February 15, 2024

  • Japan and the UK fall into technical recessions.
  • US January Retail Sales ex-autos down 0.6% m/m
  • US dollar slips after US data dump.

FX at a glance

Source: IFXA

USDCAD Snapshot: open 1.3537-40, overnight range 1.3513-1.3552, close 1.3543

USDCAD dropped from 1.3535 to 1.3513 then popped to 1.3523 in the minutes following weaker than expected US retail sales, lower than expected weekly jobless claims and robust Philly Fed data.

Expectations for Bank of Canada easing have been pushed out to June from March, previously which is helping to slow USDCAD gains from robust US data that suggests Fed rates will remain restrictive for longer.

Oil prices retreated yesterday after the Energy Information Administration (EIA) reported a 12.01 million barrel surge in US crude inventories, for the week ending February 9. Nevertheless, ongoing  Red Sea shipping attacks by Yemen’s Houthi rebels will limit the downside.

Canada Housing starts fell to 223.6k from 248.9k while Manufacturing Sales data fell 0.7% m/m.

USDCAD Technicals

The USDCAD technicals are bullish. An intraday bullish flag pattern is evident on the hourly chart that suggests USDCAD could rally to 1.3600 on a break above 1.3550.

Longer term, there is an uptrend channel from the start of the year is guiding prices higher inside a 1.3410-1.3660 range.

For today, USDCAD support is at 1.3520 and 1.3490. Resistance is at 1.3570 and 1.3610. Today’s range is 1.3510-1.3610.

Chart: USDCAD daily

Source: Investing.com

G-10 FX recap

The US dollar is still the champion.  It is off its latest peak but still standing compared to the wannabe currency kings  which are battered, bruised and prone on the canvas. The key driver is  US economic outperformance  (Q4 GDP 3.3% q/q) compared to Germany, Japan and the UK  which have fallen into technical recessions. Those results have helped underpin the greenback. Michael Barr, the Federal Reserve Vice Chair for Supervision wasn’t overly concerned about Tuesday’s inflation report. He did acknowledge that the results were a reminder that the path to 2.0% inflation might be bumpy.

US Retail Sales fell more than expected in January (actual -0.8% vs forecast -0.1% m/m) but that may be a result of massive snow storms that buried large swathes of the country. Weekly jobless claims fell8,000 to 212,000 which underscores the resilience of the US economy, as does the better than expected Philadelphia Fed Manufacturing survey results (actual 5.2, forecast -0.8, previous -10.6).

EURUSD firmed in a 1.0724-1.0772 band and prices are near the top after today’s US data.  The European Commission released new economic growth forecasts today suggesting that the economy will grow more slowly but inflation will fall faster. EU and the euro area growth is lowered to 0.5% in 2023, from 0.6% projected in the Autumn Forecast. The Harmonised Index of Consumer Prices (HICP) inflation is forecast to fall from 6.3% in 2023 to 3.0% in 2024.

GBPUSD is rallying in a 1.2542-1.2576 band despite negative sentiment from a 0.2% drop in Q4 GDP (forecast 0.1%), which put the economy into a technical recession. However volatile components in the data suggest an upside risk to the result from revisions. The short term GBPUSD technicals are bullish above 1.2400, a level guarded by additional support at 1.2500.

USDJPY remains on the defensive and is trading in a 149.54-150.60 range with the low seen after today’s US data.  A drop in the US 10-year Treasury yield from 4.261% at yesterdays close  to 4.203% in NY is weighing on prices. Traders are also on high alert for BoJ intervention. Japan’s economy tripped into a recession after  Q4 GDP which fell 0.4% q/q.

AUDUSD climbed from 0.6478 to 0.6529 after this mornings US data sparked some profit taking.  Traders ignored a disappointing Australian employment report. The  unemployment rate rose to 4.1% (forecast 4.0%, previously 3.9%) while adding just 11,100 jobs.

USDMXN is in a 17.0532-17.1115 range and has fully retraced its post-US CPI gains. The October downtrend is intact while prices are below 17.02300, looking for a decisive break below the 17.0270-90 area to extend losses to 16.7080.

FX high, low, open (as of 6:00 am ET)

Source: Investing.com

China Snapshot

PBoC fix: closed 7.1036, expected 7.1996, previous 7.1063

Shanghai Shenzhen CSI 300 closed- Feb. 8/24- 3364.93.

Chinese markets will be closed -Lunar New Year

Chart: USDCNH daily

Source: Investing.com