FOREX: USD Off Earlier Highs, Yen Outperfroms CAD & MXN
US President Trump held an impromptu press conference in the oval office as he signed executive orders. Comments around 25% tariffs on Canada and Mexico, most likely to be enacted on Feb 1 (per Trump comments) drew a significant market reaction.
- The USD BBDXY recouped earlier losses from sub 1300 to highs of 1310.28. We sit a little lower now, last around 1307.3, still up 0.40%, versus end Monday levels in NY.
- Some market relief around lack of tariff action from Trump on Day 1 of the administration has clearly given away to a more cautious market tone. In the cross asset space, US equity futures flipped from early gains to back in the red, although sit up from lows (last near flat). US yields are still holding lower, the 10yr last down 8bps to 4.55%. Earlier lows were just under 4.54%.
- USD/CAD got to highs of 1.4516, fresh highs since 2020. We sit back around 1.4440 in latest dealings around 0.90% weaker. USD/MXN got to 20.7987, sub recent highs. We are back around 20.73 in latest dealings, off a little over 1.0%.
- USD/CNH is higher, last near 7.2870, up around 0.35%. Trump didn't specify anything around tariffs on China, but made threats on BRICS countries more broadly (something he stated around the election time last year). Trump also stated he had been invited to China. This suggests potential for negotiations with China, but market sentiment is still likely to remain cautious. He added that the administration is not ready for a universal tariff yet.
- USD/JPY got to highs of 156.23 but sits back at 155.50/55 now, little changed for the session. The lower US yield backdrop and less positive equity backdrop helping yen outperformance. AUD and NZD are holding weaker but up from lows. A$ last near 0.6230/35, NZD around 0.5640/45.
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USDCAD TECHS: A Pullback Would Be Considered Corrective
- RES 4: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 3: 1.4537 2.0% 10-dma envelope
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4356 @ 16:56 GMT Dec 20
- SUP 1: 1.4301 Low Dec 18
- SUP 2: 1.4174/4014 20- and 50-day EMA values
- SUP 3: 1.3928 Low Nov 25 and a key support
- SUP 4: 1.3822 Low Nov 6
USDCAD bulls remain in the driver’s seat. While price faded into the Thursday close, the recent breach of 1.4178, the Nov 26 high, confirmed a resumption of the uptrend and this maintains the price sequence of higher highs and higher lows. The latest rally opens 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4174, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Bearish Trend Structure
- RES 4: 0.6550 High Nov 25
- RES 3: 0.6501 50-day EMA
- RES 2: 0.6429 High Dec 12
- RES 1: 0.6337/6396 Low Dec 11 / 20-day EMA
- PRICE: 0.6263 @ 16:55 GMT Dec 20
- SUP 1: 0.6199 Low Dec 19
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
The trend needle in AUDUSD continues to point south and this week’s fresh cycle lows and Wednesday’s sell-off, reinforce a bear theme. The move down maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. The break lower opens 0.6158 next, a Fibonacci projection. Initial firm resistance to watch is 0.6396, the 20-day EMA.
