FX Weekly

FX Weekly Update – June 26th, 2023

Posted Under: Weekly updates

Central Banks were all the news last week. The BoE (0.5%), Swiss National Bank (0.25%), and Norges (0.25%) surprised the market with their increases. The dollar, though, remained strong. It rallied against the euro, the pound, and yen and held steady against most others. The lack of dollar weakness has caused weaker short positions to get covered, further supporting the dollar.

The technical studies are building a consolidation pattern that should give way to a lower dollar in both the short-term and medium-term outlook.

EUR (1.0900): Last week’s range of 1.1012 to 1.0842 provides insight into the struggle between the bull and bears. The BoEs half point increase did attract interest, resulting in the euro falling. The current range will remain until 1.1100 is paid and bid.

Once that happens, then we are comfortable with a rally to 1.1500. Support for the single-currency is last week’s low of 1.0842 and then 1.0600.

GBP (1.2730): The BoE raised its rates by an unexpected 0.5% and will do it again in August. The pound did not rally beyond its recent highs and fell back. It did climb against the euro, leaving the pair nearing its long-term support of 0.8300. The market will focus more on EUR/GBP than the USD / pairs. The heavily traded pair will lead to a choppy EUR/USD and GBP/USD. Trade ranges and don’t chase a losing position.

JPY (143.50): Yen’s weakness is not unexpected. G-10 countries continue to increase their interest rates, and Japan has kept theirs at 0.00%. The current area needs to be respected. The BoJ had checked rates in November of ’22 at the 143.00 level, which slowed down the fall of the yen. Ultimately they did come in and sell USDs to purchase yen, but this time, the market may not see the BoJ’s line in the sand until too late.

CAD (1.3160): Key support at 1.3225 has given way. This may push the USD lower against the Canadian, targeting 1.2600. There is another support level to keep an eye on at 1.3000. USD/CAD resistance at 1.3300 and quiet trading usually leads to a more significant move. Be prepared to sell Cad and buy USD below 1.2700.

MXN (17.1500): Last week’s low was 17.0135. The dollar did bounce to 17.3000 but has begun to fall back. There is no reason to sell MXN. The interest rate curve favors the peso, manufacturing is coming back online in Mexico, and the U.S. economy is moving forward. Resistance is at 17.3000, and support is at 16.5000.

CNH (7.2200): The yuan has fallen since the beginning of ’23, and the speed of the fall is picking up. Sept 30, 2022, a high of 7.3785 is also the USD high for at least ten years. Corporations that purchase products from China may find the same product cheaper now that the CNH is weak. There is also an opportunity to use forward or window forward contracts to take advantage of these levels and purchase CNH to match future cash flows