PSE Trading’s Post

USDCAD Comment US CPI posted significantly better than hoped yesterday, with m/m inflation printing at 0.0% vs. expectations of a 0.2% rise, Y/Y inflation fell from 3.4% to 3.3%. Core also cooled off, posting up 0.2% m/m vs. 0.3% previous and expected, and core Y/Y dipped 2/10th to 3.4%, 3.5% was expected. This triggered a very quick sell off the US Dollar, with USDCAD tumbling through the floor of my expected range as traders see this as a paving the way for at least a pair of FOMC cuts later this year. Attention however quickly shifted to the FOMC meeting, where the Fed did the expected keeping rates on hold at 5.50%. The Summary of Economic Projections and the “Dot-plot” however saw many in the Fed making assumptions of higher inflation as the year progresses (4.1% vs. 3.9% previous), and this resulted in 7 members favouring just 1 cut in 2024, while 8 still think two cuts will be appropriate. The overall theme though is rates will remain elevated for a longer period of time.  Powell also sounded very cautious in the press event, stressing that the Fed is data dependent and still needs to see more compelling evidence that inflation is on a sustained cooling path. There was a clear warning to markets not to read too much into the single soft CPI read, as the trend for most of the year has been upward pressure on prices. This was enough to push traders back into the USD dollar, and we saw the pair rise back to the mid-1.37s. For today we get the next US inflation indicator, this time PPI which is expected to show a cooling from 0.5% m/m to 0.2% m/m while Y/Y is expected to post unchanged at 2.2%, for the core read we are expecting a similar m/m cooling from 0.5% to 0.3% and expected Y/Y core to ease from 2.4% to 2.3%, We also get the weekly US initial jobless claims read, this is expected to show 227K new claimants, around the same as last weeks 229K. There is no Canadian data due out. I think US PPI will reinforce the market bias that inflation is improving, and this will see increased bets on a September cut and a weaker USD. Technical outlook Yesterday’s sharp sell-off stalled at key support in the 1.3660 area, but the bounce back has failed to pierce the 1.3760 level, so we are in a neutral stance at the moment. We need to see either a downside break of 1.3640 to turn bias to the downside or a move above 1.3790 to trigger an extended rebound into the 1.38s and a retest of 1.3845. For today support lines are at 1.3682, 1.3640 and 1.3600 while initial resistance is drawn at 1.3764, followed by 1.3804 and 1.3846. I’ll call a range of 1.3660-1.3760 for the day. 

Dollar falls sharply on softer than expected US May inflation numbers The US dollar fell across the board in immediate reaction to softer than expected US May inflation numbers, which revived hopes for Fed rate cut in September. US m/m consumer prices were flat in May after 0.3% increase in April and annualized rose by 3.3% last month, compared to 3.4% rise previous month / forecast. Core CPI, stripped for the most volatile components, was down to 0.2% in May m/m from 0.3% in April and 3.4% y/y from 3.6% previous month. Softer than expected May figures provided relief to Fed policymakers, who signaled further delay in timing of the first rate cut, boosting bets for the first action by the central bank to be seen in September. FOMC ends its two day policy meeting later today, with wide expectations to keep rates unchanged, but markets will focus more on the central bank’s projections, which will provide more details about Fed’s steps in coming months. Soft CPI numbers soured dollar’s sentiment and prompted sharp selloff, which pushed the price of dollar index down by 0.6% in the first minutes after the data release. Fresh drop significantly weakened technical picture, with hourly and 4-h studies becoming firmly bearish, while the structure on daily chart significantly weakened. Sharp post-data fall already retraced over 50% of 103.61/105.42 upleg, with rising negative momentum and stochastic reversing from overbought territory, generating strong bearish signal on daily chart. Bears pressure key supports at 104.30 zone (daily cloud base / converged 100/200DMA’s / Fibo 61.8% of 103.61/105.42 rally), with clear break here to validate bearish signal and open way for fresh extension lower (103.90/103.61 are next targets). However, bears may face increased headwinds here which may spark a partial profit-taking, with limited upticks to be seen as consolidation and positioning for continuation of the bear-leg from 105.42 (Jun 11 peak). Barriers at 104.70/80 zone should ideally cap upticks and guard upper pivots at 105.00/18 (broken Fibo 50% / daily cloud top). Res: 104.57; 104.75; 105.00; 105.18 Sup: 104.30; 103.90; 103.61; 103.22 #uscpi #inflation #fed #usdollarindex #usdollar #ratecut #technicalanalysis

USDCAD Comment Yesterday Canadian CPI release was a pleasant surprise, with headline y/y inflation cooling to 2.8% and defying expectations of a rise to 3%. M/M inflation did tick up 0.3%,but this was cooler than the expected 0.6%. So Canadian inflation has now improved two months in a row, and while there is still work needed to get to the 2% target level. I don’t think this moves up timing of a BoC rate cut nor the amount of easing we see this year, but it doesn’t delay it either. So my view that the BoC is likely to cut sooner and more than the FOMC remains intact, and this supports a stronger USD relative to CAD. In terms of impact USDCAD briefly topped 1.36 and did set a fresh 2024 high, but we ran out of steam and quickly settled back towards the mid-1.35s as markets repositioned ahead of today’s key FOMC meeting. We are inching back towards the I’ve covered my expectations for the meeting, which is that the Fed will hold rates steady, but that there is risk in both the potential revision of the Fed’s “dot plot”, the accompanying statement and perhaps most of all in Powell’s press event. I can’t imagine that Powell would take a dovish stance given the uptick in inflation, and perhaps he takes the opportunity to correct from his past dovish comments. If he is forceful enough, he may convince markets to cut back on their pricing of a June rate cut and this could see the US Dollar make gains. There is a lot of uncertainty and Fed meetings can have a massive impact on the FX markets, so we’ll just have to wait and see. Technical Outlook Bias remains to the upside with momentum building as the pair consolidates just under the 1.3600 handle. We’ll watch resistance lines at 1.3610 (a level we moved through briefly yesterday, but more significantly 1.3655 and 1.3695, if the pair moves comfortably into the mid-1.36s then the next target would be 1.3710, which we haven’t seen since Nov 24th, 2023. To the downside a move below support at 1.3527 would shift bias to neural but it would take a move below 1.3419 to shift bias to the downside. Support levels are at 1.3525, 1.3485 and 1.3440. I am calling a range of 1.3560-1.3660, but a sharp surprise from the Fed could see us break beyond.

We envision two potential scenarios: first, if evidence of disinflation emerges in the February and March data, it could lead to a parallel shift lower in US yields, possibly resulting in some bull steepening. Conversely, if inflation remains sticky, there is a risk of further yield curve inversion, as prolonged elevated rates might trigger a recession or crisis, prompting the Fed to respond with swift rate cuts. Gold remains a favored asset, benefiting from lower US real rates and risk aversion. Despite leaning towards the first scenario before the recent CPI print, we currently adopt a neutral stance, awaiting the next US CPI releases. We believe a failure by the Fed to cut rates by May could shift the risk sentiment, favoring the second scenario. 𝗙𝗼𝗿 𝗱𝗲𝘁𝗮𝗶𝗹𝗲𝗱 𝗶𝗻𝘀𝗶𝗴𝗵𝘁, 𝗴𝗼 𝘁𝗵𝗿𝗼𝘂𝗴𝗵 𝗺𝘆 𝗮𝗿𝘁𝗶𝗰𝗹𝗲 𝗧𝗵𝗲 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗧𝗶𝗺𝗲𝘀 𝗯𝘆 𝗰𝗹𝗶𝗰𝗸𝗶𝗻𝗴 𝗼𝗻 𝘁𝗵𝗲 𝗶𝗺𝗮𝗴𝗲 𝗯𝗲𝗹𝗼𝘄.

The U.S. Bureau of Labor Statistics released the much-awaited Consumer Price Index (CPI) inflation data for February, which showed that US inflation comes in hotter at 3.2%. The crypto and stock market investors worried as they looked for further cues on Fed rate cuts. After a shocking hotter CPI inflation last month of 3.1%,

The U.S. Bureau of Labor Statistics released the much-awaited Consumer Price Index (CPI) inflation data for February, which showed that US inflation comes in hotter at 3.2%. The crypto and stock market investors worried as they looked for further cues on Fed rate cuts. After a shocking hotter CPI inflation last month of 3.1%,

The U.S. Bureau of Labor Statistics released the much-awaited Consumer Price Index (CPI) inflation data for February, which showed that US inflation comes in hotter at 3.2%. The crypto and stock market investors worried as they looked for further cues on Fed rate cuts. After a shocking hotter CPI inflation last month of 3.1%,

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The seasonally adjusted overall U.S. CPI for September increased by 0.2% month-on-month (same as the previous month), while the year-on-year rate fell to 2.4% (down from 2.5%). Core CPI rose by 0.3% month-on-month (same as the previous month) and rebounded to 3.3% year-on-year (up from 3.2%), both exceeding market expectations. We believe the inflation rate has not seen further declines, and combined with strong non-farm payroll data, this may prompt the Fed to slow down its rate cut pace. We expect the Fed to cut rates by 25 basis points in November, with more cautious guidance for future cuts. Our baseline assessment for the U.S. economy remains a soft landing, but the path to achieving it may be bumpy, with inflation fluctuations like today possibly recurring. The recent sharp rebound in U.S. Treasury yields serves as a reminder, also indicating that the “high for longer” scenario for U.S. interest rates remains intact.

CPI (consumer price index) increased 3.5% year over year in March, above the Dow Jones estimate of 3.4%. According to the CME Group’s FedWatch tool, the data pushed futures traders to extend expectations for the Federal Reserve's first rate cut from June to September. However, markets were buzzing about an even more specific price gauge contained within the data — the so-called supercore inflation reading. Along with the overall inflation measure, economists also look at the core CPI, which excludes volatile food and energy prices, to find the true trend. The supercore gauge, which also excludes shelter and rent costs from its services reading, takes it a step further. https://lnkd.in/gWhBi9gr