February 21, 2024

  • Data void leaves markets looking for direction.
  • FOMC minutes due this afternoon.
  • US dollar is uninspired and trading mixed.

Source: IFXA/RP

USDCAD Snapshot: open 1.3520-24, overnight range 1.3505-1.3536, close 1.3523.

USDCAD is directionless and locked within a 1.3460-1.3560 band. Yesterday, sellers of USDCAD were forced to become buyers after the January CPI index came in at 2.9% y/y compared to the consensus of 3.3%. The media were quick to jump all over the news with headlines with misleading headlines like The Globe and Mail’s “Canada’s inflation rate tumbles.” Inflation did not tumble; it rose 2.9%. That means the basket of goods that CPI measures costs more in January than it did in December.

Nonetheless, the impact of economic changes varies widely across individuals. Take Kristian Firth and Darren Anthony, for instance, who helm a boutique tech firm right from their kitchen in Quebec. They’ve snagged an impressive roster of 125 government contracts under Trudeau’s tenure, one of which is the hefty $25 million ArriveCAN project. The partners do no work, and unfortunately, the ArriveCAN app didn’t work either. For them, inflation was not an issue as they had friends with benefits.

The CPI data fueled rate cut hopes, and the odds for a 25 bps rate cut in April are 50/50.

Canada’s new housing price index data is ahead.

USDCAD Technicals

The hourly USDCAD technicals are mildly bullish above the 1.3520 area looking for a break above 1.3560 to extend gains to 1.3600.  A move below 1.3520 shifts the focus to 1.3480 then 1.3450.

Longer term, the USDCAD uptrend from April 2021 is intact while prices are above 1.3250, a level guarded by the uptrend line from November 2023 at 1.3360.  A break above 1.3620 targets 1.3880 while a move below 1.3360 suggests a retest of 1.3360.

For today, USDCAD support is at 1.3510 and 1.3480. Resistance is at 1.3560 and 1.3600. Today’s range is 1.3480-1.3580

Chart: USDCAD weekly

Source: Investing.com

G-10 FX recap

The lack of actionable economic data from the US and the Eurozone leaves FX traders scrambling to identify a catalyst. There isn’t one today, but Nvidia’s earnings report will get a lot of attention when it is released after the close today. Bloomberg reported that Nvidia options are implying a 10.6% swing in prices, or $180 billion, which will create quite a ripple throughout financial markets.

The FOMC minutes from the January 31 meeting are released this afternoon. They should be a non-event as Fed Chair Powell and traders have already dismissed talk of a March rate cut.

EURUSD is drifting in a 1.0790-1.0819 band. There are no actionable Eurozone economic reports today leaving direction at the mercy of US stock markets and the SP 500 futures are down 0.32% (as of 5:34 am PT). EURUSD continues to flitter around the 100 day moving average (1.0806)

GBPUSD is sitting in the top half of its  1.2602-1.2637 overnight range. Yesterday Bank of England officials, BoE Governor Andrew Bailey and Deputy Governor Ben Broadbent suggested that it was too early to talk about cutting rates which as helped to underpin the currency pair.

USDJPY  traded quietly in a 149.85-150.20 band with the US 10-year Treasury yield(4.27%) supporting prices and recent comments from Bank of Japan Governor Kazuo Ueda that suggested only a modest tightening of rates is needed.  However, the risk of BoJ intervention is high and that is capping gains. Japan’s trade deficit narrowed by nearly half compared to January 2023 (actual -12 billion) fueled by a 0.9% rise in exports.

AUDUSD traded defensively in a 0.6547-0.6573 range with gains being hampered by lower iron ore prices.

USDMXN traded in a 17.0421-17.0865 range in a mixed risk sentiment environment, with prices following S&P 500 moves. Banxico is expected to cut rates in March, but Banxico warning that rates could go higher, and a spate of weak data suggests a rate cut is questionable.

FX high, low, open (as of 6:00 am ET)

Source: Investing.com

China Snapshot

PBoC fix: closed 7.1030, expected 7.1877, Monday 7.1068

Shanghai Shenzhen CSI 300 rose 1.35% to 3456.87.

The surge in the stock market was due to recent stimulus actions by authorities and a crack down on short selling by Quant firms.

Chart: USDCNY daily and USDCNH

Source: Bloomberg