December 6, 2024
- Markets ignore Syrian drama
- Central bank parade-RBA, BoC and ECB this week
- US dollar opens mixed from Friday, CAD underperforms
FX at a Glance
Source: IFXA/RP
USDCAD open 1.4101, overnight range,1.4133-1.4175, close 1.4159
USDCAD soared on Friday, rising from 1.4048 pre-Canadian employment data to 1.4165 in the aftermath. Prices inched higher in early Asia trading then slid steadily and touched the low in NY.
Canada’s unemployment rate rose three ticks to 6.8% from 6.5% due to the ongoing fallout from Trudeau’s open borders policy. The labor market increased by 138,000 people, while Canada only created 50,500 new jobs, 45,000 of which were in government.
The results forced many economists to revise Wednesday’s BoC rate cut forecast down to 50 bps from 25 bps.
Meanwhile, the US continued to churn out jobs. Nonfarm payrolls rose by 227,000, hourly earnings climbed 0.4%, and the unemployment rate ticked up only slightly, from 4.1% to 4.2%. That news will support a 25 bp Fed rate cut on December 18.
The 10-year CAD/US interest rate yield spread widened sharply from 107.5 to 118.6 today.
WTI oil prices caught a bit of a bid on news that Syrian dictator Bashar Assad fled for his life as rebel forces entered Damascus.
Mr. Assad phoned his friends, Russia and Iran, to beg for aid, but neither Putin nor Ayatollah Khamenei were taking calls. You can’t blame them—both leaders have learned from the Hezbollah experience. WTI rose from 67.00 to 68.28, which isn’t much of a rally.
There are no Canadian or US economic reports today.
USDCAD Technicals
The intraday technicals are bullish above 1.4080 and looking for a retest of the 1.4180 area. However, gains above that price are unlikely until after the BoC monetary policy meeting on Wednesday. Until then, price action should be contained in a 1.4080-1.4180 band.
Longer term, the USDCAD uptrend from May 2021 remains intact above 1.3500 and that level is protected by many layers of support including the previous peak of 1.3960. Fibonacci retracement analysis of the Covid range suggests that the break above 1.4085, which represents the 78.6% Fibo level, opens the door to a 100% retracement to 1.4660.
For today, USDCAD support is 1.4110 and 1.4080. Resistance is 1.4160 and 1.4180.
Today’s Range: 1.4110-1.4180.
Chart: USDCAD daily
Source: Oanda.com
Greenback Flaunting Its Strength
The US dollar is flaunting its stuff and remains perky against the majors despite retreating from its best levels seen last week.
Friday’s US employment report supports a 25 bp Fed rate cut, but that view could change on Wednesday with the US inflation data ahead. A higher-than-expected Core CPI result may force the FOMC to delay easing.
Meanwhile, geopolitical issues are underpinning the US dollar. The fall of the government in Syria opened up a new can of worms for the Middle East. China faces another Trump-led trade war, and Ukraine may find itself forced to cede territory to Russia by order of the Donald.
Trump is President in all but Name
Donald Trump was at his blustery best on Sunday in an interview with NBC. He may not be parked in the Oval Office, but he is the President of the United States. Joe Biden is merely a cadaver-in-waiting. He promised mass deportations, tax cuts and said he would levy tariffs on imports from America’s biggest trading partners. That doesn’t bode well for the Loonie.
EURUSD
EURUSD traded in a 1.0532-1.0586 range with traders biding their time until Thursday’s ECB decision. The ECB is expected to cut rates by 25 bps, and traders are concerned about a dovish outlook from President Christine Lagarde.
GBPUSD
GBPUSD mirrored EURUSD moves and traded in a 1.2717-1.2784 range. The intraday technicals are bullish above 1.2720.
USDJPY
USDJPY see-sawed in a 149.59-150.57 range, similar to Friday’s trading band. The bottom was seen in the wake of Chinese comments suggesting monetary policy would be eased and on safe-haven demand from the fall of the Syrian government. The move didn’t last, and prices rallied due to broad US dollar strength.
AUDUSD and NZDUSD
AUDUSD recouped all of Friday’s post-NFP losses and rallied from 0.6380 to 0.6451 following China’s vow to ease monetary policy. Traders hope that the planned Chinese government actions will boost the economy and increase demand for Australian exports. NZDUSD followed suit and rallied in a 0.5805-0.5890 band.
USDMXN
USDMXN is trading defensively in a 20.1240-20.2224 range as it consolidates its post-NFP losses. Mexican inflation rose 4.55% y/y in November (forecast 4.59% and previous 4.76%).
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC Fix: 7.1870 vs exp. 7.2627 (prev. 7.1848)
Shanghai Shenzhen CSI 300 fell 0.17% to 3966.57
China inflation rose 0.2% y/y compared to 0.3% y/y in October while Raw material prices fell 2.5% y/y vs -2.9% in October.
China plans to be more active in expanding domestic demand in 2025 and the announcement boosted Hong Kong’s Hang Seng by 2.76%
Chinese President Xi Jinping and his allies have concluded that the failure of massive stimulus programs to reignite economic growth stems not from the actions themselves, but from the ineffective language used to describe them.
Source: Bloomberg
Chart: USDCNY and USDCNH
