Source: Pixabay

June 15, 2021

EU/US end Boeing/Airbus spat

US Retail Sales weaker than forecast

US dollar opens mixed then gains in early trading

USDCAD open 1.2177-81, Overnight range 1.2132-1.2197,  Previous  close 1.2148

FX at a Glance

FX Recap and outlook

The US data dump was a mixed bag.  May Retail Sales dropped a worse than expected 1.3 %m/m, but the news was offset by the upward revision to Aprils results (from 0.0% to 0.9%).

 Producer Prices rose  0.8% m/m. compared to 0.6% in April, while the June NY Empire State Manufacturing Index was lower than expected at 17.4.

The US and EU put an end to their 17 year long dispute over Airbus and Boeing subsidies and suspended tariffs for the next five years.

Global equity traders have no fear of inflation. Wall Street closed at record highs, and the positive sentiment flowed into Asia.  Japan’s Nikkei 225 rose 0.96%, and Australia’s ASX 200 indices closed at a record 7,379.47.  The major European bourses are adding to record peaks, seemingly content in their view that the Fed will continue to ignore current inflation levels.  The B of A Fund Managers Survey shows why; 72% of fund managers believe that inflation is transitory.  The 2021 mantra is “what goes up, keeps on going up.”

FX traders have adopted a less sanguine view.  US selling pressures have abated somewhat and the greenback traded with a modest bid in overnight price action. 

EURUSD dropped from an overnight peak of 1.2147 to 1.2102 in NY trading, partly due to position adjustments ahead of the FOMC statement.  ECB policymaker and Finland Central Bank Governor Olli Rehn expressed his support for last  week’s ECB decision. He said, “Now it is essential that we ensure favourable financing conditions, which implies we need to continue with the significant purchases under PEPP as we agreed last week.”  German HICP inflation was confirmed at 2.4% y/y, and the eurozone trade surplus narrowed in April.   For today, EURUSD support is at 1.2080 while Resistance is at 1.2140.

GBPUSD traded very choppily in a 1.4035-1.4127 range.  Prices broke support at 1.4070 in NY and stop-loss selling drove GBPUSD to the low, before rebounding to 1.4070.  The UK government’s decision to delay the final post-pandemic opening phase by one month due to fears of the COVID-19 Delta variant are weighing on the currency The UK unemployment slipped to 4.7%, as forecast, but the outlook is murky, as furlough schemes end in September.  The intraday GBPUSD technicals are bearish and targeting 1.4000.

USDJPY rallied from 109.60 yesterday to 110.16 at the NY open, then retreated to 110.00. Prices are underpinned by firmer US Treasury yields and reports the BoJ may extend pandemic relief measures for another six months.

AUDUSD is trading at the bottom of its 0.7687-0.7715 trading band as it tracks broad US dollar sentiment.  The RBA minutes did not reveal anything new.

USDCAD added to its overnight gains in early NY trading, with prices tracking broad US dollar sentiment despite steady to firm WTI oil prices ($71.46/barrel).  The move continues to be a bit of “short-squeeze” ahead of the FOMC meeting.

USDCAD technical outlook

The USDCAD technicals are bullish with the break above 1.2060 targeting 1.2210, then 1.2250. For today, USDCAD support is at 1.2150 and 1.2110.  Resistance is at 1.2210 and 1.2250.   Today’s range 1.2140-1.2210

Chart USDCAD 4 hour

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank