October 21, 2024
- Risk sentiment sours and greenback catches a bid.
- China trims 1 and 5-year loan prime rates
- US dollar opens mostly higher with commodity bloc underperforming.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3822, overnight range 1.3799-1.3827, close 1.3802
USDCAD climbed on the back of broad US dollar weakness fueled by rising odds of a Trump election victory. Mr Trump is a well-known fan of tariffs and since the US is Canada’s largest trading partner, it doesn’t bode well.
USDCAD is also supported by expectations that the BoC will cut rates by 50 bps to 3.75% at Wednesday’s meeting. The risk is if the updated monetary policy report forecasts point to a weak economic outlook, the governor’s comments will be very dovish, sparking another leg higher in USDCAD.
USDCAD trading may be messy around the 10:00 am option expiry window as a $1.1 billion strike expires.
WTI oil prices rallied from a session low of 68.47 to 70.26 in NY. Traders are hoping that China’s latest interest rate cuts spur increased demand from that country, although it is probably wishful thinking. Prices got a bit of a bid after Saudi Aramco’s CEO said that he was bullish on Chinese oil demand.
There are no US or Canadian economic reports today.
USDCAD technicals
USDCAD is stuck inside its week-long range of 1.3740-1.3840 but underpinned by an uptrend line that has been intact since October 3 (4 hour chart), A break above 1.3840 sets the stage for a test of 1.3900 while a move below 1.3740 negates the October rally and puts a retest of 1.3640 in play,
For today, USDCAD support is 1.3760 and 1.3730. Resistance is at 1.3830 and 1.3860.
Today’s Range 1.3760-1.3830
Chart: USDCAD 4 hour
Source: Investing.com
“Anyone Can Be President”
America is still the land of milk and honey and where the streets are paved with gold. It is the preferred destination of the world’s poor and downtrodden because of the endless opportunities available to those who make the effort. Where else can a man who inherited a mere $400 million rise above the minions and get his own TV show? Where else can a convicted felon still be the preferred choice of 50% of the voters, while another law-abiding candidate only garners 48% of the vote? Traders know what to expect from the Donnie Trump show and are buying US dollars in anticipation of four years of bullshit, bluster, and tariffs.
EURUSD
EURUSD is rangebound in a 1.0844-1.0872 band. The outlook for a slower pace of Fed rate cuts and a quicker pace for ECB rate cuts is capping gains, while concerns about another Trump presidency are weighing on prices. The short-term EURUSD technicals are bearish below 1.0870.
GBPUSD
GBPUSD was steady in Asia, then slumped to 1.3012 from 1.3058 with traders cautious ahead of tomorrow’s speech by Bank of England Governor Bailey. Two weeks ago, Mr. Bailey warned that policymakers may get more aggressive with interest rate cuts if inflation pressures continue to weaken, and GBPUSD has been on the defensive ever since. Traders are hoping for an update on the view after last week’s UK inflation data. CPI rose 1.7% y/y in September, compared to 2.2% in August.
USDJPY
USDJPY dipped to 149.03 in Asia after closing at 149.53, then rallied to 150.10 by the time NY started. There is no particular catalyst for the move except the dovish BoJ and less dovish Fed interest rate outlooks, alongside a dose of “Trump trepidation.” A victory by the slap-happy tariff tsar is seen as a threat to global growth.
AUDUSD and NZDUSD
AUDUSD closed at 0.6706 on Friday then traded negatively in a 0.6679-0.6724 range. Broad US dollar demand due to Trump’s election prospects has overshadowed support from the prospect that the RBA will leave rates unchanged until 2025. NZDUSD is at the bottom of its 0.6049-0.6084 range, with prices unable to garner any support despite China’s PBoC cutting interest rates.
USDMXN
USDMXN erased all of Friday’s losses, which occurred on more talk of a US soft landing, and traded in a 19.8490-19.9781 range. A large part of the gains is due to the prospect Trump may win the election.
BTCUSD (Bitcoin)
Bitcoin climbed in Asia and peaked at 69,586, then erased all the gains and dropped to 68,422 just before NY opened. The gains were due to fresh inflows into US ETFs as investors are betting that a Trump victory will mean friendlier cryptocurrency regulations.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.0982 (prev. 7.1274)
Shanghai Shenzhen CSI 300 rose 0.26% to 3935.20
PBoC cuts 5-year loan prime rate (LPR) to 3.6% from 3.85% and the 1-year LPR was cut to 3.1% from 3.35%. The move was expected an pre-announced by PBoC Governor Pan Gongsheng on Friday.
Chart: USDCNY and USDCNH
Source: Investing.com
