FOREX: USD Rebounds On Trump Tariff Headlines, Yen Firmer On Lower US Yields
The USD surged on Trump tariff headlines. From just under 1300, the BBDXY index got above 1310, a +0.80% trough to peak move. We sit lower now, last around 1305.35, around +0.30% firmer versus end NY levels from Monday.
- The USD started on the backfoot, amid carry over from the US Monday session, with news sources indicating that there would be no Day 1 tariff announcements. However, an impromptu press conference in the oval office (as Trump signed executive orders) saw the USD Rally, as Trump stated Mexico and Canada would likely be hit with 25% tariffs from Feb 1 (which is only a few weeks away).
- Not surprisingly, CAD and MXN saw the brunt of USD demand. Both currencies slumped more than 1%. USD/CAD reached 1.4516, fresh highs back to 2020. USD/MXN rose to 20.7987, just short of recent highs. Both currencies are now away from lows against the USD. USD/CAD last near 1.4420.
- Further Trump headlines stated he hasn't made a decision on universal tariffs. This, coupled with lower US yields, which have fallen today by over 9bps for the belly of the curve, has curbed USD buying interest.
- The US yield move is interesting in the context that tariffs should be seen as inflationary. It may suggest Tsy yields were already primed for such tariff announcements/threats, like those Trump made today. The 25% hike for Mexico and Canada were mentioned in 2024 after Trump won the election.
- USD/JPY is lower, aided by the USJP yield differential dip. We got to lows of 154.78, but sit slightly higher in latest dealings (last 155.00/05). Yen is still 0.40% stronger versus the USD, the only G10 currency higher against the USD so far today. Focus will be on whether we can sustain a downside break under the 50-day EMA, which is just under 155.00.
- AUD and NZD both fell as the tariff headlines crossed. However, we sit away lows, AUD/USD last 0.6250, NZD/USD around 0.5655.
- Later US January Philly Fed non-manufacturing, UK labour market, euro area/German ZEW and Canada’s December CPI data are released.
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TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU WANTS GOVT TO PREPARE FOR NEW US ADMINISTRATION
- TRUDEAU DOESN'T ADDRESS QUESTIONS ABOUT HIS LEADERSHIP
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.
