November 4, 2024
- Fed expected to ignore NFP and cut rates 25 bps on Thursday.
- Trump trade takes a beating after Iowa poll flips to Harris
- US dollar slides across the board.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3910, overnight range 1.3892-1.3928 close 1.3961
USDCAD looked like it was heading to the moon on Friday. The Bank of Canada is expected to cut rates by 50 bps on December 11, US 10-year yields were close to 3.40%, oil prices were sliding and Trump’s chances for winning the election looked pretty good. USDCAD closed at the peak for the day and for all of 2024. Then a poll in Iowa happened which gave Harris a 3-point lead over Trump. The US dollar plunged and USDCAD went down as well.
WTI oil prices jumped from 69.33 on Friday to 71.81 today. The Trump oll story had a bit of an impact but the main driver was Opec’s decision to delay its planned December production increase for 1 month. Iran’s promise to attack Israel was another factor.
FX markets may be choppy as liquidity evaporates until the election.
USDCAD Technicals
The intraday USDCAD technicals are useless until after the election-and the FOMC decision. However, hourly technicals suggest a negative bias while trading below 1.3930 looking for a move below 1.3890 to extend losses to 1.3860. A move above 1.3930 targets 1.3960
The USDCAD uptrend line from June 2021 is intact above 1.3405 on a monthly chart.
For today, USDCAD support is 1.3890 and 1.3860. Resistance is 1.3930 and 1.3960.
Today’s Range 1.3860-1.3960.
Chart: USDCAD 4 hour
Trump Trades Being Trashed
Donald Trump needed a glass of Alka-Seltzer after a poll by Selzer & Co showed that Kamala Harris was leading Trump by 47% to 44% in Iowa. That’s a 6-point flip from September when Trump had a four-point lead. Donnie’s reaction was typical and in CAPITAL LETTERS. He said “In fact, it’s not even close! All polls, except for one heavily skewed toward the Democrats by a Trump hater who called it totally wrong the last time, have me up, BY A LOT.”
Trump may think the poll was out to lunch, but traders voted with their wallets and the Trump trade took a hit. Betting site Predictit had Harris with a 3-point lead over Trump for the first time, but those odds have narrowed, and she only has a 1-point edge.
Central Banks are Still a Factor
The US election has put financial markets on hold for the short term, but the central bankers are still wielding influence. The RBA meets tomorrow, and the Bank of England and Fed are at bat on Thursday. The FOMC is expected to ignore Friday’s hurricane-tainted employment data and cut rates by 25 bps, due to the Q3 GDP data showing the economy was growing at a healthy 2.8% y/y.
EURUSD
EURUSD closed at 1.0839 on Friday then gapped higher at the Asian open and traded in a 1.0870-1.0905 range overnight. The rally occurred in a US election-thinned market and was sparked by a poll showing Harris leading in Iowa, a state that was thought to be a “sure-win” for Trump. Trump’s campaign added Iowa to the list of states that are cheating.
Meanwhile, the US is not the only major G-7 economy struggling with political issues. Germany’s three-party coalition cannot get along, with the Chancellor (SPD party) and the Finance Minister (FDP party) holding separate business summit meetings and excluding each other from the guest list. Some analysts are suggesting that the risk of a government collapse is very high. If so, it is hard not to believe that EURUSD has a lot of upside above 1.0950. Meanwhile, Eurozone Investor Confidence improved marginally to -12.8 from -13.8 while Manufacturing PMI ticked up to 46 from 45.9.
GBPUSD
GBPUSD also gapped higher at the open, rising from Friday’s close and trading in a 1.2945-1.2999 range overnight. Traders have the Bank of England and the Fed to worry about in addition to the US election. The BoE is expected to cut rates by 25 bps. The move won’t be unanimous, and policymakers will reiterate that rates will be reduced gradually.
USDJPY
USDJPY dropped from 153.09 at the end of Friday’s session and is at the bottom of its 151.59-152.58 range. The drop was due to the Iowa poll and the drop in the US 10-year yield from 4.37% on Friday to 4.285% today.
AUDUSD and NZDUSD
AUDUSD rallied from 0.6584 to 0.6620 before retreating to 0.6602 in NY. The TD inflation gauge rose 0.3% (previous 0.1%) which supports the view that the RBA will leave rates unchanged at 4.35% tomorrow. NZDUSD traded in a 0.5977-0.6016 range with price action determined by broad US dollar sentiment.
USDMXN
USDMXN is trading negatively in a 20.0230-20.2670 range with prices gapping lower compared to Friday’s close. It all has to do with some of the Trump trades being unwound following the Iowa poll and the drop in the US 10-year Treasury yield.
BTCUSD (Bitcoin)
Bitcoin traded sideways in a 67,530-69,505 range as risk takers take a breather and await the US election results.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1203 (prev. 7.1135)
Shanghai Shenzhen CSI 300 rose 1.41% to 3944.76
China is attempting to woo foreign investors by allowing individuals to provide capital for publicly traded firms, as per Securities and Regulatory Commission. Xi Jinping may have just figured out that arresting, jailing and “disappearing” business leaders doesn’t encourage
Chart: USDCNY and USDCNH
Source: Investing.com
