The markets have made the “clubhouse” turn and are thundering down the home stretch into year end.
In the lead, nuclear powered North Korea, ridden by a pudgy Kim Jong-un. ECB, ridden by Mario Draghi and Twitter, with Donnie Trump in the saddle, are neck and neck. Racing up the rear are a herd of mules, ridden by Congress.
USDJPY has yet to recover from Monday’s opening plunge from 110.26 to 109.21 due to a North Korea nuclear bomb test. That same risk aversion sentiment drove USDCHF to 0.9548 from 0.9651.
President Trump responded with a tweet threatening to stop trade with any country doing business with North Korea.
USDJPY has yet to recover and opened in New York at 109.38 while USDCHF is a little above the low and trading at 0.9597.
AUDUSD rode a roller-coaster, gapping lower at Monday’s open, recovering all those losses almost immediately and then sliding from 0.7969 to 0.7942. Weaker than expected data was behind that move. Prices recovered after Tuesday’s RBA announcement. They left rates unchanged, and the statement was upbeat. AUDUSD rallied to 0.7984 and opened in New York at 0.7978
NZDUSD was a tad more subdued, trading in a 0.7143-77 range until mid-morning in Europe when prices rallied to 0.7188 where it sat at the New York open. Both AUDUSD and NZDUSD were supported by a better than expected China Caixin report. (Actual 52.7 vs. 51.8)
EURUSD was choppy. Safe-haven demand and concerns of a QE tapering announcement by the ECB competed with weaker than expected Eurozone Services PMI and month over month Retail Sales data. .EURUSD traded in a 1.1858-1.1921 range and opened at 1.1882.
Sterling traded in a 1.1914-1.2965 range on Monday with downward pressure due to soft Construction PMI. Prices recovered on Tuesday in Europe, in part due to the selling of EURGBP and a story that Norway’s oil fund was selling yen to buy pounds.
Risk aversion was good for gold prices. XAUUSD gapped higher at Monday’s Asia open, jumping from $1,324..50 to $1,339.68. The gap was filled this morning as New York started the day.
Oil prices rallied, rising from 47.15 to $47.98 in anticipation of fresh crude demand as Texas refineries reopen.
USDCAD drifted in a 1.2377-1.2415 range. US dollar gains are capped by concerns that the Bank of Canada may hike rates by 0.25 bps tomorrow and by firmer crude prices.
It is not a banner day for US data, leaving a speech by FOMC member Lael Brainard to provide direction, although it probably won’t. USDCAD traders will be sidelined ahead of the BoC statement on Wednesday. The rest of the world will be waiting for the ECB statement and press conference on Thursday
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish. Prices are consolidating inside a 1.2350-1.2440 range with a negative bias due to the gently sloping downtrend channel from June 12, when the BoC first announced their policy shift to a tightening bias. For Today, USDCAD support is at 1.2360 and 1.2310. Resistance is at 1.2420 and 1.2450.
Today’s Range 1.2360-1.2420
Chart: USDCAD 4 hour