FX Weekly

FX Weekly Update – June 12th, 2023

Posted Under: Weekly updates

Little change in the U.S. dollar since the U.S. employment report two weeks ago. The lack of movement should change this week as CPI, PPI, and the FOMC meeting are the focus of the first three trading days—the probability of “no change” in the U.S. interest rate situation is at 70%. Most currencies deal in their ranges of the last several months. A surprise increase by the Fed will push the dollar higher, which provides an opportunity to sell dollars and buy foreign currencies at better levels.

EUR (1.0750): Last week’s range for the single-currency was 1.0630 to 1.0780. This upcoming week’s calendar begins with ZEW survey for economic sentiment, followed by Industrial Production. These are important but the ECB monetary policy decision on June 15 will drive euro activity. The ECB has been hawkish and another quarter-point hike is forecast. The levels to focus on remain at 1.0500 and 1.1100.

GBP (1.2540): The pound Sterling is trading in a very narrow range. Last week it was 1.2327 to 1.2545. The lack of movement is characteristic of a currency impacted by the EUR/GBP (0.8535) cross. This critical pair has fallen (EUR lower / GBP higher) to the bottom part of its long-term range. When a cross is the highlight of the trading session the individual currencies bounce around without moving into new territory. The U.K. economic calendar includes GDP, housing prices, industrial production, and the quarterly BoE bulletin.

JPY (139.26): The yen has consolidated like most other currencies. The difference is the yen is at its weakest level since last November. Technically, it is building a ‘falling wedge,’ with its first resistance level at 140.47 (5/30). Above there, we are expecting the currency pair to weaken to 143.00.

CAD (1.3320): The BoC raised their interest rates by 0.25% last week and CAD rallied but remained within its recent range of 1.3300/ 1.3600. Oil prices are holding steady at $70/bbl. Significant support for USD/CAD is 1.3225 (low from Nov. 14,’22), and trendline support is 1.2950. 1.3500 and 1.3600 are resistance levels.

MXN (17.2700): The peso gained strength last week and is now opening the week at 7-year highs. The current level is essential support, with the next target at 16.5000 within reach. GSFX is bullish on the MXN and has been for several years. The interest rate difference between the two economies is a significant reason, but the increase in manufacturing in Mexico is another. The following 12 months should see the peso trade to 14.0000.

CNH (7.1380): The dollar’s strength against the CNH has been surprising. The political issues behind power will be around for a while. While the back-room deals in Tawain, Russia, and Cuba continue, the market moves funds into dollar assets. The highest level for the USD/CNH was 7.3565 on 10/30/22. GSFX now considers that level one will be tested before dollar weakness.