June 11, 2024

• UK wage data dampens summer rate cut enthusiasm.
• Markets slowly getting over EU parliament election surprises.
• US dollar opens slightly lower after quiet overnight session.

 FX at a Glance

Source: IFXA/RP

USDCAD open 1.3775, overnight range 1.3756-1.3778 close  1.3760

USDCAD drifted aimlessly overnight but it still has a bullish tone thanks to BoC/Fed interest rate policy divergence. The 10-year CAD/US interest rate spread narrowed to 90.8 from 94.4 which has served to cap USDCAD gains for now.  However, the BoC is expected to cut rates again with some expecting another 225 bp cut in July while tomorrows FOMC dot-plot may indicate fewer rate cuts in 2024. If so, USDCAD will rally.

WTI oil prices consolidated yesterdays gains in a 77.33-78.17 range.  Prices are supported by the latest forecast from Goldman Sachs predicting crude prices will rise 7% in the summer due to increased fuel demand from motorists.

There are no Canadian economic reports today.

USDCAD Technicals

The USDCAD intraday technicals are bullish. The week-long, steep uptrend is intact above 1.3690 and it is guarded by support (from previous resistance) at 1.3740. A decisive break above 1.3790 will extend gains to 1.3850, while a break below 1.3690 will extend losses to 1.3660.

Longer term, the June 2021 uptrend from 1.2060 is intact above 1.3360 and looking for a retest of resistance in the 1.4000 area.

For today, USDCAD support is at 1.3740 and 1.3710. Resistance is at 1.3810 and 1.3850. Today’s range is 1.3740-1.3820.

Chart: USDCAD monthly.

Source: DailyFX

Watching the Clock

There are no top-tier US economic reports today, leaving traders looking for other ways to entertain themselves. Wednesday’s US CPI data and the afternoon FOMC meeting will ensure a quiet trading session today.

EURUSD

EURUSD is at the bottom of its 1.0740-1.0774 range. The single currency traded sideways in Asia then drifted down in Europe after Moody’s warned France that the snap election increased risks to fiscal consolidation and that France’s “stable” outlook could be cut to “negative.” ECB policymaker Francois Villeroy argued that the timing of future rate cuts should be guided by “pragmatic gradualism.” ECB President Christine Lagarde warned that last week’s rate cut was justified but it did not mean that ECB rates are on a “linear declining path.”

GBPUSD

GBPUSD traded with a modest bid, rising from 1.2713 to 1.2750, underpinned by UK employment data. UK unemployment rose by 138,000 jobs (3-months to April) while the jobless rate rose to 4.4% from 4.3% previously. Traders downgraded risks for a BoE rate cut in the summer after total pay, including bonus, rose 5.9% compared to the forecast of a 5.7% increase. The GBPUSD technicals are bullish above 1.2700, looking for a retest of resistance at 1.2800.

USDJPY

USDJPY shuffled in a 156.96-157.46 range overnight, with prices supported by steady US 10-year yield at 4.434%, which is slightly lower than the 4.469% close on Monday. The BoJ meeting is Friday, and USDJPY is vulnerable to the tone of the statement.

AUDUSD and NZDUSD

AUDUSD climbed from 0.6592 to 0.6613 as markets reopened following a long weekend. Traders ignored NAB Business Confidence data, which turned negative in May (actual -3 vs April 2). NAB Chief Economist Alan Oster said, “Overall, the message here is a mixed one for the RBA. There are warning signs on the outlook for growth but at the same time reasons to be very wary about the inflation outlook, and we expect the RBA to keep rates on hold for some time yet as they navigate through these contrasting risks.” AUDUSD also has a chunky ($1.2 billion) worth of option strikes in the 0.6615-20 area rolling off today. NZDUSD drifted higher in a 0.6118-0.6133 range with direction determined by the prevailing US interest rate outlook.

USDMXN

USDMXN traded with a modest bid in a 18.2096-18.5880 range due to ongoing fallout from the Mexican elections. One of the reasons is that the new Congress takes their seats a month before incoming President Claudia Sheinbaum replaces outgoing President Andrés Manuel López Obrador (AMLO). Investors fear that AMLO will take advantage of the majority in Congress to pass a slew of market-unfriendly reforms. The USDMXN downtrend from May 2020 is intact while prices are below 18.5100.

BTCUSD (Bitcoin)

BTCUSD is at the bottom of its overnight 97,100-70,150 range due to caution ahead of tomorrow’s US inflation report and the FOMC meeting. The reduced odds for a Fed rate cut in September are also weighing on the cryptocurrency. The technical picture is bearish while prices are below 68,700, with a move below 66,550 targeting 64,200.

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

Source: Investing.com

China Snapshot

PBoC fix: 7.1135 vs expected. 7.2724 (prev. 7.1106).

Shanghai Shenzhen CSI 300 fell 0.87% to 3542.88.

Chinese stock traders returned from a long weekend to a host of negative news including geopolitical tensions, ongoing property market woes and trade concerns over Chinese exports of electric vehicles.

Chart: USDCNY and USDCNH

Source: Investing.com