November 22, 2021
- PBoC leaves interest rates unchanged, Analysts expect easing ahead
- Anti-vaccine riots weigh on EURUSD
- US dollar boosted by risk off sentiment, Commodity currency bloc outperforms
FX at a Glance:
Source: IFXA Ltd/RP
USDCAD Snapshot Open 1.2633-37, Overnight Range 1.2632-1.2656, Previous close 1.2643
USDCAD consolidated last week’s losses in a fairly quiet range but remains supported by oil prices. Speculation that Japan, China, and the US will coordinate the released of oil from Strategic Petroleum Reserves, drove WTI prices down 10% since November 10.
Overnight, oil extended losses with WTI falling to $75.05/barrel from $76.67, before rebounding to $76.07/b. The intraday WTI technicals are bearish with the break below $76.42 suggesting further losses to $67.40.
USDCAD gains are also fueled by the shift to modestly more hawkish rhetoric by FOMC members. Friday, Fed Vice Chair Richard Clarida suggested that it may be appropriate to increase the speed of tapering. Fed Governor Christopher Waller seems to agree. He said that inflation may stick around for a while which is affecting his expectations about the “level of monetary policy accommodation that is needed.”
Those remarks helped lift US 10-year Treasury yields to 1.584% from Friday’s 1.549% closing level.
The Canadian economic data calendar is empty.
Technical view: The USDCAD technicals are bullish with the uptrend from the November 10 low coming into play at 1.2620. If broken, the trend flips to bearish and USDCAD would target 1.2550, then 1.2490. A move above 1.2660 risks a test of the June 2020 downtrend line at 1.2750.
For today, USDCAD support is at 1.2620 and 1.2580. Resistance is 1.2660 and 1.2710. Today’s range 1.2580-1.2660
Chart USDCAD Weekly
Source: Saxo Bank
G-10 FX recap and outlook
It is a big week in America but not so much elsewhere. The US Thanksgiving holiday is Thursday, and many American’s take this week off and if not the entire week, a lot of workers skip Wednesday and Friday.
Despite the holidays, the economic data dragon must be fed. Wednesday, the release of the FOMC minutes from the November 3 meeting headline a massive data dump that includes Durable Goods Orders, Weekly Jobless Claims, Q3 GDP, and Michigan Consumer Sentiment.
President Biden is reportedly announcing his pick for Fed Chair before Thursday.
EURUSD is trading with a negative and is at the bottom of its 1.1261-1.12912 range in part due to negative sentiment from widespread coronavirus lockdown protests.
Russian and Ukraine issues may also be a negative EURUSD factor. According to the Kremlin, Russian troops amassing on the Ukraine border are no cause for concern, but US military officials are claiming it is a sign of an imminent invasion.
Still, the key driver of EURUSD weakness is the divergent interest rate outlook between the ECB and the Fed. ECB President Christine Lagarde insists the eurozone economy needs low rates while Fed officials are mulling the need to hike. EURUSD technicals are bearish below 1.1310.
GBPUSD is at the top of its 1.3421-1.3448 range. Ernst and Young is predicting slower than expected growth for the UK economy in 2022. Broad US dollar demand and the ongoing EU/UK Brexit dispute is capping gains.
USDJPY consolidated gains from Friday, trading in a 113.93-114.26 range, supported by the rebound in the US 10-year Treasury yield.
AUDUSD and NZDUSD outperformed as both nations ease coronavirus restrictions. AUDUSD got an added lift from firmer iron ore prices. NZDUSD is underpinned by expectations for the RBNZ to raise interest rates o.25% at Thursday’s monetary policy meeting.
Chart of the Day: WTI oil
Source: Yahoo Finance.com
FX open, high, low, previous close as of 6:00 am ET
Chart: Saxo Bank
Today’s Bank of China Fix 6.3952 Previous 6.3825
Shanghai Shenzhen CSI 300 rose 0.46% to 4,912.40
PBoC leaves 1 year LPR at, 3.85%, 5 year LPR 4.85%
Analysts suggest PBoC leaning toward easing monetary policy with Nomura Bank analysts opining the PBoC is hinting at RRR cut
French politicians demanding China allow tennis player Peng Shuai to speak publicly or face diplomatic consequences.
Chart: USDCNY 1 month
Source: Yahoo Finance