CNH: CNH Lags G10 Gains On Friday, Citi China Surprise Index Lower

The implied probability of a July BOC rate cut has gone from a distinct possibility to negligible this week, following Tuesday's firmer-than-expected core inflation data. 

• The accompanying chart shows implied pricing (in percentage points) for July's BOC decision - it dropped from around 30% implied (7+bp) prior to the labour market report last Friday, to under 20% going into CPI (4+bp), reducing after that to under 10% (<2bp).
• For the year as a whole, markets have priced out about 15bp of cuts through those two data points - now seeing about 15bp of easing through December. As such, it's very much in question whether the BOC's easing cycle is already at an end.
• Apart from the ongoing US-Canada trade negotiations, next week's scheduled highlight will be the BOC's Business Outlook Survey out Monday, followed by May Retail Sales out Thursday which will be the final major input into the macro puzzle for the BOC going into its decision on July 30.

• RES 4: 1.3920 High May 21  
• RES 3: 1.3862 High May 29 
• RES 2: 1.3798 High Jun 23  
• RES 1: 1.3747/74 50-day EMA / High Jul 17 
• PRICE: 1.3715 @ 16:56 BST Jul 18
• SUP 1: 1.3639/3557 Low Jul 08 / 03
• SUP 2: 1.3540 Low Jun 16 and the bear trigger
• SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
• SUP 4: 1.3473 Low Oct 2 2024

USDCAD is trading closer to its recent highs. Attention is on resistance at 1.3747, the 50-day EMA. It has been pierced. A clear break of it is required to highlight a possible stronger short-term reversal. This would open 1.3798, the Jun 23 high. For now, a bear trend remains firmly in place. A resumption of weakness would refocus attention on key support at 1.3540, the Jun 16 low. Clearance of this level would confirm a resumption of the downtrend.  

From our US Macro Weekly (here):

• It’s a quiet economic calendar next week, headlined by flash PMIs, durable goods orders, home sales and a latest weekly update for jobless claims.
• With the start of the FOMC blackout, Fed Chair Powell’s welcome remarks on Tuesday won’t touch on monetary policy.