Greenback gains on concerns around global growth outlook
USD Retail Sales rise 0.6% in June (forecast -0.4%)
US dollar poised for strong finish this week, except against NZD
USDCAD open 1.2572-76, Overnight range, 1.2563-1.2599, Previous close 1.2594
Weekly FX at a Glance
FX Recap and outlook
US Retail Sales were better than expected in May, rising 0.6% m/m compared to expectations for a drop of 0.4%., while Retail Sales, ex-Autos rose 1.3% m/m .
The US dollar is ending the week on a firm footing. Ongoing tensions between China, and most of the G-10, concern that US economic growth has peaked, and that it is downhill from here, and spreading coronavirus-delta cases around the world, has given the greenback a safe-haven bid.
US stocks wobbled yesterday after Fed Chair Powell admitted he was not comfortable with the current inflation readings. He said ““This is a shock going through the system associated with reopening of the economy, and it has driven inflation well above 2%. And of course, we’re not comfortable with that.”
China is unhappy with talk that President Biden will impose new sanctions on a number of Chinese officials while issuing a warning to investors about risks in Hong Kong from the Chinese government.
Australian Prime Minister Morrison reissued his call for an independent investigation into the origin of COVID
Asia equity indexes closed with losses, except the Australian ASX 200, and European bourses are trading mixed around flat. S&P 500 futures are flat, and gold is a tad lower, while oil prices have risen.
EURUSD traded sideways in a 1.1798-1.1821 range. Eurozone June inflation was confirmed at 1.9% y/y, which contrasts sharply with US CPI at 5.4% for the same month. Traders are cautious ahead of next week’s ECB meeting, which is expected to deliver another dovish outlook, stressing the need for accommodative monetary policy. EURUSD technicals are looking for a break of support at 1.1770 to extend losses to 1.1700.
GBPUSD traded in 1.3793-1.3861 band, peaking after Eurozone inflation data but gains are capped ahead of next week’s ECB meeting. GBPUSD is supported by recent comments from Bank of England officials alluding to the need to “withdraw stimulus.” However, broad US dollar demand erased the gains and GBPUSD is trading at the session low. GBPUSD is directionless in a 1.3740-1.3910 range.
USDJPY rallied from 109.74 in Asia to 110.22 in early NY trading, helped by the bounce in US 10-year treasury yields from 1.296% to 1.334%. The BoJ left interest rates unchanged and downgraded GDP growth from 4.0% to 3.8% in 2021
NZDUSD popped from 0.6984 to 0.7033 after news that New Zealand inflation surged to 3.3% y/y in Q2, easily beating the forecast of a 2.8% gain. The strong reading reinforces analysts predictions that the RBNZ will raise interest rates in November, or earlier.
USDCAD is sitting just below resistance in the 1.2610 zone after probing support at 1.2450 on Wednesday. The rally coincides with the drop in crude prices. WTI oil has fallen 7.4% since July 6. USDCAD continues to be underpinned by the somewhat dovish tilt to the Bank of Canada outlook and the downgrade in the GDP growth forecast.
USDCAD technical outlook
The intraday USDCAD technicals are bullish while above 1.2560, looking for a break above 1.2610 to extend gains to 1.2650. Longer term. The uptrend from the June low of 1.2008 is intact above 1.2380, looking for a test of 1.2760 on a break above 1.2650. For today, USDCAD support is at 1.2560 and 1.2520. Resistance is at 1.2610 and 1.2650. Today’s range 1.2560-1.2630.
Chart USDCAD 4 hour
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank