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September 11, 2023
- BoJ Governor’s verbal intervention roils USDJPY.
- US CPI due Wednesday, ECB meeting Thursday
- US dollar retreats on mildly better risk sentiment.
FX at a Glance
Source: IFXA/RP
USDCAD Snapshot: open: 1.3596, overnight range: 1.3579-1.3640, close 1.3640
The USDCAD slide was all due to broad US dollar weakness that began in Asia. The Bank of Japan Governor verbally intervened in USDJPY which knocked that currency pair for a loop while China’s PBoC’s USDCNY fix was sharply lower than the spot rate.
Friday, Stats Canada said that Canada added 39,000 jobs in August. The numbers are sketchy. The full-time job gains were due to government hiring while self-employed (those who used to have full-time jobs and are looking for work but haven’t found anything yet) rose by nearly 50,000. In addition, new immigrants are arriving faster than jobs can be created-hardly a recipe for economic prosperity.
West Texas Intermediate (WTI) oil prices remain firm and traded in a $86.72/b-$87.38/b range as oil demand is expected to outstrip supply in the short term.
USDCAD direction is at the mercy of US dollar sentiment with traders patiently awaiting US CPI data on Wednesday. Softer than expected results will suggest US rates may have peaked and weigh on the greenback.
USDCAD Technicals
The intraday USDCAD technicals are bearish while trading below 1.3630 and looking for a break of 1.3580 to lead to a sharp drop to 1.3490. A break above 1.3630 suggests further 1.3580-1.3680 consolidation.
Longer term, a move below 1.3580 (the uptrend line from August) shifts the technicals to bearish and suggests further losses to 1.3490 and then 1.3360.
For today, USDCAD support is at 1.3580 and 1.3510. Resistance is at 1.3630 and 1.3680. Today’s range 1.3540-1.3630
Chart: USDCAD daily
Source: Investing.com
G-10 FX recap
The G-20 meeting ended with absentee leaders Putin and Jinping wielding major influence. They successfully avoided having the G-20 condemn Russia’s invasion of Ukraine, with other world leaders afraid of annoying China.
FX markets opened on a risk-positive note after Bank of Japan Governor Kazuo Ueda verbally intervened in USDJPY when he suggested the negative interest rate policy would be over by year-end.
Asian equity indexes closed mixed. Japan’s Nikkei 225 index lost 0.43%, while Australia’s ASX 200 gained 0.50%. European bourses are trading higher, with the German Dax up 0.44% and the UK FTSE 100 index up 0.16%. S&P 500 futures have gained 0.37%. The US 10-year Treasury yield climbed to 4.296% in NY after closing at 4.256% on Friday.
EURUSD traded higher in a 1.0708-1.0741 range due to improved risk sentiment. A lack of data and caution ahead of Thursday’s ECB monetary policy meeting limited price action. Analysts suggest the odds of the ECB opting to pause or hike are 50/50.
GBPUSD rallied from 1.2466 to 1.2538 then eased to 1.2519 in NY. The gains were due to broad US dollar weakness stemming from developments in China, BoJ verbal intervention, and the WSJ story claiming a shift in the Fed’s thinking.
USDJPY tumbled from 147.82 at Friday’s close to 145.91 in early Asia as traders reacted to hawkish comments from Bank of Japan Governor Kazuo Ueda. He suggested that prices and wages continued to rise; policymakers may have enough evidence to end negative interest rates by year-end. He also warned that the BoJ was still some distance away from achieving price stability. USDJPY has rebounded to 146.81 in early NY due to higher US Treasury yields.
AUDUSD traded with a bit of a bid overnight, rising from 0.6377 to 0.6443 due to mildly positive risk sentiment. The news that China’s inflation inched into positive territory and the PBoC’s fixing USDCNY sharply lower weighed on the US dollar.
Today’s US economic calendar is empty.
FX high, low, open
Source: Investing.com
China Snapshot
Bank of China Fix: today 7.2148, expected 7.3437, previous 7.2150.
Shanghai Shenzhen CSI 300 rose 0.74% to 3767.54.
China inflation rises into positive territory. August CPI rose0.1% y/y compared to -0.3% in July which gives PBoC room to cut interest rates again. Some analysts speculate that the 1-year MLF rate will be cut Friday.
PboC continues to defy reality with USDCNY fixing levels.
Chart: USDCNY 1 month
Source: Bloomberg
