January 3, 2025
- Beijing hacks US Treasury as PBoC yuan slide.
- US ISM Manufacturing PMI expected to be unchanged in December
- USD opens modestly lower after quiet overnight session.
FX at a Glance
USDCAD open 1.4402, overnight range 1.4383-1.4413, close 1.4404
USDCAD is bouncing inside yesterday’s 1.4369-1.4442 range with direction determined by broad US dollar sentiment. That sentiment was mildly negative in a very quiet overnight session.
Nothing has changed. USDCAD remains supported by expectations that the Bank of Canada will cut interest rates more deeply than the Fed which has seen the CAD/US 10-year yield spread widen to -133.1 bps and by -24.5 in the past month. The soaring Federal budget deficit and political dysfunction in Ottawa are also negatives. And the 800 lb gorilla in the room is Donald Trump and his tariff threat.
WTI oil prices eased from Thursday’s peak after the weekly EIA crude stocks report showed that inventories fell less than expected.
Today, US ISM Manufacturing PMI is expected to be unchanged at 48.4 but still in contraction territory.
USDCAD Technicals
The intraday USDCAD technicals are neutral with prices trapped in a 1.4300-1.4450 trading band, but with a bullish bias. The December uptrend line is intact above 1.4335, which is guarding the October uptrend line at 1.4210
For today, USDCAD support is 1.4380 and 1.4360. Resistance is 1.4420 and 1.4450
Today’s Range: 1.4370-1.4440
Chart: USDCAD daily
Insider Trading
The government of China successfully hacked into the US Treasury and reportedly stole documents related to economic sanctions. Treasury Secretary Janet Yellen’s office was also targeted. Government officials claim that no classified documents were stolen, but that seems dubious. Meanwhile, China is protesting its innocence, saying the claim was without factual basis despite the fact that Beijing controls almost all internet access. The hacking sound you hear is merely Xi Jinping clearing his throat.
EURUSD
EURUSD is consolidating Thursday’s losses in a 1.0258–1.0306 range.
German unemployment was unchanged at 6.1% and not a factor. EURUSD is being pressured by widening US/EU interest rate differentials and concern about the fall-out from Ukraine’s decision to shut down a major gas pipeline from Russia.
GBPUSD
GBPUSD is consolidating recent losses in a 1.2373–1.2416 range after touching 1.2355 yesterday, helped by a generally softer US dollar profile against the majors.
Analysts expect further GBPUSD weakness due to a mix of higher gas prices and higher UK taxes. Traders focused on comments from former BoE Monetary Policy Committee member Andrew Sentence, who warned, “An economic crisis in the UK is looming.”
USDJPY
USDJPY traded quietly in a 157.04–157.57 range with liquidity lower than normal due to a Japanese national holiday.
Prices remain underpinned by elevated US 10-year Treasury yields and dovish expectations for the next BoJ meeting. President Biden blocked the sale of US Steel to Nippon Steel on national security grounds.
AUDUSD and NZDUSD
AUDUSD chopped about in a 0.6197–0.6222 range.
Analysts are suggesting that the AUDUSD outlook is negative due to dovish RBA monetary policy expectations and China’s ongoing economic slump. However, for now, speculation that the PBoC will cut interest rates is providing a bit of a floor.
NZDUSD tracked AUDUSD and traded in a tight 0.5591–0.5611 range. Kiwi faces similar issues as AUDUSD.
USDMXN
USDMXN squeezed lower in a 20.5213–20.6337 range overnight as prices consolidated Thursday’s losses. Mexico’s jobless rate rose to 2.6% in November (2.5% in October) but it was below the estimate for a 2.7% increase.
Analysts are expecting Mexican inflation to continue to trend lower, allowing Banxico to trim interest rates. However, USDMXN downside is limited due to the threat of tariffs from the US.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC Fix: 7.1878 vs exp. 7.2868 (prev. 7.1879)
Shanghai Shenzhen CSI 300 fell 1.19% to 3775.16
Chart: USDCNY and USDCNH -Daily 1 year.
USDCNY soars as PBoC stops defending CNY around the 7.3000 level. USDCNY was rising to due China’s ongoing economic growth issues combined with widening US/China interest rate differentials. Things will only get worse with Trump’s tariffs.
Sources:
Yahoo Finance, Oanda, Investing.com
