ministry went ballistic, calling the remarks ‘irresponsible’ and stating, ‘It is against the basic facts and diplomatic protocols, seriously violates China’s political dignity, and amounts to public political provocation.’ Blinken’s Beijing trip was canceled.

Asian equity indexes closed with losses. Hong Kong’s Hang Seng index was the biggest loser, down 1.98%, while Australia’s ASX 200 index fell 0.59%. Both indices suffered from disappointment over China’s tepid rate cuts and lack of fiscal stimulus announcements. Japan’s Nikkei rose 0.56%, supported by reports of significant foreign inflows.

European bourses are treading water around unchanged, while S&P 500 futures are also flat.

EURUSD drifted in a 1.0907-1.0933 range while traders await the next catalyst. ECB officials have been commenting about the inflation outlook, but traders are only looking ahead to the July monetary policy meeting where a 25 bp rate increase was basically pre-announced by ECB President Christine Lagarde.  Traders are also hoping for some fresh insight from Mr Powell’s testimony today.

GBPUSD plunged to 1.2693 from 1.2802 after another disappointing inflation report.  Headline CPI rose 8.7% in May, (forecast 8.4% vs April 8.7%) and hotter than expected Core-CPI (actual 7.1% vs forecast 6.8%). The data served to raise the risk that the Bank of England hikes 50 bps at Thursday’s meeting.

USDJPY traded in a 141.29-142.16 range and opened with a bid in NY.  Prices saw additional support following more dovish comments by BoJ officials suggesting the yield curve control (YCC) policy would remain unchanged in July.

AUDUSD is at the bottom of its overnight 0.6749-0.6798 range due to negative sentiment from the RBA’s dovish turn and because China has not followed up its rate cuts with new fiscal stimulus.

There are plenty of Fed officials delivering speeches today, but Fed Chair Powell’s testimony is the one that counts.

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

Source: Bloomberg

China Snapshot

Bank of China Fix: 7.1795, previous 7.1596

Shanghai Shenzhen CSI 300 fell 1.53% to 3864.03.

Chart: USDCNY 6 month

Source: Bloomberg