UK data underpins GBPUSD
US dollar opens with gains-CAD outperforms
FX at a Glance
FX Recap and Outlook
BAZINGA! The US inflation results made the most optimistic forecasters look like pessimists. CPI jumped to 0.8% m/m compared to forecasts for a 0.2% increase Annually, CPI rose 4.2% y/y in April, the largest 12-month increase since September 2008. CPI-ex food and energy rose 3.0%.
The FX reaction was sharp but short, and prices retraced to pre-data levels. It seems that the flock of Fed officials that spoke yesterday and insisted higher inflation would be transitory, had an effect.
EURUSD traded in a 1.2115-1.2150 range overnight. Prices plunged to 1.2073 then bounced to 1.2115 following the US inflation report. EURUSD is underpinned by upgraded European commission forecasts that predict 2021 GDP growth of 4.3% and 4.4% in 2022. EURUSD technicals are bullish above 1.2040.
GBPUSD reacted to the US CPI data by dropping from 1.4120 to 1.4082, before reversing the move and climbing to 1.4134. UK Manufacturing and Industrial Production data beat expectations, and provided further evidence for a robust post-pandemic economic recovery.
WTI oil prices got a lift from another drop in US crude inventories, and the International Energy Agency. The IEA said the pandemic oil glut had been absorbed, and oil supplies have returned to normal levels. They except demand to outstrip supply even after phasing out Opec production cuts.
USDCAD rallied in Asia and retreated in Europe, then collapsed from a post-CPI level of 1.2112 to 1.2048. USDCAD selling pressure is driven by rising crude prices, the perception that a robust US economic recovery will boost the domestic economy and by concerns the Bank of Canada will raise interest rates ahead of the Fed.
USDCAD Technical Outlook
The intraday USDCAD technicals are bearish below 1.2130 looking for a break of support in the 1.2050 zone to extend losses to the 1.2000. For today, USDCAD support is 1.2050 and 1.2000 Resistance is at 1.2110 and 1.2130. Today’s Range 1.2040-1.2110
Chart: USDCAD 4 hour
FX open, high, low, previous close
Source: Saxo Bank