CANADA DATA: Precious Metals Obscure Trend Rise In Industrial Product Inflation
Canadian industrial product price pressures continued to run on the hot side in July, keeping IPPI on a rising path though underlying price growth momentum appears to be relatively subdued.
- The overall index (IPPI) rose 2.6% Y/Y in July, the fastest rate since March, with the ex-energy/petroleum products reading up 3.8%, highest since April (energy and petroleum product prices fell 6.7% Y/Y, the 5th consecutive decline, helping relieve upside pressure on the headline index).
- However, the ex-energy readings themselves are exaggerated by a rise in gold prices, which have been inflated due to safe haven/monetary demand as opposed to indicative of underlying industrial demand.
- Per the StatCan report: "The unwrought gold, silver, and platinum group metals, and their alloys (+33.7%) subgroup was the largest contributor to the IPPI's year-over-year gain in July. High prices for gold were mainly supported by strong safe-haven investment demand over the past 12 months. Other key upward contributors included fresh and frozen beef and veal (+16.5%) and softwood lumber (+12.0%)."
- The raw material price index rose 0.8% Y/Y (ex-energy was a 4month high 12.6%), though again this was exaggerated by soaring precious metal prices.
- To be sure, the 0.5% M/M rise was high from a seasonal perspective for a 2nd consecutive month - though this is difficult to make a clear conclusion from this as it follows two lower-than-usual moths in April and May.
- From a longer-term perspective, there has been a continued rise in the price level of both industrial and raw materials ex-crude energy since late 2023, ending a period of flatlining between 2022-late 2023. These prices tend to steady out for a multi-year period before breaking higher for a couple of years, such as in the pandemic reopening episode. That's started to happen again though the influence of precious metals prices obscures the signal.
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USDCAD TECHS: Key Short-Term Resistance Intact For Now
- RES 4: 1.3920 High May 21
- RES 3: 1.3862 High May 29
- RES 2: 1.3798 High Jun 23
- RES 1: 1.3744/74 50-day EMA / High Jul 17
- PRICE: 1.3640 @ 16:03 BST Jul 22
- SUP 1: 1.3631/3557 Low Jul 22 / 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
Resistance in USDCAD at 1.3744, the 50-day EMA, remains intact for now. It has been pierced, however, a clear break of it is required to highlight a possible stronger short-term reversal. This would open 1.3798 initially, the Jun 23 high. For now, a bear trend remains 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.
US TSYS: Tsys Back at July 10 Lvls, Philly Fed Non-Mfg Improves, Costs Elevated
- Treasuries bounced off early Tuesday lows, initially tracking a similar move in German Bunds - before settling into a narrow range near session highs since midmorning.
- The US$ resumed its weakening trend on Tuesday, extending the pullback from last week’s highs to ~1.6% in recent trade, further eroding the cautious recovery that had been seen across the first half of July.
- Tsy Sep'25 10Y futures are +7 at 111-13 after the bell vs. -14.5 high, briefly through resistance at 111-13+, the Jul 10 high. A clear break of this hurdle would highlight a stronger reversal. Key support lies at 110-08+, the low on Jul 14 and 16. A move through this support would reinstate the recent bearish theme.
- The Philadelphia Fed's Nonmanufacturing Business Outlook Survey continued to show improvement in July, though cost pressures remained elevated. The regional current general activity index rose to a 6-month high -10.3 from -25.0 prior. This was the 3rd consecutive improvement since bottoming at -42.7 in April amid tariff policy concerns.
- The Johnson Redbook Retail Sales Index continues to post solid gains, rising 5.1% Y/Y in the week ending Jul 19, fairly steady compared with 5.2% the prior week.
- Look ahead: Wednesday's data limited to MBA Mortgage Applications at 0700ET, Existing Home Sales follow at 1000ET.
AUDUSD TECHS: Support At The 50-Day EMA Remains Exposed
- RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6688 High Nov 7 ‘24
- RES 2: 0.6603 High Nov 11 ‘24
- RES 1: 0.6595 High Jul 11 and the bull trigger
- PRICE: 0.6545 @ 16:01 BST Jul 22
- SUP 1: 0.6455 Low Jul 17
- SUP 2: 0.6435 23.6% retracement of the Sep 9 - Jul 11 bull leg
- SUP 3: 0.6373 Low Jun 23 and a bear trigger
- SUP 4: 0.6357 Low May 12
The trend set-up in AUDUSD remains bullish. Support around the 50-day EMA, at 0.6492, has been breached, however, the pair has found support just below the average. A clear break of this EMA would highlight a stronger reversal and signal scope for an extension initially towards 0.6435, a Fibonacci retracement. Key short-term resistance has been defined at 0.6595, clearance of this hurdle would resume the uptrend.
