- Central bankers keep focus on higher interest rates
- Canada Retail Sales on tap
- US dollar slides on improved risk sentiment
FX change at a glance
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.2924-28, overnight range 1.2908-1.2984. close 1.2981
USDCAD continued to slide overnight thanks to a shift to positive risk sentiment. There wasn’t a specific catalyst for the improved mood but that didn’t stop the US dollar index from dropping or global equities, rallying.
USDCAD may have underperformed due to the widening of the CAD/US 10 year interest rate differential which had narrowed sharply last week. USDCAD also dropped due to widespread US dollar selling pressure after ECB, RBA, and BoE policymakers talked about the need for higher interest rates.
WTI oil prices tested support from the December 2021 uptrend line in the $106.00-20/barrel area. It help and prices bounced to $110.74/b. Treasury Secretary Yellen was dismissive about restarting the Keystone XL pipeline, mainly because it would take too long to have an impact on the current energy crisis. The US and allies are considering a ban for insurance on certain Russian oil shipments.
Canada Retail Sales rose 0.9% m/m in April, a tick above the 0.8% estimated. Statistics Canada estimates that May will see a 1.6% increase. The data is evidence that the Canadian economy is robust, and helps support views that even with aggressive rate hikes, the BoC could engineer a soft landing
USDCAD failure to decisively take out resistance in the 1.3050-70 area suggests that a move below 1.2860 would open another 1.2500-1.3000 consolidation phase.
USDCAD technical outlook
The intraday USDCAD technicals flipped to bearish with the move below 1.2980, which will now become resistance. A drop below 1.2905, will lead to a test of support in the 1.2840-1.2860 zone. A decisive breach of 1.2840 targets 1.2760, then 1.2660.
For today, USDCAD support is at 1.2905and 1.2860. Resistance is at 1.2960 and 1.2990. Today’s Range 1.2890-1.2960.
Chart: USDCAD 4 hour
Source: Saxo Bank
G-10 FX recap and outlook
Summer arrived this morning, and US traders returned from a long weekend. UK traders are still trying to get to the office thanks to the biggest rail strike in 30 years.
Warren Buffet is a hot date.
Someone paid $19 million for the pleasure of having lunch with the Berkshire Hathaway CEO at New York’s Smith and Wollensky steakhouse. The restaurant is rather pricey, but the winning bid should be enough to cover the meal, drinks, and a small tip.
Asia equity traders were in a good mood. The Nikkei closed with a 1.84% gain, helped by a weak yen, while Australia’s ASX 200 climbed 1.41% on firmer commodity prices. European bourses are grinding higher, led by a 1.51% rise in the French CAC index. DJIA and SP500 futures have climbed around 1.70%. WTI oil prices rallied 2.3% from yesterday’s close, while gold prices are a tad lower. The US 10-year yield is 3.28%.
EURUSD traded in a 1.0510-1.0582 range. The fall-out from the French election has faded from FX markets and traders continue to ignore Russian/Ukraine war news, at least for today. The single currency is underpinned by rising equity prices. Finish Central Bank Governor and ECB Governing Council member, Ollie Rehn, suggested a September rate hike could exceed 0.25% because inflation pressures are broader and higher than previously expected. The EURUSD intraday technicals are looking for a test of 1.0600 while prices are above 1.0500.
GBPUSD is giving back gains and has dropped to 1.2270 after trading in a 1.2244 to 1.2323 band overnight. Prices got a lift after BoE Chief Economist Huw Pill indicated that higher rates are needed, and he would tolerate weaker growth, to drive inflation down to 2.05. The ongoing railway strike which may be joined by many other unions may ensure weaker UK growth and exaggerate the negative impact from higher rates.
USDJPY climbed from 134.94 to 135.96. It would appear traders are trying to drive the currency pair high enough to trigger Bank of Japan intervention. BoJ and Government officials are always spouting about how they are watching currency moves but the verbal intervention is having little to no impact. That’s because the BoJ ‘s yield curve control policy is fueling the USDJPY gains.
AUDUSD rallied to 0.6986 in Asia before dropping to 0.6942 in NY. RBA Governor Philip warned rates were going higher but seemed to dismiss the risk of hikes larger than 0.50%. The RBA minutes said policymakers expect inflation to rise further and then decline.
NZDUSD is at the bottom of its 0.6324-0.6362 range. Prices were weighed down by weaker than expected Q2 Consumer Survey data which fell to 78.7 from 92.1
US existing home sales data is ahead.
FX open, high, low, previous close as of 6:00 am ET
Source: Saxo Bank
Today’s Bank of China Fix 6.6851, Previous 6.7120
Shanghai Shenzhen CSI 300 fell 0.11% to 4.325.57, Previous close 4,330.43
Chart: USDCNY 1 month
Source: Yahoo Finance