January 10, 2024

  • Data void keeps traders sidelined.
  • Oil inventory decline gives WTI a bit of support.
  • US dollar opens little changed from close.

FX at a glance

Source: IFXA

USDCAD Snapshot: open 1.3371-75,  overnight range 1.3366-1.3397, close 1.3392.

USDCAD drifted aimlessly, along with the other G-10 majors.  Traders are unmotivated to get involved until tomorrow’s US inflation data.

Canadian taxpayers are quaking in their boots following reports that government officials are meeting with Honda executives to discuss an $18.4 billion investment to build electric vehicles. Honda may be enamoured with Canada because the government has already subsided Stellantis and Volkswagen to the tune of $28.2 billion.  What’s another $18.4 billion to a government where the leader claims “I do not think about monetary policy.”

WTI oil prices got a little support from the API report of a 5.21 million barrel drawdown of US crude inventories last week and by stepped up missile attacks in the Red Sea.  Nevertheless, the rise from $71.67 to $72.72 was underwhelming.

USDCAD Technicals:

The intraday USDCAD technicals are bullish, and little changed from Tuesday.  The uptrend from the end of December is intact while prices are above the 1.3350-60 area on the 4-hour and daily charts. A decisive break above 1.3440 targets 1.3520 then 1.3640.

A break below 1.3340 targets 1.3305 then 1.3250.

For today, USDCAD support is at 1.3350 and 1.3310.  Resistance is at 1.3410 and 1.3440. Todays range 1.3330-1.3420

Chart: USDCAD 4 hour

Source: Investing.com           

G-10 FX recap

FX markets were deathly dull overnight. The world keeps inching closer to all-out war, but all global markets seem to care about is if interest rates will drop and stock markets rally.

 The Russia/Ukraine war continues unabated, and German Chancellor Olaf Scholz is berating the EU union for not delivering enough aid.

Iran’s Houthi rebel proxies have stepped up attacks on Red Sea shipping, forcing US and UK ships to shoot down over 20 missiles. Yemen doesn’t have much, if anything, going for it, which is probably why Iran’s religious zealots chose the country to be ground zero in its undeclared war against the west.

Taiwan goes to the polls on January 13, and China is actively working to derail the campaign of leading contender Lai Ching-te, and Beijing warns the election is a choice between war and peace. (Who knew Jinping read Tolstoy?) On December 23, Xi Jinping said reunification with Taiwan is inevitable. If so, the Fed and its interest rate outlook will be the least of market worries.

Despite the geopolitical noise, Japan’s Nikkei 225 index closed with a 2.01% gain, while European bourses are trading modestly higher. SP futures are flat. The US 10-year yield is unchanged at 4.0%.

EURUSD seesawed in a narrow 1.0923-1.0955 range overnight and is at the top of the band in NY. Gains may have been limited after yesterday’s comments by ECB policymaker Francois Villeroy. He said, “We will cut rates this year when the inflation outlook is solidly anchored at 2% (with) effective and durable data.”

GBPUSD traded in a 1.2686-1.2736 range and opened unchanged from yesterday. Traders are sidelined, awaiting more clarity for US interest rates, which will happen tomorrow with the release of the US inflation report.

USDJPY traded choppily in a 144.31-145.16 range and is trading at 144.82 in NY. The Japanese Labour Cash Earnings data rose 0.2% y/y in November (forecast 1.5%), which suggests wage inflation is not an issue and reduces the risk that the BoJ tightens policy in the near term.

AUDUSD traded in a 0.6680-0.6714 range, with the low occurring after the November monthly CPI index dipped to 4.3% from 4.9% in November. The result supported expectations that interest rates have peaked. The move was reversed by the time NY opened.

Today’s US data includes wholesale inventories.

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

Source: Investing.com

China Snapshot

PBoC fix: today 7.1055, expected 7.1618, previous 7.1010.

Shanghai Shenzhen CSI 300 fell 0.47% to 3277.13.

Chart: USDCNY and USDCNH 1 year.

Source: Investing.com