December 6, 2021

  • PBoC cuts RRR rate effective December 15
  • US 10-year Treasury yield a tad firmer at 1.385%
  • US dollar opens firm; CAD outperforms

FX at a Glance for November

Source: IFXA Ltd/RP

USDCAD Snapshot   Open 1.2797-01, Overnight Range 1.2787-1.2841, Previous close 1.2845

USDCAD closed at resistance than sank in European trading thanks to Aramco raising crude prices for Asia markets, positive sentiment from Friday’s robust Canadian employment report.

Canada gained 153,700 jobs in November which included 79,900 full-time jobs. The news follows on the heels of news GDP rose 5.4% y/y in Q3, and inflation is at an 18-year peak of 4.7% y/y. The Bank of Canada mandarins will be hard-pressed to ignore the data, suggesting Canadian rates may rise far sooner than expected. However, the Omicron variant gives policymakers an excuse to due nothing when they meet on Wednesday.

Saudi Arabia raised oil prices for its Asia customers effective January 1. The news boosted oil prices and WTI climbed from Friday’s close of $66.23/barrel to $68.24/b in NY.

Technical view:  The USDCAD technicals are bullish but the base of the uptrend channel from November 16 may get tested in the next few days. USDCAD tried and failed many attempts to break above 1.2750-60 area resistance last week, suggesting this week should see a probe of support. A hawkish BoC meeting may be the catalyst for a downside break, which might extend losses to 1.2575.

For today, USDCAD support is at 1.2760 and 1.2720.  Resistance is at 1.2810 and 1.2850.  Today’s Range 1.2750-1.2820

Chart USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

Franklin Delano Roosevelt predicted that American’s would never forget the day Japan launched a surprise attack on Pearl Harbour. His prediction has held true and even the woke cancel culture hasn’t discovered anything to be offended, yet.

Russia is offended.

They are upset talk that NATO may include Ukraine, and they have amassed over 170,000 troops to help dissuade the West from threatening their borders. Biden and Putin have a call to discuss the issue tomorrow.

The Iran Nuclear treaty negotiators are upset

They fear the treaty talks will collapse if Iran doesn’t scrap “unacceptable” changes to the existing draft agreement.

US Chief Medical Advisor to the President Dr Fauci is not upset. In fact, he is almost optimistic about the latest coronavirus variant. Omicron’s impact. He said, “Though it’s too early to really make any definitive statements about it, thus far it does not look like there’s a great degree of severity to it,”

Asia equity indexes followed Wall Street’s lead and closed with losses. European traders were more optimistic, and the major indexes are higher with the UK FTSE up 0.90%. Gold prices inched lower, oil prices are higher, and US 10-year yields are 1.385%

Bitcoin (BTCUSD) had a busy Friday-Monday. Prices plunged from $57,300 to 45,032 Friday, then consolidated the losses on the weekend.

EURUSD traded in an uninspiring 1.1275-1.1320 band. Weaker than expected German Factory Orders which fell 6.9% m/m in October weighed on prices, as did the ongoing ECB dovish outlook for rates. EURUSD technicals target further losses to 1.1200 while prices are below 1.1350.

GBPUSD rallied to 1.3284 from 1.3224 but lost momentum in early NY trading and prices dropped to 1.3257. Gains are limited due to ongoing Brexit uncertainty and bearish technicals.

USDJPY climbed to 113.36 from 112.74 coinciding with US 10 year treasury yields climbing from the Friday close of 1.3450 to 1.377% in NY trading.

AUDUSD traded softer ahead of Tuesday’s Reserve Bank of Australia (RBA) monetary policy meeting. The RBA is expected to reaffirm its stance that domestic interest rates will not rise in 2022.

The US and Canadian economic calendars are empty.

Chart of the Day: Bitcoin Nov. 30-Dec. 6

Source: Saxo Bank

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3702, Previous 6.3738

Shanghai Shenzhen CSI 300 fell 0.17% to 4,892.62

PBoC cuts RRR 50bps and releases CNY 1.2 trillion in long term liquidity to support growth

Chinese Property developer default risk in spotlight after Sunshine 100 Holdings defaults on $170 million payment. Evergrande shares drop on the news.

Chart: USDCNY 1 month

Source: Yahoo Finance