We begin another week with the dollar unchanged which has been pretty much the case over the last several weeks. U.S. yields are back near their highest levels during the current tightening cycle. Oil prices are back near $120.00/bbl and all these levels were reached after the U.S. employment report on Friday morning. The U.S. economy added 390k jobs in May, higher than forecasted. The employment rate ticked up to 3.6%, but that remains a low for the last two years.

This week will look toward the CPI on Friday. The market is expecting a print of 8.2%, lower than last month’s 8.3%. This would still have inflation at 40-year highs. Oil prices will be a major concern for the markets this week. They will not only press the U.S. dollar lower against the Canadian dollar but may also stop the rallies in European currencies. This dovetails with the long-term DXY chart. The dollar has rallied through a long-term resistance line but remains hovering around it at 102.50. With the Fed meeting on June 15, the market is expecting 50 bp’s. A higher CPI print and rising oil prices may prompt the Fed to increase by 75 bp’s. This would be the support for the U.S. dollar and begin to push it toward its ultimate target level of 118.00.

EURO (1.0720): The Euro has been rallying since it printed the low of 1.0352 on May 11th. Last week, the currency touched 1.0800 before falling to 1.0625. A rally from this level to 1.0765 ended with a sell-off back to 1.0700. This now will be the first levels of support and resistance. 1.0765 and 1.0800 on the top side, with support at 1.0700 and 1.0625. Hourly charts do indicate a “topping” pattern, but it is too early to call it such. Trade the range and look for new of further ECB discussions about their rate hikes.

GBP (1.2480): The festivities in the U.K., celebrating the Queens 70th year on the throne, has been a relief for the world. To consider all the leaders of countries she has met, the wars, the technology advancements. Amazing. Sadly, we cannot say the same about the sterling pound. It remains under pressure and may continue to move sideways before the next move lower. The first important support level is the low of 1.2150 from May 8th. If that level does not hold, then 1.1800 would be the next area of consolidation. The resistance level which should hold further rallies is 1.2670.

JPY (130.55): The Yen fell back to levels not seen since 2002. The rise in U.S. yields and the expected increase in those yields will keep the pressure on the yen. Look for the next move to target 135.00. Clients that need to purchase yen for payments may consider adding forward positions near 135.00. Hedge positions should be weighed against the probability of the cash flow happening, beginning with a 30% layer of hedges and then increase those.

CAD (1.2580): The up and down pattern of USD/CAD over the year has provided many of us to predict bold moves, only to have the pair stop and race in the other direction. Last week, between high oil prices and a strong statement from the BoC (potential need for a 0.75 bp rate hike in July), the Canadian dollar rallied 1%! The first support level for USD/CAD is 1.2450, then 1.2400 and 1.2285. The move last week was very quick, I would expect some move higher toward 1.2675.

MXN (19.5200): The peso remains near 18-month highs. The key level that we have discussed for some time is the current 19.5000. A close below that level can see the peso move much higher to 18.5000. If the support area holds, then selling USD/MXN against 20.000 and then 20.5000. This is another fitting example of taking advantage of currency movements. Peso expense can be cheapened by hedging using the forward markets. Hedges that are higher than the current spot are “in the money”. Any hedges that are put on now will average in. Managing the expenses with forwards and consistently adding them will provide a better result than using spot trades.

CNY (6.6500): The CNY remains steady at the current level. The quick move away from the key resistance area of 6.8400 should slow near 6.55/6.60. Higher energy prices may take some of the positive economic activity from the opening of the Chinese economy. Their recent manufacturing and employment numbers have been weaker than forecast. The Fed’s adjustment in U.S. rates may support the dollar and that would be fine with the PBOC. Their goal will be to keep the CNH as steady as they can while their economy opens again!