May 13, 2012

  • Jobless claims better than expected
  • Global markets fear US CPI gain not “transitory”
  • US dollar consolidates Wednesday’s gains

USDCAD open 1.2133-37, Overnight range 1.2106-1.2155, Previous close 1.2137

FX at a Glance

FX Recap and Outlook

US jobless claims  fell 34,000 to 473,000 in the week ending May 8, which was better than the 490,000 expected.  Producer prices rose 0.6% m/m  in April compared to the forecast for a 0.3% increase.  The FX reaction was muted.

A sea of red ink washed over global equity markets overnight as traders reacted to the 4.2%y/y  jump in US CPI in April.  Japan’s Nikkei 225 index closed down 2.49%, on fears inflation could derail a global post-pandemic recovery.  The inflation worries continued to reverberate in Europe. The  UK FTSE 100 is down 2.07%, leading the other bourses lower.  S&P Futures gave up earlier gains are down 0.30%.  Gold and oil prices are lower, and 10-year US Treasury yields are at 1.70%

Elon Musk put the boots to bitcoin (BTCUSD).  He decided the high use of fossil fuels used in bitcoin mining was not environmentally friendly.  He suspended the use of cryptocurrency to buy Tesla vehicles.  BTCUSD plunged to $46,294.72 from $57,024.25 before they recovered to $50,167.67

EURUSD traded sideways in Asia then popped to 1.2105 from 1.2070 when Europe opened. The rally stalled, and EURUSD fell to 1.2052 just before NY opened.   EURUSD  traders continue to digest the implications of the US CPI data.  EURUSD maintains its bullish bias as prices are above the uptrend line from April 1 at 1.2040. They were no Eurozone economic reports  available

GBPUSD tested support in the 1.4000-10 area, and it held, but only a move above 1.4060 will negate the downside pressure.  Outgoing Bank of England Chief Economist Andy Haldane reiterated his call that the UK economy could experience double-digit growth. Traders ignored the better than expected RICS Housing Survey data (actual 75% vs March 54%)

USDJPY traded in a 109.49-109.78 range.  The rally was supported by rising US Treasury yields, but profit-taking following the rise from 108.65 yesterday helped cap gains.  The short term technical outlook is bullish following the break above 109.30, which targets the March 31 peak of 110.84.

AUDUSD is probing uptrend line support in the 0.7695 area, which will extend losses to the 0.7600 area if decisively broken. Prices continue to be pressured by widening US/Australia yield differentials in favour of the US.

USDCAD dropped to 1.2048 yesterday as traders were deciding whether or not the US inflation numbers were a temporary increase. 1.2048 is also the 50% Fibonacci retracement level of the 2011-2020 range. The rally stalled at 1.2155 as oil prices, while off their peak, remain supportive.

There is no Canadian data, but Bank of Canada Governor Tiff Macklem speaks at 11:00 am ET.

USDCAD Technical Outlook

The intraday USDCAD technicals are mildly bullish above 1.2110, looking for a break above 1.2160 to extend gains to 1.2190. A failure to break above 1.2190 suggests another test of support at 1.2050.  For today, USDCAD support is at 1.2110 and 1.2150.  Resistance is at 1.2160 and 1.2190.  Today’s Range 1.2090-1.2190.

Chart: USDCAD daily

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank