USDCAD open: 1.3906, overnight range 1.3897-1.3924, close 1.3901
USDCAD drifted sideways albeit with a bit of a bid due to elevated risk aversion from the prospect of a Fed rate hike on Wednesday and a widening of the Middle East conflict, and continued to tick higher in NY trading.
Mark Carney used his Canada Investment Summit to unveil a new tax strategy and incentives to lure potential investors. The government is hoping to secure $1.0 trillion in new investment. Carney also indicated that he hoped to renew US trade talks but will not slow down efforts to diversify trade.
WTI oil traded higher in a $101.84-$104.21 range and is trading at $102.84 in early NY due to military escalation in the Middle East.
Canada Wholesale sales rose 0.3% in July (forecast -0.5%, June 2.8%). US NY Empire Manufacturing Index came in at 7.6% for September compared to estimates of 14.75, and previous 20.6. Richard Deitz Economic Research Advisor wrote: “On the heels of strong growth in August, New York State manufacturing activity continued to pick up modestly in September. Employment grew at a solid pace, while pricing pressures intensified.”
USDCAD Technicals
USDCAD technicals remain bullish above 1.3891 (the 100-day moving average), with price grinding to a fresh high of 1.3919 today, its fourth straight up session. The next hurdle is 1.3932(yesterday’s high), and a break there targets 1.3970. A close back below 1.3891 puts the 200-day moving average (1.3834) back in play.
For today, support is 1.3890 and 1.3860. Resistance is 1.3930 and 1.3960
Today’s range 1.3870-1.3940
FX Heat Map
FX open high low 6:00 am
Risk Aversion Rises
Surging oil prices and the risks for another energy-fueled inflation spiral, combined with what many believe is uncontrolled US government spending, drove the US 10-year Treasury yield to 5.047% overnight. The US dollar rallied against the majors and global stock markets fell.
The escalation and expansion of Trump’s war with Iran, which now includes Yemeni Houthis damaging a major Saudi pipeline and disrupting shipping in the Bab-Al-Mandab Strait, threatens to engulf the entire region. The Saudis have retaliated with airstrikes and UK Prime Minister Andy Burnham is reportedly pondering a Saudi request for military support. History is repeating itself.
Taking Stock
Asian equities closed in the red. The Hang Seng dropped 1.00%, Australia’s ASX 200 lost 0.88% and Japan’s Topix fell 0.52%.
As of 5:30 am PT, the UK FTSE 100 is down 0.34%, the French CAC 40 is down 0.22%, and the German DAX has lost 0.10%. S&P 500 futures are down 0.13%, the 10-year Treasury yield is 4.997%, the DXY is 99.61 and gold is $4,280.79.
EURUSD | Range 1.1527-1.1555
EURUSD faded yesterday afternoon’s NY bounce and gave back most of the gains overnight. Prices are weighed down by broad US dollar strength, higher oil prices and fears of a Fed rate hike tomorrow. The German ZEW Economic Sentiment Survey ticked up to 34.7 from 34.2 but was below the 37 expected. Analysts suggest the results offer cautious optimism for an economic recovery although rising energy costs are a major drag.
GBPUSD | Range 1.3464-1.3506
GBPUSD mirrored EURUSD moves, for most of the same reasons, but with the additional weight of a dovish Bank of England policy meeting outcome on Thursday. The UK July employment data was not a factor. The unemployment rate was unchanged at 4.9% and the economy added 67,000 jobs compared to the 83,000 gained in June.
USDJPY | Range 154.21-155.55
USDJPY rallied on the back of rising US Treasury yields and the latest odds of a 92% chance for the Fed to hike rates tomorrow. A Fed rate hike negates some of the benefit from the upcoming Bank of Japan rate hike, expected Friday, which will be even more pronounced if the BoJ statement is on the dovish side.
AUDUSD | Range 0.7117-0.7143
The Aussie is trading defensively ahead of Wednesday’s Fed meeting and the rise in negative risk sentiment, despite the RBA’s hawkish bias. Many analysts expect a 25 bp rate hike on September 29.
USDMXN | Range 17.1271-17.1923
USDMXN rallied on the back of surging US Treasury yields and the almost universal expectation that the FOMC will raise rates on Wednesday.
CHINA
- PBoC Fix 6.7670 vs Exp. 6.7051 (prev. 6.7698)
- Shanghai Shenzhen CSI 300 fell 0.67% to 4,450.04
Industrial production rose 5.2% year on year in August, beating the 4.8% forecast and accelerating from July’s 4.5% pace.
Retail sales rose just 0.4% year on year in August, missing the 0.8% forecast and slowing from July’s 0.6% pace
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
