February 14, 2025
- Canada and US on holiday Monday.
- Reciprocal US tariffs do not kick in until April-Risk on!
- USD opens lower as it consolidates yesterday’s losses.
FX at a Glance
USDCAD open 1.4290, overnight range 1.4157-1.4202, close 1.4195
USDCAD tumbled yesterday on reports (later confirmed) that the U.S. would delay the much-ballyhooed reciprocal tariff plan until April. The news was seen as confirmation that Trump’s tariff plan was far more bark than bite, and long USDCAD positions got dumped. The move lower was exacerbated when major support in the 1.4240-60 area crumbled, triggering a wave of stop-loss selling.
I find it hard to believe that the latest sell-off is the start of a trend lower in USDCAD. The threat of tariffs is real, with 25% tariffs on Canadian steel and aluminum slated for March 12. Trump’s reciprocal tariff takes direct aim at Canada’s digital service tax, claiming that Canada and France collect over $500 million from American companies.
USDCAD had reached extreme overbought levels since the beginning of the year, and the latest move lower is merely bringing positioning back into balance. If ever a move should be faded, the USDCAD drop is at the front of the line—in my opinion.
USDCAD has $2.7 billion of 1.4195-1.4200 option strikes maturing today at 10:00 am EDT. Price action is certainly to get messy.
US Retail Sales fell 0.9% m/m in January compared to the forecast of a0.1% drop, but the sting of the disappointment was soothed by the upward revision to December’s result. Still the number shows that consumers are spending less.
Canada wholesale sales fell 0.2% in December compared to a gain of 0.2% that was predicted and Manufacturing Sales rose 0.3%. rather than the 0.6% expected.
US 10-year Treasury yields fell to 4.488% from 4.54% following the data and the US dollar edged lower.
USDCAD Technicals
The intraday USDCAD trend is bearish. Yesterday’s drop through 1.4240 snapped a support line that had been intact since December 17, setting the stage for a visit to the 1.4090 zone. A break above 1.4300 is needed to negate the downward pressure.
Longer term, USDCAD is poised to consolidate recent losses in a 1.4090-1.4250 range, with the downside guarded by the November uptrend line at 1.4150. Fibonacci retracement analysis argues that the move below 1.4280 (38.2% Fibonacci retracement of the November-January range) targets the 61.8% retracement level at 1.3963.
For today, USDCAD support is 1.4150 and 1.4090. Resistance is at 1.4240 and 1.4270.
Today’s Range: 1.4140-1.4240
Chart: USDCAD daily
Getting it Done
Love him or hate him, President Trump is getting things done. In just 25 days he has managed to accelerate the release of hostages by Hamas, he spurred India to reduce what he described as “India’s unfair, very strong tariffs that limit U.S. access to the Indian market,” and is forcing Europe and NATO countries to start paying their fair share for defense. And if that is not enough, Trump managed to convert Quebec Premier Francois Legault from a dirty oil, pipeline-hating, anti-Alberta zealot to preaching the virtues of oilsands pipelines spanning his province.
Trump’s weapon of choice is access to the U.S. market, which he is controlling by the liberal use of, or threat of, tariffs on anything and everything. His “reciprocal tariff” plan is aimed at taxes on U.S. goods, particularly the European VAT, which he claims creates an unfair advantage by effectively taxing U.S. imports while subsidizing their exports.
Fair and Reciprocal President Trump announced his “Fair and Reciprocal Plan” on trade. He wants to restore fairness in U.S. trade relationships while countering non-reciprocal trading arrangements. He cites Brazil charging an 18% tariff on U.S. ethanol and the EU’s ban of shellfish from 48 American states while exporting all it wants. He also pointed to the EU’s 10% tariff on imported cars. The man has a point. The U.S. is not being treated fairly.
Relief Rally
Global stock markets climbed, and the U.S. dollar slid ahead of and following Trump’s announcement. The rally occurred because the imposition of the tariffs is not until April, which traders took to mean the threat is just another Trump negotiating ploy.
They are right—it is. Trump’s memorandum ended with the following: “Just last week, President Trump leveraged tariffs to force Canada and Mexico to make long-overdue changes at our northern and southern borders, ensuring the safety and security of American citizens.”
EURUSD
NY Open: 1.0465, Overnight Range: 1.0447-1.0488 EURUSD climbed yesterday after the U.S. PPI data was considered benign, which led to a dip in Treasury yields. The rally accelerated as traders were relieved that Trump’s highly touted Reciprocal Tariff plan would not be implemented until April, which meant that there is lots of time for negotiations. This rally is not likely to last beyond 1.0550 because unless the EU caves to U.S. demands, it will face a barrage of tariffs. Eurozone GDP rose 0.1% q/q in Q4, a tick better than the 0.1% expected.
GBPUSD
NY Open: 1.2576, Overnight Range: 1.2547-1.2596 GBPUSD extended its post-GDP rally on the back of a broad-based improvement in global risk sentiment from the delay in U.S. tariffs. A senior government minister said the UK government will adopt a “wait-and-see” approach as “the most sensible thing to do with all of these announcements is to digest them, see if they actually come to pass, and then decide what you do.”
USDJPY
NY Open: 152.52, Overnight Range: 152.39-153.15 USDJPY extended Thursday’s losses overnight, supported by the U.S. 10-year Treasury yield falling from 4.66% on Tuesday to 4.52% overnight. USDJPY also attracted a few safe-haven flows as, although reciprocal tariffs are not until April, they remain a serious risk to the global economy.
AUDUSD
NY Open: 0.6632, Overnight Range: 0.6310-0.6345 AUDUSD rallied on the back of improved risk sentiment and reached a new year-to-date high. The RBA monetary policy meeting is February 18, and a 25 bp rate cut is expected. Traders will be more concerned with the forward guidance considering tariff risks.
NZDUSD
NY Open: 0.5700, Overnight Range: 0.5657-0.5711 NZDUSD tracked the Aussie higher, but the rally stopped just shy of its YTD peak of 0.5723. Business NZ PMI jumped to 51.4 in January, from an upwardly revised 46.2 in December, the first time the data has been in expansion territory since December 2023. The RBNZ meets on Wednesday when a 50 bp rate cut is anticipated.
USDMXN
NY Open: 20.3937, Overnight Range: 20.3728-20.4380 USDMXN dropped on the news that reciprocal tariffs would not be imposed until April. The sell-off was exacerbated by long USDMXN positions getting stopped out. The losses are unlikely to be sustained as tariffs remain a real risk, and Fed and Banxico interest rate outlooks support USDMXN.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC fix: 7.1706 vs exp. 7.2739 (prev. 7.1719)
Shanghai Shenzhen CSI 300 rose 0.87% to 3938.01
President Xi Jinping hosting tech summit in Beijing on Monday, in what is described as an effort to show support for the sector. That news, and the US delay to impose reciprocal tariffs helped to boost stocks.
Sources: Yahoo Finance, Oanda, Investing.com,
