September 25, 2024
- China cuts 1-year medium term loan facility by 30 bps to 2.0%.
- Traders uninspired ahead of Thursday’s US data dump.
- US dollar steady overnight but lower from Tuesday’s opening.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3438, overnight range 1.3420-1.3441, previous close 1.3432.
USDCAD dropped yesterday because US consumer confidence deteriorated at the fastest pace since August 2021. The news raised the odds for another 50 bp Fed rate cut in November, Meanwhile Bank of Canada Governor Tiff Macklem remarks to a Toronto audience yesterday did increased confidence for jumbo Canadian rate cuts. That’s because he equated keeping inflation near its 2.0% level would require economic growth to accelerate. And growth is not expected to accelerate anytime soon.
USDCAD selling pressure increased with the break below the key 1.3480 support level, which triggered a wave of stop-loss selling.
China’s latest stimulus actions helped to underpin commodity prices and that weighed on USDCAD. However, WTI oil prices failed to keep yesterday’s gains and dropped from 71.72 to 70.92.
There are no top tier US or Canadian economic data releases today suggesting FX markets will be rangebound and quiet.
USDCAD technicals
The intraday USDCAD technicals are bearish. The downtrend from September 18 is intact while prices are below 1.3560 and the decisive breech of 1.3480 sets the stage for deeper losses to 1.3380 then 1.3360.
Fibonacci retracement analysis targets 1.3380 suggests that a decisive break below 1.3470 sets the stage for further losses to 1.3330. However daily RSI and Bollinger band studies suggest USDCAD is at extreme oversold levels.
For today, USDCAD support is at 1.3430 and 1.3410. Resistance is at 1.3480 and 1.3510.
Today’s Range 1.3480-1.3540
Chart: USDCAD daily
Source: Tradingview.com
The Terrorists are Winning the PR War
Hezbollah is a terrorist group according to the US, Canada, the UK, and Germany, to name a few countries. They have launched unprovoked attacks on Israel since October 2023, but instead of being condemned for their actions, the Western media and many politicians are blaming Israel for defending itself. Hezbollah leadership would be patting themselves on the back for this PR coup, except most of them are being blown up. Karma.
Consumer Caution Stalls Equity Rally
US consumers are not feeling all that optimistic. The Conference Board’s consumer confidence gauge fell 6.9 points to 98.7, and expectations for the next 6 months fell to 81.7. The news boosted the odds for another 50 bp rate cut in November. Chinese equity indexes rallied again overnight, but they were the only indexes that did. Japan’s Topix fell 0.23%, and Australia’s ASX 200 lost 0.19%. European bourses are all in the red, except for the UK FTSE 100 index, which is up 0.20%. S&P 500 futures are flat.
EURUSD
EURUSD is trading with a modest bid in a 1.1178-1.1199 range, with the single currency getting a boost from China’s stimulus efforts and yesterday’s soft US consumer confidence report. Sweden’s Riksbank cut rates by 25 bps as expected and indicated that two more rate cuts were likely this year.
GBPUSD
GBPUSD peaked above 1.3400, then rose to 1.3430 before getting swatted. Prices dropped to 1.3366 in early NY trading due to a lack of fresh catalysts and news Hezbollah fired a missile (unsuccessfully) at Tel Aviv.
USDJPY
USDJPY traded lower in Asia but rallied from 142.91 to 144.26 in Europe and early NY trading. Prices are being whipsawed by shifting BoJ rate hike sentiment after Governor Ueda hinted that he was not in a hurry to raise rates anytime soon and steady to firm(er) US 10-year Treasury yields.
AUDUSD and NZDUSD
AUDUSD rallied from 0.6872 to 0.6909 before dropping to the low in NY. The gain was on the back of cool inflation (actual 2.7% y/y vs 3.5% in July), which dropped to inside the RBA’s target range for the first time since August 2021. The results opened the door to speculation that the RBA may cut rates before year-end.
NZDUSD rose then fell in a 0.6307-0.6356 band and is at the bottom of that range in NY as the euphoria from the latest Chinese interest rate cut and previously announced stimulus moves fade.
USDMXN
USDMXN dropped to 19.2351 yesterday following cooler than expected Mexican inflation and weak US consumer confidence data. The move was not sustained, and the currency pair traded in a 19.3125-19.3655 range overnight. The Banxico meeting is tomorrow, and a 25 bp rate cut is fully priced in.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.0202 (prev. 7.0510)
Shanghai Shenzhen CS! 300 rose 1.48% to 3401.53
Chinese equity indexes extended yesterday’s impressive 4.33% rally with another 1.48% jump today after the PBoC fired another round from its stimulus cannon. The PBoC cut the 1-year medium-term facility by 30 bps to 2.0% from 2.30%. That news drove USDCNH and USDCNY lower. Governor Pan Gongshen said that the 7-day repo rate will be cut by 20 bps to 1.50% soon.
Chart: USDCNY and USDCNH
Source: Investing.com
