Friday January 14th, 2022

The US$ stalls, oil prices advance, equity markets are down and US yields firm heading into the US Retail sales. The US$ remains under pressure as investors appear to be taking the view that the US$ has capped and future Fed tightening are priced into the market. The US$ Index is heading into its 4th day of losses setting a fresh 2-month low as markets shift focus to the Dec US Retail Sales and the Michigan Consumer Sentiment for January. In other news. China’s trade surplus hits annual record as exports increases by 30%. Canada joins Mexico in challenging the US on auto trade rules. Russia says Ukraine talks have hit a ‘dead end’, Poland warns of the risk of war and the Ukraine is hit by cyberattacks. Covid. The US Supreme court halts President Biden’s covid vaccine mandate for employers. The Swedish PM tests positive for covid as the fourth wave surges. The US Fed government backs down from mandating covid vaccinations for cross-border Canadian truckers. In currency markets. The US$ index is down 1.1% this week its biggest drop since Dec 2020, the JPY rallies 1% in January, while CNY is up 1.8% in 6 months testing 3 ½ year highs. CNY up 0.15%, Asian currencies are mixed with INR, KRW & PHP down 0.25% while SGD, THB & TWD are up 0.15% vs US$. Trading currencies are mixed with JPY & MXN up 0.2%, NOK firms 0.3% ZAR rallies 0.6% while CHF weakens 0.1%, and AUD & NZD are down 0.2% vs US$.

Oil prices advance, testing a fourth week of gains as capacity constraints keeps demand strong despite ongoing Omicron/covid restrictions. China’s crude oil imports posts its first annual drop in 20 years and China agrees with the US to release oil reserves near Lunar NY (Feb 1st). C$ gains in early trading as Brent crude tests fresh 2-month highs and the US$ remains under selling pressure. Intraday no CAD economic releases so focus will be on key US retail sales & Michigan Consumer Sentiment Index for currency direction today. Our bias remains for longer term C$ strengthening, but current levels are favorable if you have Short-term US$ needs. Support resets to 1.2453, if breached look for a test of 1.2383 (Nov 10th) while resistance lowers to 1.2535.

Euro remains capped at the psychological 1.1500 level. Euro appears to be losing some steam vs US$ as investors shift their attention to today’s Key US Retail Sales report & Michigan Consumer Sentiment Index and EBC President Lagarde’s speech. The current Euro strength is on the back of a weaker US$ vs a hawkish view of the single currency. Our bias remains to sell rallies as long as the ECB holds off interest rate hikes in 2022. Support holds 1.1370 while resistance remains at 1.1500.

EURGBP continues under pressure near 2-year lows on speculation of further BoE rate hikes and despite domestic political issues in the UK. Support resets to .8280 (1.2077) while resistance resets at .8400 (1.1905)

GBP defies domestic headwinds holding above 1.37 on positive UK growth data. The UK GDP grew at 0.9% (Nov) beating expectations of 0.4%, providing the pound support vs US$. Domestically the UK PM remains under pressure for lockdown parties at No 10 and pressure continues for his resignation. UK Brexit ministers Truss says there is a “deal to be done’ over the NI protocol and a follow up meeting is expected on January 24th. Intraday US data and UK political updates will help guide intraday direction. Support holds at 1.3675 while resistance rises remains at 1.3800.