October 10, 2024
- Jobless claims numbers muddled by Hurricane Helene
- Fed minutes reveal FOMC may not be as dovish as thought.
- US dollar opens with a bid.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3733, overnight range 1.3598-1.3655, previous close 1.3713
USDCAD rallied on the back of the FOMC minutes which implied that the Fed was not as dovish as the 50 bp rate cut implied, although subsequent comments from policymakers weaken that argument. Today’s US data didn’t answer any questions and USDCAD retreated from the peak to 1.3538.
USDCAD is underpinned by the contrasting Canada and US economic situation. The US economy is far more robust than its northern neighbor and it is still creating jobs. Canada cannot add enough new jobs to keep pace with the rising population, thanks to a lack of an immigration policy.
Oil prices are steady in a 73.33-74.57 band with traders awaiting the fall-out from Israel’s looming retaliation on Iran.
Canadian employment data is released tomorrow
USDCAD technicals
The intraday USDCAD are bullish. USDCAD is in a steep, but steady channel that started October 2 with the uptrend intact while prices are above 1.3690 (hourly chart). However it is bumping into the channel top in the 1.3750 area which raises the risk of a reversal which could take prices down to 1.3660.
Longer term, the USDCAD rally is at extreme overbought levels with RSI’s at 90. Meanwhile the Bollinger bands have exceed 2 standard deviations with the 3rd level at 1.3845.
For today, USDCAD support is at 1.3710 and 1.3660. Resistance is at 1.3760 and 1.3790
Today’s Range 1.3690-1.3790.
Chart: USDCAD daily
Source: Investing.com
FOMC Minutes Boost Greenback
Fed officials appear to be a tad less dovish than what a 50 bps rate cut would imply. The minutes revealed that some participants preferred a 25 basis point cut rather than the larger 50 bps, signaling concerns over moving too quickly. They were focused on the risk of appearing prematurely confident about inflationary control, especially considering some lingering inflation pressures (e.g., housing services). San Francisco Fed President Mary Daly isn’t one of them. Yesterday she said “I think that two more cuts this year, or one more cut this year, really spans the range of what is likely in my mind, given my projection for the economy.” Her colleague, Boston Fed President Susan Collins agreed.
Little Reaction to Inflation and Jobless Claims Data
Core-CPI number will 0.3% m/m vs forecast for a 0.2% increase which is the same as the August result. Core-CPI rose 3.3% y/y which was more than expected at higher than the 3.3% result seen in August. Weekly jobless claims jumped by 33,000 to 258,000 but the gains are likely due to claims from Hurricane Helene. The US 10-year Treasury yield eased to 4.06% from 4.09%.
Musk-Robot
Tesla is expected to unveil its plans for an autonomous, taxi prototype or “robotaxi” at an event in L.A tonight. It would appear that Jane Jetson’s Rosie has finally been upgraded.
EURUSD
EURUSD is trading defensively between 1.0928-1.0947, pressured by concerns that the FOMC is less dovish than expected from the 50 bp rate cut. Traders are awaiting key US inflation and jobless claims data for further direction.
GBPUSD
GBPUSD remained in a narrow 1.3062-1.3089 range, with traders awaiting US data today and UK data on Friday. Comments from BoE Governor Bailey hinting at a more aggressive rate cut strategy continue to limit gains.
USDJPY
USDJPY edged up to 149.55 in Asia but dropped to 148.81 in early NY trading. Sellers are responding to speculation that recent Japanese data might push the BoJ toward a rate hike, despite dovish remarks from BoJ Governor Ueda and PM Kishida.
AUDUSD & NZDUSD
AUDUSD traded sideways within a 0.66712-0.6743 range, supported by expectations of new Chinese stimulus announcements, while FOMC minutes suggesting less dovishness limited gains.
NZDUSD recovered slightly from post-RBNZ rate cut losses, moving from a session low of 0.6058 to 0.6093, but struggled amid broad US dollar strength following the FOMC minutes release.
USDMXN
USDMXN consolidated its post-inflation gains in a 19.4517-19.5070 range, supported by broad US dollar strength and the expectation that Banxico will cut rates after Mexican inflation eased to 4.58%.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.0702 (prev. 7.0568)
Shanghai Shenzhen CSI 300 rose 1.06%% to 3997.79
Stocks rally following implementation of new liquidity tool allowing eligible securities firms to buy government bonds with the provision of certain collateral. The funds must be invested in the stock market
Chart: USDCNY and USDCNH
Source: Investing.com
