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Feb 24, 02:37 HKT
EUR/USD spins tires just north of 1.0800 as Friday wrapup goes nowhere

  • EUR/USD continues to cycle north of 1.0800.
  • European data confirms preliminary prints.
  • Investors will have to wait until midweek for meaningful data.

EUR/USD cycled on Friday, stuck in a near-term range between 1.0840 and 1.0810 as markets settle in for the weekend and gear up for the long wait for significant data. Fresh figure prints aren’t due until the back half of next week, and the pair is hanging onto the top half of the week’s chart action.

Next week sees US Gross Domestic Product (GDP) on Wednesday, followed by German Retail Sales and German Consumer Price Index (CPI) figures on Thursday. Thursday also sees US Personal Consumption Expenditure figures (PCE). Pan-European Harmonized Index of Consumer Prices (HICP) rounds out next week alongside US ISM Purchasing Manager Index (PMI) numbers.

Daily digest market movers: thin action for EUR/USD leaves pair strung along the middle

  • Friday pulls into the midrange, EUR/USD continues to grind it out near 1.0820.
    Germany’s final GDP print for the fourth quarter revealed nothing new, confirmed the preliminary prints.
    Final German Q4 GDP declined -0.3% QoQ, -0.4% compared to the same quarter last year.
    German IFO Expectations for February improved more than expected, printing at 84.1 versus the forecast for 84.0 and beating the previous print of 83.5.
    Several European Central Bank (ECB) policymakers hit the newswires as Europe’s Eurogroup meeting gets underway alongside day two of EcoFin Meetings.
  • ECB coverage: policymakers scramble for the microphone on Friday.
  • Next Thursday’s US PCE Price Index figures for January will be a key dataprint as investors seek signs the Federal Reserve (Fed) will get pushed into rate cuts sooner rather than later.
    US MoM January PCE Price Index forecast to tick higher to 0.3% from 0.2%.
    Core PCE for the same period is expected to accelerate to 0.4% from 0.2%.

Euro price this week

The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Japanese Yen.

USD   -0.45% -0.54% 0.06% -0.25% 0.26% -1.00% 0.00%
EUR 0.45%   -0.09% 0.51% 0.21% 0.71% -0.54% 0.45%
GBP 0.54% 0.09%   0.60% 0.27% 0.80% -0.45% 0.54%
CAD -0.06% -0.52% -0.60%   -0.41% 0.21% -1.11% -0.03%
AUD 0.26% -0.19% -0.26% 0.34%   0.55% -0.73% 0.28%
JPY -0.25% -0.72% -0.78% -0.21% -0.51%   -1.26% -0.26%
NZD 1.02% 0.57% 0.48% 1.08% 0.77% 1.27%   1.02%
CHF 0.01% -0.41% -0.53% 0.18% -0.28% 0.22% -0.98%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Technical analysis: EUR/USD remains pinned to 1.0820

EUR/USD continues to churn the waters just above the 1.0800 handle as the pair remains bolstered above the 200-hour Simple Moving Average (SMA) near 1.0780. The pair managed a bullish climb into a near-term high of 1.0888 in the midweek before getting pushed back to familiar levels.

Daily candlesticks reveal the EUR/USD remains hampered by the 200-day Simple Moving Average (SMA) at 1.0827, and despite being on pace to close for an eighth consecutive trading day on Friday, EUR/USD remains on the low side of key technical levels. The pair is still down around 2.8% from late December’s peak bids at 1.1140.

EUR/USD hourly chart

EUR/USD daily chart

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Feb 24, 03:29 HKT
Gold price rallies, eyeing weekly finish in the green amid lower US bond yields
  • Gold price surges, buoyed by a decline in US Treasury yields and optimistic market conditions.
  • Risk-on mood prevails, yet Gold attracts investors, defying typical safe-haven asset trends.
  • Market sentiment adjusts to Fed's cautious stance with expectations of significant rate easing by year-end.

Gold price resumes its weekly uptrend on Friday and is set to finish the week in the green, taking advantage of the fall in US Treasury bond yields amid quiet news flows. Federal Reserve officials continued to cross the wires, led by New York Fed President John Williams, who aligned with his colleagues' recent comments. The XAU/USD exchanges hands at $2,038, up 0.70%.

The financial markets are in a risk-on mode, which usually translates to “less” appetite for safe-haven assets, but not today as Gold remains underpinned by dropping US Treasury yields. The 10-year benchmark note erased most of its gains, falling three and a half basis points, down to 4.248%. Despite Fed officials delivering a “slightly” hawkish tone recently, this was well received by investors who trimmed bets on Fed interest rate cuts and expect 93 basis points of easing toward the year’s end.

Daily digest market movers: Gold advance prompted by soft US Dollar undermined by lower US yields

  • The Federal Open Market Committee (FOMC) minutes for January showed that policymakers remain hesitant to cut rates, adopting a cautious approach amid the latest resurgence of inflationary measures. Although acknowledging that the risks of achieving both mandates are more balanced, they would remain “highly attentive” to inflation. This is at the expense of economic risks being tilted to the downside.
  • Besides that, the US labor market remains strong after the latest Initial Jobless Claims data saw fewer Americans applying for unemployment benefits.
  • US business activity moderated in February, revealed S&P Global. The Services and Composite Indices expanded below the previous month’s reading, though Manufacturing surprisingly jumped, exiting contractionary territory.
  • The CME FedWatch Tool sees traders expect the first 25 bps rate cut by the Fed in June 2024.
  • Investors are pricing in 95 basis points of easing throughout 2024.
  • The US Dollar Index, tracking the performance of the US Dollar against a basket of six major currencies, is currently trading near 103.90, down 0.04%.
  • The Federal New York Fed President John Williams said the Fed is on track to cut interest rates “later this year.” He noted that the progress of inflation toward the central bank's 2% target would be “bumpy,” but overall, the economy is headed “in the right direction.”

Technical analysis: Gold surpasses the 50-day SMA eyes on $2,050

Gold has shifted to a neutral-upwards bias as it hurdles the 50-day Simple Moving Average (SMA) at $2,033.75, opening the door to challenge the $2,050 figure. Once those levels are cleared, up next would be the February 1 high at $2,065.60, ahead of the December 28 high at $2,088.48.

On the flip side, sellers dragging the XAU/USD spot price below the 50-day SMA could pave the way to test the October 27 daily high-turned-support at $2,009.42.  A breach of the latter will expose the 100-day SMA at $2,002.05. The next stop would be the December 13 low at $1,973.13, followed by the 200-day SMA at $1,965.86.

XAU/USD Price Action - Daily Chart

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Feb 24, 05:53 HKT
EUR/JPY Price Analysis: Closes week higher despite daily losses, buyers eye 163.00
  • EUR/JPY finishes week with a 0.66% gain, reflecting persistent JPY softness against a backdrop of economic data.
  • Technical analysis shows YTD high at 163.21, with support and resistance levels indicating potential upward momentum.
  • Key technical levels outlined for potential reversals or further advances in the EUR/JPY pair's trajectory.

The EUR/JPY wraps up Friday session with losses of 0.02% but is set to finish the week with 0.66% gains, courtesy of overall Japanese Yen (JPY) weakness, as economic data doesn’t justify the Bank of Japan (BoJ) finishing negative interest rates. At the time of writing, the cross exchanges hands at 162.86, virtually unchanged.

From a technical standpoint, the pair printed a new year-to-date (YTD) high at 163.21 but failed to cling to gains above the 163.00 figure. That opened the door for a pullback, capped at around the day’s low of 162.64, which keeps buyers hopeful of higher prices. Achieving a daily close above 163.00 would open the door to testing the November 27 high at 163.72, ahead of the 164.00 mark.

Conversely, if sellers step in, they would clash with the Tenkan-Sen, first support at 162.11. the next support will emerge at January’s 19 high turned support at 161.87, followed by the Senkou Span A at 161.44.

EUR/JPY Price Action – Daily Chart


Feb 23, 20:55 HKT
Stock Market Today: Dow Jones finds the green as S&P hits fresh highs, Nvidia extends rally but hesitates
  • Dow Jones Industrial Average held onto Friday's gains.
  • Nvidia shares pushed higher on Friday before falling back.
  • S&P 500 touched new all-time highs above 5,100 before ending close to flat.

The S&P 500 (SPX) index was broadly unchanged to close the session at 5,088.8. The Dow Jones (DJIA) climbed 0.16% to end at 39,131.53, while the Nasdaq (IXIC) lost 0.28% to finish at 15,996.82.

What to know after the Friday close

  • The Technology Sector started off the day as the best-performing major S&P 500 sector on Friday, rising nearly 1% before falling back to end the day down 0.27%. The Utilities Sector rose 0.71% to become Friday's best-performing sector, and the Energy Sector was the lamest dog in the race to wrap up the trading week, down 0.58% at the closing bell.
  • Palo Alto Network (PANW) gained 5.328% on Friday, ending at $282.09 while Mercado Linbre Inc (MELI) on the NASDAQ tumbled 10.378% as the biggest loser on Friday, closing at $1,629.32.
  • Nvidia Corp. (NVDA) initially gained more than 3% on Friday to trade near $823.68 before pulling back in the back half of the trading day to finish at $788.17, up around 0.36% at the closing bell. The chipmaker had reported on Wednesday that earnings per share topped $5.16 versus the $4.64 forecast, while revenue climbed to $22.10 billion compared to the expected $20.62 billion. The company also said that it forecasts the current-quarter revenue of $24 billion, plus or minus 2%. 
  • Mizuho has raised the target price for Nvidia stock to $850 from $825, HSBC lifted its target to $880 from $835 and Citigroup revised its expectation to $820 from $575.
  • ETSY Inc. (ETSY) tumbled 8.44% to close at $70.62 as the worst-performing S&P 500 stock on Thursday.
  • The US Department of Labor reported that there were 201,000 Initial Jobless Claims in the week ending February 17, a 12,000 decrease from the previous week's reading of 213,000.
  • Federal Reserve (Fed) Vice Chair Philip Jefferson said on Thursday that he wants to move in a way that would not lead to stops and starts in policy and increase policy uncertainty. Later in the day, Governor Christopher Waller argued that there is no rush to begin cutting interest rates, citing the need to see further evidence that inflation is cooling.
  • The Fed said in the Minutes of the January policy meeting released Wednesday that most policymakers noted the risks associated with moving too quickly to ease the policy. Furthermore, the publication showed that officials highlighted uncertainty around how long the restrictive policy stance would be needed.
  • Retailer giant Walmart Inc. (WMT) reported an adjusted earning per share of $1.8 ahead of the opening bell on Tuesday. The company said that it expects consolidated net sales to rise in the range of 3%-4% and announced that it will buy smart TV producer Vizio (VZIO) for about $2.3 billion.
  • Home Depot Inc. (HD) said net income in Q4 was $2.8 billion, and the adjusted earnings per share was $2.82. The company, however, said that it projects sales for the fiscal year 2024 to be below estimates, citing slowing demand for discretionary items such as flooring, furniture and kitchen, per Reuters.

Nvidia FAQs

What is Nvidia known for?

Nvidia is the leading fabless designer of graphics processing units or GPUs. These sophisticated devices allow computers to better process graphics for display interfaces by accelerating computer memory and RAM. This is especially true in the world of video games, where Nvidia graphics cards became a mainstay of the industry. Additionally, Nvidia is well-known as the creator of its CUDA API that allows developers to create software for a number of industries using its parallel computing platform. Nvidia chips are leading products in the data center, supercomputing and artificial intelligence industries. The company is also viewed as one of the inventors of the system-on-a-chip design.

What is the history of Nvidia?

Current CEO Jensen Huang founded Nvidia with Chris Malachowsky and Curtis Priem in 1993. All three founders were semiconductor engineers, who had previously worked at AMD, Sun Microsystems, IBM and Hewlett-Packard. The team set out to build more proficient GPUs than currently existed in the market and largely succeeded by late 1990s. The company was founded with $40,000 but secured $20 million in funding from Sequoia Capital venture fund early on. Nvidia went public in 1999 under the ticker NVDA. Nvidia became a leading designer of chips to the data center, PC, automotive and mobile markets through its close relationship with Taiwan Semiconductor.

What is Nvidia’s relationship to artificial intelligence?

In 2022, Nvidia released its ninth-generation data center GPU called the H100. This GPU is specifically designed with the needs of artificial intelligence applications in mind. For instance, OpenAI’s ChatGPT and GPT-4 large language models (LLMs) rely on the H100’s high efficiency in parallel processing to execute a high number of commands quickly. The chip is said to speed up networks by six times Nvidia’s previous A100 chip and is based on the new Hopper architecture. The H100 chip contains 80 billion transistors. Nvidia’s market cap reached $1 trillion in May 2023 largely on the promise of its H100 chip becoming the “picks and shovels” of the coming AI revolution.

Why does Jensen Huang have a cult following?

Long-time CEO Jense Huang has a cult following in Silicon Valley and on Wall Street due to his strict loyalty and determination to build Nvidia into one of the world’s leading companies. Nvidia neary fell apart on several occasions, but each time Huang bet everything on a new technology that turned out to be the ticket to the company’s success. Huang is seen as a visionary in Silicon Valley, and his company is at the forefront of most major breakthroughs in computer processing. Huang is known for his enthusiastic keynote addresses at annual Nvidia GTC conferences, as well as his love of black leather jackets and Denny’s, the fast food chain where the company was founded.

Feb 24, 00:40 HKT
US Dollar closes the week flat and gears up for PCE data next week
  • The DXY exhibits mild daily gains in Friday’s session.
  • The Federal Reserve's measured approach alongside a robust labor market reduces expectations of rate cuts.
  • The market expects no chance for a March rate cut and less than a 25% chance of a cut in May. 
  • Investors keenly await upcoming economic reports for further insights on economic health and implications on the Fed's stance.

The US Dollar Index (DXY) is currently at 104.10, mildly higher thanks to stable conditions in the American economy. That stability brings down hope of earlier rate cuts by the Federal Reserve (Fed), whose officials are delaying any monetary adjustments. Next week, markets will get January’s Personal Consumption Expenditure (PCE) figures, an important data set on US inflation.

The US economy showcases durable strength as signified by resilient economic activity figures, which may signify a threat to the fight against inflation. Additionally, the robust labor market, marked by lows in jobless claims, further deters prospects for near-term interest rate cuts and, therefore, limits the Greenback’s losses. 

Daily digest market movers: US Dollar remains stable as the US economy holds resilient

  • The US Dollar trades mildly higher as the market gears up for next week’s Personal Consumption Expenditure (PCE) figures from January, setting a quiet tone for Friday's session.
  • Market expectations indicate a decreased likelihood of a rate cut in the near term as indicated by the CME FedWatch Too with low odds of easing in March or May. A strong US domestic economy and resilient labor market contribute to maintaining the Fed’s current stance, delaying the easing to June.

Technical analysis: DXY bulls close the week in a stable manner

The indicators on the daily chart reflect mixed sentiment with both buying and selling forces battling for dominance. On one hand, the Relative Strength Index (RSI), although flat, is stationed in positive territory, hinting toward underlying bullish strength. This bullishness is supported by the DXY's positioning above the 20-day and 200-day Simple Moving Averages (SMAs), highlighting the resilience of buyers over a longer term.

On the contrary, the Moving Average Convergence Divergence (MACD) shows rising red bars, indicating that selling momentum is building up. Moreover, the index's positioning below the 100-day SMA suggests that bears have not completely withdrawn from the game. 

It's worth noting that the 20 and 100-day SMAs are about to perform a bullish crossover, which would provide additional traction to the buyers and push the DXY higher.


Central banks FAQs

What does a central bank do?

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

What does a central bank do when inflation undershoots or overshoots its projected target?

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

Who decides on monetary policy and interest rates?

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Is there a president or head of a central bank?

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.

Feb 24, 00:53 HKT
USD/CAD grinds to a halt near 1.3500 as Friday wraps up
  • USD/CAD dipped to 1.3461 before a US-session surge back to 1.3500.
  • It's a thin Friday on the economic calendar.
  • USD/CAD put a lot of effort going nowhere this week.

USD/CAD looked in both directions on Friday as markets see thin action heading into the week’s closing bell. It was a relatively sedate trading week for the pair with the US Dollar (USD) gaining around a third of a percent against the Canadian Dollar (CAD).

Next week brings a slew of data for both the US and Canada with US Gross Domestic Product (GDP) on Wednesday and Canadian GDP on Thursday alongside US Personal Consumption Expenditure (PCE) figures. Next Friday also brings Purchasing Managers Index (PMI) figures for both Canada and the US.

Daily digest market movers: USD/CAD churns the midrange on quiet Friday

  • Friday markets look thin, leaving USD/CAD open to drift in the middle.
  • Thursday’s mixed PMIs for the US and Retail Sales for Canada leave the pair with little directional momentum to wrap up the week.
  • Next week is set to open quiet as well with only January’s US New Home Sales on the docket for Monday.
  • US New Home Sales Change last printed at 8.0% in December, New Home Sales are expected to increase slightly to 680K from 664K.
  • Tuesday also sees mid-tier data with US Durable Goods figures for January forecast to print at -4.0% versus the previous 0.0%.
  • Canada is absent from the economic calendar until Wednesday’s Current Account figures for the fourth quarter, which last printed at -3.22 billion.

Canadian Dollar price this week

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies this week. Canadian Dollar was the strongest against the Japanese Yen.

USD   -0.33% -0.47% 0.18% -0.37% 0.27% -0.95% 0.05%
EUR 0.34%   -0.14% 0.52% -0.04% 0.61% -0.59% 0.38%
GBP 0.47% 0.14%   0.65% 0.11% 0.74% -0.47% 0.54%
CAD -0.18% -0.51% -0.65%   -0.55% 0.09% -1.12% -0.13%
AUD 0.37% 0.04% -0.10% 0.55%   0.63% -0.57% 0.41%
JPY -0.26% -0.62% -0.71% -0.08% -0.65%   -1.21% -0.21%
NZD 0.93% 0.60% 0.48% 1.11% 0.57% 1.20%   0.99%
CHF -0.05% -0.39% -0.53% 0.12% -0.42% 0.21% -1.00%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Technical analysis: 1.3500 is proving a tough number to beat

USD/CAD continues to cycle 1.3500 as the pair experiments with losing momentum in the longer term. The 1.3500 figure remains a sticky major level for the pair, but a heavy supply zone near 1.3530 could prove a viable selling region for particularly brave traders as the pair etches in the beginnings of a Fair Value Gap (FVG) on Friday.

USD/CAD continues to get mired in the 200-day Simple Moving Average at 1.3478, but a rough bullish pattern is still bullish, and the long-term moving average is providing a technical floor for bidders to push off of.

USD/CAD hourly chart

USD/CAD daily chart

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

How do the decisions of the Bank of Canada impact the Canadian Dollar?

The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

How does the price of Oil impact the Canadian Dollar?

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

How does inflation data impact the value of the Canadian Dollar?

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

How does economic data influence the value of the Canadian Dollar?

Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

Feb 24, 01:31 HKT
Mexican Peso ends week lower against US Dollar amid dovish Banxico shift
  • Mexican Peso drops, reflecting concerns over Mexico's economic performance and potential Banxico rate cuts.
  • Recent Mexican data shows inflation decline, GDP slowdown and significant drop in Retail Sales.
  • Banxico minutes hint at possible easing in March with a shift toward a less hawkish monetary policy stance.

Mexican Peso loses steam for the second straight day against the US Dollar as market sentiment has shifted negatively. The Mexican currency is headed to end the week with losses after economic data witnessed inflation edging lower, the Gross Domestic Product (GDP) decelerating, and Retail Sales plummeting. At the time of writing, the USD/MXN exchanges hands at 17.14, up 0.20%.

The economic docket across the Bravo River is empty. Economic data revealed from Mexico showed the impact of higher interest rates set by the Bank of Mexico (Banxico). Although inflation dipped sharply in the first 15 days of February, the GDP for Q4 came in as expected at 2.5% YoY, exceeding forecasts but 0.8% lower compared to Q3 2023. Additionally, Retail Sales plunged, signaling that consumers reduced their spending.

In the meantime, Banxico’s latest minutes showed that the Governing Council could cut rates at the March 21 meeting as expressed by three of the five voting members. Two members added they can’t disregard maintaining rates at current levels. One of those members added he/she requires that underlying inflation shows a downward trajectory before beginning the easing cycle.

The language of the minutes was less “hawkish,” indicating a more flexible approach, according to analysts cited by El Economista. Analysts at Goldman Sachs commented that the Banxico Governing Council is tilting toward easing monetary policy unless exogenous shocks impact the USD/MXN exchange rate.

The USD/MXN has resumed its uptrend above the 50-day Simple Moving Average (SMA) following the release of last Thursday’s inflationary figures, while the sudden shift in Banxico’s rhetoric keeps the pair afloat above the 17.10 area.

Across the border, the Minutes of the US Federal Reserve (Fed) meeting showed that policymakers remain hesitant to cut rates amidst fears of a second round of inflation. Recently, the US Bureau of Labor Statistics (BLS) revealed that unemployment claims rose below estimates, while business activity, despite moderating, expanded.

Daily digest market movers: Mexican Peso hits seven-day low despite trimming some losses

  • Mexico’s Consumer Price Index (CPI) in the first half of February dipped from 4.9% YoY to 4.45%, while core CPI slowed from 4.78% to 4.63% in the yearly data.
  • GDP expanded in the fourth quarter by 0.1% QoQ but was lower than Q3’s 1.1% expansion. Annually based, GDP exceeded estimates of 2.4% and hit 2.5%, less than Q3’s 2023 3.3%.
  • Mexico’s Retail Sales dropped -0.9% MoM, below estimates of 0.2%. Yearly figures plummeted -0.2% vs. a 2.5% forecast.
  • The Mexican currency could depreciate further if the Mexican government fails to resolve its steel and aluminum dispute with the United States. US Trade Representative Katherine Tai warned the US could reimpose tariffs on the commodities.
  • With no major events on the US economic calendar, recent unemployment claims figures and robust S&P Global Flash PMIs have backed Federal Reserve officials' hawkish remarks. Policymakers have expressed willingness to adjust policy when necessary but remain cautious, indicating no urgency to act. This stance is supported by current economic data suggesting strength in the economy, which could potentially revive inflationary pressures.
  • Market players are expecting the first rate cut by the Federal Reserve at the June monetary policy meeting as they have trimmed odds for March and May.

Technical analysis: Mexican Peso extends losses to two-straight days as USD/MXN stays above 50-day SMA

The USD/MXN remains consolidated despite breaking above the 50-day Simple Moving Average (SMA) at 17.07. If buyers like to regain control, they must lift the exotic pair above 17.20, so they can threaten the 200-day SMA at 17.27. Once cleared, the 100-day SMA at 17.38 would be up next, ahead of the 17.50 figure.

On the other hand, if sellers step in and cap USD/MXN’s upside, they need to push prices below the 17.00 figure. Once cleared, the next support would be the current year-to-date (YTD) low of 16.78, followed by the 2023 low of 16.62.

USD/MXN Price Action – Daily Chart

Mexican Peso FAQs

What key factors drive the Mexican Peso?

The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.

How do decisions of the Banxico impact the Mexican Peso?

The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.

How does economic data influence the value of the Mexican Peso?

Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.

How does broader risk sentiment impact the Mexican Peso?

As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

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