USDCAD open: 1.3803 overnight range 1.3785-1.3806, close 1.3794
USDCAD traded sideways in an uneventful overnight session. Today is the unofficial start to the last long weekend of the summer. Labour Day weekend has arrived in both Canada and the USA, although Trump is rumoured to be planning to rename it “The Golden Age of Trump Worker Appreciation Day (GATWAD).”
Today is also StatsCanada Labour Day, the day the August Labour Force Survey (LFS) is released. Canada is expected to have added 15,000 new jobs (75,000) in July and the unemployment rate to have remained unchanged at 6.4%.
There may be a flurry of activity following the release, but the results really don’t matter. The Bank of Canada policy meeting was just two days ago and the next meeting isn’t until October 28. The more important meeting (for financial markets) is the FOMC meeting in two weeks.
US Trade Rep is doing his best to ensure Mexico and Canada do not insist on negotiating a new trade deal together. Yesterday he claimed that Mexico is eager to protect America from Chinese imports while greedy, difficult Canada keeps demanding more tariff relief.
WTI oil prices are steady in a $90.42-$92.16 range. Only eight ships have made the transit in the past 24 hours, compared to the pre-Trump war average of 60. The price of diesel in the US has set a new record high, surpassing the peak seen when Russia invaded Ukraine. So much for Trump’s policies creating “energy dominance.”
USDCAD Technicals
USDCAD remains under pressure below 1.3850 and is looking for a clean break of support between 1.3740 and 1.3760 to open the door toward the 1.3660 zone.
The longer-term outlook is unchanged. The breakthrough the 50% retracement of the January-July range at 1.3870, is now looking to blow through the 61.8% level at 1.3790. Momentum tells a mixed story though. The 4-hour RSI is bouncing hard off an oversold extreme, even as the daily RSI, at 36.76, still has considerable room to fall before flagging oversold conditions of its own.
Today’s support sits at 1.3780 and 1.3740, with resistance at 1.3840 and 1.3880.
FX Heat Map
FX open high low 6:00 am
Does Today’s NFP Data Matter?
The US August employment numbers drop at 8:30 am and are expected to show that America created 56,000 jobs. That’s a far better result than the 23,000 loss in July. However, the reaction to this morning’s numbers may be rather underwhelming. That’s because Fed Chair Kevin Warsh explicitly stated that the Fed’s focus is on prices, and CPI is not released until next Friday. Furthermore, the last long weekend of the summer does not make for motivated trading desks. FX volatility following the data is likely to rapidly dissipate as traders get an early start to the holiday.
Fed September Rate Hike Odds Drop
Yesterday, Fed Governor Christopher Waller took the boots to predictions that the Fed would raise rates by 25 bps to 4.0% on September 16. He said recent data show encouraging signs of disinflation and that, if this continues, he will support holding rates at their current level in September. He believes underlying inflation is improving faster than headline measures suggest, with tariff and energy-price effects largely contained to a hike. His comments drove Wall Street higher and knocked Treasury yields and the US dollar.
Taking Stock
Asian equity markets were mixed. Japan’s Topix finished flat, Australia’s ASX climbed 0.16% and the Hang Seng soared 1.74%.
As of 4:35 am PT, European bourses are close to home. The French CAC 40 is down 0.14%, the German Dax gained 025% while the UK FTSE 100 and S&P 500 futures are flat. The 10-year Treasury yield is 4.763%, the DXY is 99.07 and Gold is $4,467.42
EURUSD | Range 1.1616-1.1633
EURUSD recaptured all of its losses from last Friday, held and traded quietly ahead of the US nonfarm payrolls release. German factory orders rose 2.5% m/m in July, which topped forecasts but were below the upwardly revised June result. Lower-than-expected Eurozone retail sales (actual -0.6% vs forecast 0.3% m/m) did not have much impact and neither did comments from ECB Chief Economist Philip Lane. He forecasted sharply lower inflation in the next 20 months. Traders ignored a Reuters report that ECB hawk Isabel Schnabel could leave the central bank early for a senior IMF position.
GBPUSD | Range 1.3522-1.3548
GBPUSD’s rally stalled in the 1.3550 area, which has capped gains since Tuesday, but has still gained 0.51% since last Friday. BoE Chief Economist Huw Pill advocated for a 25bp rate hike to 4.0% promptly to fight inflation risks from Trump’s war with Iran. UK Construction PMI was 44.3 compared to 44.7 in July.
USDJPY | Range 155.30-156.58
USDJPY dropped sharply in the past two days but clawed back some of those losses overnight. USDJPY continues to be undermined by the universal expectation of a 25 bps rate hike on September 18. Gains are limited after comments yesterday by a board member calling for a 50 bp hike.
AUDUSD | Range 0.7194-0.7215
AUDUSD held around 0.7200 overnight after benefiting from renewed US dollar selling and stronger expectations for another RBA rate increase. Australia’s stronger-than-expected second-quarter growth has boosted the case for further tightening, while Fed Governor Waller’s comments have reduced expectations for a September Fed hike
USDMXN | Range 16.8896-16.9315
USDMXN slipped to a fresh low for the overnight session as the dollar remained under pressure. The dovish comments from Fed Governor Christopher Waller which reduced the odds the Fed would raise rates in September fueled the selling pressure.
CHINA
- PBoC Fix: 6.7787 vs Exp. 6.7093 (prev. 6.7807)
- Shanghai Shenzhen CSI 300 fell 0.10% to 4,548.05
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
