Photo: BingAI

July 14, 2023

  • Markets trading cautiously after this week’s big moves.
  • Oil prices inch high due to supply disruptions
  • USD opens lower from yesterday but is little changed overnight.

FX at a glance:

Source: IFXA Ltd

USDCAD Snapshot: open 1.3116-20, overnight range 1.3095-1.3137, close 1.3110

USDCAD sank on the back of broad US dollar weakness all week, then consolidated the losses overnight. USDCAD is the laggard in the G-10 currency rally despite this week’s 25 bp rate hike and hawkish statement from the BoC. Perhaps traders just aren’t buying what the BoC is selling.

Reportedly, there is a $700 million option strike in the 1.3100-05 area expiring today which may reinforce support in the 1.3090-1.3100 zone.

WTI oil price rose from $76.56 to $77.28 due to expectations for higher demand in H2 along with supply disruptions in Libya and Nigeria.

Canada Manufacturing Sales data is on tap.

USDCAD Technical Outlook

The intraday USDCAD technicals are in a minor downtrend channel between 1.3060 and 1.3160.A topside break would extend gains to 1.3200, but only a break above 1.3300 will suggest a low is in place.

Longer term, The USDCAD uptrend from May 2021 comes into play in the 1.3030-40 are.  A move below that level targets 1.2770. For today, USDCAD support is at 1.3090 and 1.3050.  Resistance is at 1.3160 and 1.3200. Today’s range 1.3090-1.3170

Chart: USDCAD daily

Source: Saxo Bank

G-10 FX recap

Today is the final day of the annual Running of the Bulls in Pamplona, Spain, and it’s also the end of a week where US Dollar bears KO’d dollar bulls. That is due to a mixture of weaker-than-expected inflation reports, combined with a dose of unfettered optimism that the Fed rate hikes of 2022-23 are very close to ending. One more for sure, then in the immortal words of the hare-brained economist, Bugs Bunny, “T-T-That’s All Folks.”

Markets ignored comments from noted Fed hawk Christopher Waller, who said, “The robust strength of the labor market and the solid overall performance of the U.S. economy give us room to tighten policy further.” He added, “I see no reason why the first of those two hikes should not occur at our meeting later this month.”

There wasn’t much actionable economic data overnight, leaving the kick-off to the US earnings season to provide a trading catalyst.

EURUSD traded in a 1.1212-1.1245 range, marking a 2.5% gain since Monday’s NY opening level. The single currency has had a good run this week, and resistance in the 1.1250 area may be too formidable to breach, at least today.

GBPUSD traded in a 1.3095-1.3141 range and is sitting at 1.3112 in NY. The belief that the Fed is near the end of its rate-hiking cycle while the Bank of England may raise rates by another 150 bps is underpinning prices. GBPUSD is in an uptrend above 1.2630.

USDJPY dropped to 137.24 in Asia, then rallied to 138.95 in in NY. The moves were due to a mix of falling US Treasury yields and the belief that the BoJ will tweak policy tighter at the end of the July meeting, combined with profit-taking ahead of the weekend.

AUDUSD consolidated yesterday’s gains in a 0.6864-0.6894 range, with price action mirroring US dollar sentiment.

The Michigan Consumer Sentiment report is due today.

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

Source: Bloomberg

China Snapshot

Bank of China Fix: 7.1318 expected 7.1453, Previous 7.1527

Shanghai Shenzhen CSI 300 rose 0.02% to 3899.10

PBoC Deputy Governor says it is not good to see the yuan too high or too low and will prevent fluctuations. PBoC has the tools to cope with challenges and will use RRR and MLF.

Chart: USDCNY 6 month

Source: Yahoo Finance