October 4, 2024
- NFP crushes most optimistic guesses, rises 254,000 in September.
- Oil rally stalls in face of ample supply
- US dollar mixed in subdued overnight session, rallies after NFP
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3557, overnight range 1.3544-1.3589, previous close 1.3556
USDCAD climbed yesterday after a hotter than expected US Services report downgraded the risk of a 50 bp Fed rate cut in November which contrasts sharply with the Bank of Canada outlook. The odds for a 50 bp BoC rate cut are around 50%, and that has dropped the CAD/US 10-year yield spread to 75 bps from 82.7 a week ago.
The Canadian dollar is not getting any benefit from the surge in oil prices as a slew of federal government policies since 2016 have frightened away foreign capital.
USDCAD trading may see more volatility around the 10 am option expiry window due to chunky option expiries which include $2.0 billion in the 1.3500-10 area, $1.6 b in the 1.3530-1.3555 zone and $1.8 billion between 1.3580 and 1.3600.
USDCAD technicals
The intraday USDCAD are bullish following the break above the September 18 downtrend line which came into play at 1.3520 and is now aiming for 1.3630. A break below 1.3530 sshifts the focus to 1.3480.
Longer term, USDCAD is in an uptrend above 1.3480 and looking for a test of the 50 and 200 day moving averages which are 1.3610 and 1.3600, respectively.
For today, USDCAD support is at 1.3520 and 1.3490. Resistance is at 1.3590 and 1.3620.
Today’s Range 1.3520-1.3610
Chart: USDCAD daily
Source: Central Charts
New US Job Numbers Soar
US nonfarm payrolls rose far higher than even the most optimistic forecasters predicted. Not only did the American economy create 254,000 new jobs, but the unemployment rate also fell to 4.1% from 4.2%. Even the revisions point to a much stronger economy than previously expected. The fall-out was as expected, the US dollar rose, and Treasury yields jumped from 3.86% to 3.98% and S&P 500 futures rose 0.39%.
There are still plenty of top-tier economic reports ahead of the November Fed meeting but today’s data all but eliminated any risk of a 50 bp rate cut at that meeting. Even worse, surging job gains has upward implications for inflation.
Wrestling with Fate
Iran’s religious-zealot ruling class are huddled in concrete and steel bunkers awaiting Israel’s retaliation for Iran’s unprovoked missile barrage fired at Israel. So is the rest of the world.
US President Biden is stirring the pot. He told reporters that the US “was in discussion” with Israel about striking Iran’s oil fields, which some say would escalate the conflict. Israeli leadership was caught off guard and said, “Uh, thanks Biden, now Iran knows our plans.”
Oil traders were caught off guard as well, and WTI surged from 67.55 on Tuesday to 74.57 in early NY trading today. That rally looks rather pathetic despite analysts from Goldman suggesting prices could rise as much as $20/b. Others are not so sure. They point to Opec and IEA forecasts that predicted a glut of oil in 2025.
EURUSD
EURUSD traded quietly in a 1.1020-1.1040 band overnight, then divided to 1.0964 after the non-farms payrolls data. Narrowing ECB and US interest rate spreads are weighing on the single currency. There are $3.4 billion of 1.1000 option strikes expiring at 10:00 am.
GBPUSD
GBPUSD attempted to recover some of yesterday’s losses sparked by dovish comments by Bank of England Governor Andrew Bailly, Prices climbed from 1.3119 in Asia to 1.3173 in NY after BoE Chief Economist Huw Pill urged caution in cutting rates. Then NFP happened and GBPUSD plunged to 1.3087.
USDJPY
USDJPY consolidated yesterday’s gains in a 145.92-146.94 range then accelerated to 148.51 after the NFP result lifted the US 10-year Treasury yield to 3.98%. Prices are underpinned by the Prime Minister and Bank of Japan Governor expressing a reluctance to raise interest rates further.
AUDUSD and NZDUSD
AUDUSD dropped yesterday after the US ISM services data and then traded sideways in a 0.6835-0.6853 range then dropped to 0.6793 post-NFP. Australian markets are closed Monday.
NZDUSD drifted in a 0.6195-0.6220 range overnight then fell to 0.6151 due to the robust NFP data. In addition, the RBNZ is expected to cut rates by 50 bps on Tuesday.
USDMXN
USDMXN fell yesterday then traded in a 19.3058-19.3960 range overnight. Prices plunged to 19.2218 in the wake of the NFP data and news Mexico’s unemployment rate ticked up to 3.0% from 2.9% in September. That move was fully reversed in minutes and USDMXN is at 19.3168.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
Still Closed PBoC fix: unchanged 7.0074 (prev. 7.0101)
Shanghai Shenzhen CS! 300 closed at 4017.85 (as of September 30)
Chinese markets closed for Golden Week.
Chart: USDCNY and USDCNH
Source: Investing.com
