Photo: Bing AI

September 19, 2023

  • Canadian inflation heats up.
  • Oil gains undermining USDCAD.
  • US dollar opens mixed as commodity currency bloc outperforms.

FX at a Glance

Source: IFXA/RP

USDCAD Snapshot:  open: 1.3444-48, overnight range: 1.3381-1.3491, close 1.3485

Canadian’s are getting poorer. The Consumer Price Index (CPI) rose 4.0% year over year in August, following a 3.3% increase in July. Statistics Canada said the acceleration was the result of higher year over year prices for gasoline in August.  Guess what.  Gas prices have risen again in September, which suggests another high CPI reading next month.

The monthly numbers, (0.4% vs forecast 0.2% and July 0.6%) can be easily spun to fit a bullish or bearish narrative.

Rising oil prices are inflationary and WTI oil is rising, climbing from $90.89 to $91.89/b in NY today.  The gains are due to the risk of rising demand and tightening supply, underscored by a report that US Shale production would drop to its lowest level since May.

There is a danger that the USDCAD reaction to today’s CPI numbers will be short-lived. One reason is that there is another inflation report due next month, ahead of the October 25 Bank of Canada meeting.  The other reason is that attention will quickly shift to the outlook for tomorrow FOMC meeting.

Bank of Canada Deputy Governor Sharon Kozicki speaks at 2:00 pm EDT.

USDCAD Technicals

The intraday USDCAD technicals are bearish.  The downtrend  channel from September 7 is intact while prices are below 1.3505 with the bottom at 1.3400 today.  A break below 1.3400 targets 1.3300.  Only a break above 1.3505 would negate the downside pressure.

RSI studies note that USDCAD is extremely oversold on a daily chart which suggests a correction is overdue.

For today, USDCAD support is at 1.3400 and 1.3350. Resistance is at 1.3460 and 1.3490. Today’s range 1.3360-1.3460

Chart: USDCAD 4 hour


G-10 FX recap

Global markets are currently in a holding pattern ahead of a series of Central Bank meetings this week, particularly the FOMC meeting scheduled for tomorrow. Traders are fretting about how policymakers will react to rising oil prices.

However, this didn’t deter the commodity currency bloc, thanks to the rise in commodity prices, including gold, oil, and iron ore.

Asian equity indexes experienced modest declines, with Japan’s Nikkei 225 index falling by 0.87%, and Australia’s ASX 200 dropping by 0.47%. In contrast, European bourses are slightly higher, except for the German Dax, which remains flat. S&P 500 futures are showing slight positivity.

EURUSD traded within a range of 1.0675 to 1.0718, with prices receiving a boost from a slight dip in harmonized Eurozone CPI to 5.2% year-on-year, down from 5.3% in July, and a 0.5% month-on-month change compared to 0.6% in July.

GBPUSD traded in a range of 1.2370 to 1.2425, with prices struggling to establish a clear direction.

USDJPY remained steady within a range of 147.50 to 147.93, with prices supported by the US 10-year Treasury yield, which is currently at 4.317%.

AUDUSD strengthened, trading within a range of 0.6428 to 0.6474. Prices received an additional boost following the release of the RBA minutes from the September meeting, which indicated that a rate hike was under consideration.

FX high, low, open


China Snapshot

Bank of China Fix: today 7.1733, expected 7.2839, previous 7.1736

Shanghai Shenzhen CSI 300 fell 0.19% to 3720.50.

Chart: USDCNY 1 month 

Source: Bloomberg