June 10, 2022

  • US CPI jumps to 8.6% y/y from 8.3%
  • Canada adds 39,800 jobs in May
  • US dollar consolidating yesterday’s large gains.

FX change at a glance

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2737-41, overnight range 1.2683-1.2769, close 1.2699,

USDCAD bounced off of 1.2550 support yesterday in the aftermath of the ECB meeting which sparked fresh US dollar demand. Prices climbed relentlessly, triggering stop loss demand on the break above the intraday downtrend line at 1.2590 and accelerated to 1.2769 in NY, ahead of the US and Canadian data.

Canada gained 39,800 jobs in May, trouncing the forecast for a 20,000 increase, while the unemployment rate ticked lower to 5.1% from 5.2%.  The news helped offset US dollar demand after the US inflation report.

USDCAD downside may be limited by negative risk sentiment after S&P 500 futures plunged, post US CPI.

USDCAD technical outlook

The intraday USDCAD technicals are bullish. The break above the intraday downtrend line at 1.2590 and the May downtrend line at 1.2690 have shifted the focus to1.2860, the 61.8% Fibonacci retracement level of the May 10-June 8 range.

For today, USDCAD support is at 1.2710 and 1.2680. Resistance is at 1.2770 and 1.2820.  Today’s Range 1.2690-1.2790

Chart: USDCAD 4 Hour

Source: Saxo Bank

G-10 FX recap and outlook

Traders were licking their wounds overnight following the Wall Street debacle, the hawkish ECB meeting, and Vladimir’s Putin’s speech hinting that his goal is to ”win back” Russian lands.”  Politicians in in Estonia, Latvia, Lithuania, and others were not impressed.

Asian equity indexes followed Wall Street lower. The Nikkei 225 lost 1.49% while Australia’s ASX 200 dropped 1.25%. European bourses are deep in the red, led by a 1.14% decline in the German DAX index. S&P 500 and DJIA futures are freefalling, post CPI.  WTI oil and gold prices are sliding The US 10-year Treasury yield bounced between 3.025-3.066% overnight.

US May CPI was a hotter than expected 8.6% y/y (forecast 8.3%y/y), a forty-year high.  Core-CPI rose 6.0% (forecast 5.9%) and both results drove equity futures down, while underpinning the 10-year Treasury yield at 3.05%.   Today’s results are a strong indication that the Fed won’t consider pausing rate hikes in September.

The US dollar is surging across the board.

EURUSD dropped from 1.0765 pre-ECB meeting then plunged to 1.0530, following today’s US inflation report, a loss of 2.2%.

Thursday, the ECB preannounced a 0.25% rate hike for the July 21 meeting. The September meeting could see a 0.25%-or 0.50% hike. Morgan Stanley analysts predict it will be the latter.

GBPUSD dropped from 1.2555 Thursday to 1.2384 in NY today due to post-CPI US dollar strength

USDJPY traded in a 133.37-134.47 range with gains from rising Treasury yields and the US inflation outlook, offset by safe-haven demand following Putin’s speech. Mr Putin alluded to reclaiming Russian land.

AUDUSD and NZDUSD are trading at session lows, due to lower commodity prices. Overnight support from the reopening of Shanghai ports is forgotten.

Michigan Consumer Sentiment Index is expected at 58.0 (May 58.4).

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

China Snapshot

Today’s Bank of China Fix 6.6994, Previous 6.6811

Shanghai Shenzhen CSI 300 rose 1.52% to 4,238.99, Previous close 4,175.68

China May inflation 2.1% y/y, unchanged from April

Stocks bounce as Shanghai officially reopens, supported by previously announced stimulus packages.

Chart: USDCNY 1 month

Source: Yahoo Finance