July 31, 2024
- Bank of Japan raises rates to 0.25%-Fed to leave rates unchanged
- FOMC decision day
- US dollar opens mixed from Tuesday-Yen outperforms
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3843, overnight range 1.3813-1.3859, previous close 1.3850
USDCAD is steady with traders awaiting the Fed decision this afternoon. The FOMC is expected to leave rates and monetary policy unchanged. Traders will quickly refocus on US quarterly earnings data, with Meta reporting after the close.
WTI oil prices rose to 77.16 from 75.19 on fears of supply disruptions after Israel hit a target in Iran, increasing tensions in the region. However, OPEC’s planned production increases, along with slowing Chinese demand, are limiting gains.
The Canadian economy was a tad stronger than expected, rising 0.2% m/m in May (forecast 0.2%) but below the 0.3% m/m level seen in April. USDCAD ticked lower on the news but the focus remains on the Fed.
USDCAD Technicals
The intraday USDCAD technical are mildly bearish while prices are trading below 1.3860, looking for a decisive move below 1.3820 to extend losses to 1.3780.
The longer term uptrend remains intact above 1.3610 while the RS! Studies suggest USDCAD is still overbought.
For today, USDCAD support is at 1.3820 and 1.3770. Resistance is at 1.3860 and 1.3890. Today’s Range 1.3770-1.3860.
Chart: USDCAD daily
Source: DailyFX
There Will Be Blood
Life imitates art-again. The feud between a failed silver miner-turned oilman and a sleazy preacher has a lot of similarities with the ongoing turmoil in the middle east which turned uglier overnight. Israel followed up a missile strike in Lebanon with another successful strike in the heart of Iran. The strike was in response to the murder of a dozen Israeli kids playing soccer over the weekend and also served as Israel’s RSVP to the inauguration festivities for Iranian president Masoud Pezeshkian.
Will Powell Tip His Hand?
The FOMC is almost certain to leave rates unchanged today, but markets are hoping they will bless a September rate cut. Inflation is heading lower, albeit slowly, and the labor market is cooling. Some analysts suggest Mr. Powell will say nothing today and wait until his speech at the Kansas City Fed’s Jackson Hole Symposium on August 22 to provide rate cut guidance.
Quarterly Earnings
Wall Street finished on a mixed note with Microsoft earnings disappointing, and Meta set to report after the close today. Asian equity indexes closed with significant gains: Australia’s ASX 200 rallied 1.75%, and Japan’s Topix rose 1.45%. European bourses are higher, led by a 1.39% rise in the UK FTSE and a 1.18% gain in the French CAC 40-index. S&P 500 futures are up 0.98%. The US 10-year Treasury yield stands at 4.136%.
EURUSD
EURUSD fluctuated in a 1.0806-1.0833 range following disappointing Eurozone inflation data. HICP inflation rose to 2.6% in July from 2.5% in June, suggesting a September 12 ECB rate cut is not a certainty.
GBPUSD
GBPUSD traded in a 1.2820-1.2853 range as traders remained sidelined ahead of today’s FOMC meeting and the Bank of England decision tomorrow.
USDJPY
USDJPY took center stage, trading erratically in a 150.06-153.89 range overnight and currently sitting at 150.37 in early NY. The Bank of Japan hiked its benchmark rate by 15 bps to 0.25%, with several analysts suggesting the recent yen weakness was a factor in the decision. Post-yen price action also suggests BoJ activity. The BoJ announced plans to slow its bond-buying program as it begins to phase out stimulus.
AUDUSD and NZDUSD
AUDUSD traded in a 0.6479-0.6545 range due to slightly softer-than-expected inflation data and AUDJPY selling. The data was largely as expected, but economists noted the RBA’s preferred “Trim” measure declined, leaving the door open to a rate cut next week.
NZDUSD outperformed its Aussie counterpart, rising from 0.5888 to 0.5929, supported by better Business Confidence and Activity data.
USDMXN
USDMXN rallied from 18.7355 to 18.9445 before retreating to 18.7668 in NY. The gains were fueled by MXNJPY buying as carry trades were unwound.
Bitcoin (BTCUSD)
BTCUSD traded in a 65,556-67,066 range, with prices weighed down by the BoJ rate hike and ongoing pressure from MT Gox dispersions.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1364 vs exp. 7.2586 (prev. 7.1316).
Shanghai Shenzhen CSI 300 rose 2.16% to 3442.08.
China July NBS Manufacturing PMI 49.4 (forecast 49.3, previous 0.49.5
Non-NBS Manufacturing PMI 50.2, forecast 50.2, previous, 50.5
Chart: USDCNY and USDCNH
Source: Investing.com
