FX Weekly

FX Weekly Update – June 27th, 2022

Posted Under: Weekly updates

The currency markets have been quiet for the last 5 trading days. While equities and the treasury market rally and fall and rally again, the dollar has maintained tighter ranges. The U.S. calendar has key data released this week kicking off with durable goods, which is always a volatile number, followed on Tuesday by the forgotten trade balance number. Wednesday is GDP, which is forecast to have grown 7.1% on an annualized basis. Thursday will be the very important PCE core price index, and personal income and expenditures. Friday the market will be updated with U.S. manufacturing PMI.

With little in the way of “direction” for the dollar, we continue to look for a stronger dollar in the coming months. The current environment, higher U.S. interest rates, volatile energy and equity markets, have the potential to push more investors into cash.

EUR (1.0560): Early last week, the euro was trading with a negative tone, but support at 1.0500 held the currency from falling further. 1.0600 / 1.0625 is an important resistance area. Like last week, 1.0500 and again 1.0450 are support areas that may slowdown the single-currency’s descent toward 1.0220. Eurozone confidence number will be an interesting data point on Tuesday. Thursday we will get German retail sales and their unemployment situation. Friday will be the highlight of the week, Eurozone CPI.

GBP (1.2275): The pound range last week was tighter than the euro. There has been limited flows to move the sterling outside its recent range. The key level to watch is 1.2320. Support is 1.2230 and then 1.2150. Below 1.2150, there will be a quick test of 1.2000. Thursday’s U.K. GDP (6.5% yoy) and Fridays PMI manufacturing are on the docket this week.

JPY (134.85): Last week’s range was 134.25 / 135.50. This defines the consolidation pattern on the hourly chart. 134.25 is a key support level and a close below would draw out a path to 133.10. In the past several weeks, we discussed the 138.00 area as very important resistance level. This has turned out to be a more important area than even we thought. Sell USD rallies against 138.00.

CAD (1.2875): Last week the U.S. dollar printed a high of 1.3079. The market rejected that, as it had on May 11. This is now a very important resistance area. Support is 1.2570. Oil prices had fallen quickly to $102.00/bbl last week but has bounced back to $107.0/bbl to begin this week. Another rally in oil, back to $120.00, will generate more Canadian dollar buying. There is no economic information coming out of Canada this week. It will be a technical trade.

MXN (19.8500): The peso is the only currency that has gained against the dollar. But, this peso strength is running into an area of strong USD support. The medium term trend level to keep an eye on is 19.5000. Below that area is 18.5000. USD/MXN rallies will be capped by 20.7500.

CNH (6.6800): There is not much to add to what we have talked about recently. The Chinese currency is well managed by the PBOC. While China opens up, and begins to move product, the currency will remain within a tight range (6.6000-7.7500), until the PBOC feels that pressures of inflation and growth will push the USD lower against the CNH.