USDCAD open: 1.3900, overnight range 1.3865-1.3916, close 1.3870
USDCAD gains lagged those of the other G-7 majors after crude oil recouped all of Friday’s losses and rose to $103.84/b. Houthi attacks forced Saudi Arabia to shut down its East-West Pipeline, the 5-million-barrel-a-day conduit that bypasses the Strait of Hormuz, and Oman quietly postponed the meeting where it was supposed to unveil an alternative Hormuz shipping corridor. Trump is trying to blame Ukraine for the increase. He reportedly told Zelensky to stop attacking Russian diesel sites.
The Mark Carney Canada Investment Summit begins today in Toronto. His opening remarks to a 500-strong audience last night included this not-so-subtle dig at Trump. “The energy, the resources, the talent, the technology and the capital. And our greatest strength is something that cannot be found on any balance sheet: trust.”
Carney is also wooing the European Union. Trump’s nattering about making Canada the 51st state drove the PM to suggest to EU leaders that Canada should become an Associate Member of the European Union. Carney addresses the EU Parliament on Thursday.
Canadian Headline CPI held at 3.0% y/y in August, but the Bank’s preferred core gauges eased: CPI-trim to 1.9%,and CPI-median to 2.0%. Ex-gasoline CPI crept up to 2.4% from 2.2%, and seasonally adjusted monthly inflation was a modest 0.2%. Gasoline (+22.8% y/y) and travel tours (+26.1%) remain the distortion, largely energy/geopolitical noise rather than domestic demand pressure. There are no US economic reports of note.
USDCAD Technicals
USDCAD technicals are bullish above 1.3860, underpinned by the break above the 200-day moving average at 1.3834 and targeting the 100-day moving average at 1.3931. Momentum is building for another test of 1.3902 (today’s high, and the 50% Fibonacci retracement of the January-July range) with a break there opening the way to 1.3950-1.3970. A move back below 1.3860 puts 1.3820 in play, followed by 1.3770.
Longer term, the sell-off from the July peak near 1.4243 found a base close to the 78.6% retracement (1.3706) in early September before reversing higher, and price is now testing the upper boundary of the descending channel that has capped every rally since July. The RSI is pushing toward overbought territory and its signal line has turned up through the 50 midline, while the MACD confirms the shift in trend.
For today, support is 1.3860 and 1.3820. Resistance is 1.3910 and 1.3940.
Today’s range 1.3860-1.3920.
USDCAD Technicals
USDCAD technicals are bullish above 1.3860, underpinned by the break above the 200-day moving average at 1.3834 and targeting the 100-day moving average at 1.3931. Momentum is building for another test of 1.3902 (today’s high, and the 50% Fibonacci retracement of the January-July range) with a break there opening the way to 1.3950-1.3970. A move back below 1.3860 puts 1.3820 in play, followed by 1.3770.
Longer term, the sell-off from the July peak near 1.4243 found a base close to the 78.6% retracement (1.3706) in early September before reversing higher, and price is now testing the upper boundary of the descending channel that has capped every rally since July. The RSI is pushing toward overbought territory and its signal line has turned up through the 50 midline, while the MACD confirm the shift in trend.
For today, support is 1.3860 and 1.3820. Resistance is 1.3910 and 1.3940.
Today’s range 1.3860-1.3920.
FX Heat Map
FX open high low 6:00 am
It’s the Fed’s Fault
Fed Chair Kevin Warsh is in for a rough ride if the Fed raises rates on Wednesday, like 86.5% of traders on CME believe will happen.
Trump’s latest comments on interest rates offer yet another reminder that confidence and competence are not the same thing. He is arguing that because the US is the world’s strongest economy it should automatically have the world’s lowest borrowing costs. His insinuation that the Fed’s economic models (he calls formulas) are flawed because “I know more about formulas than anybody” betrays a remarkably moronic understanding of financial markets.
Taking Stock
Asian equities closed higher with Japan’s Topix gaining 0.74%, the Hang Seng rising 0.45% and Australia’s ASX 200 gaining 0.10%.
As of 5:45 am PT, European bourses are mixed. The UK FTSE 100 is up 0.55%, the French CAC 40 is down 0.96%, and the German DAX has lost 0.61%. S&P 500 futures are down 0.71%, the 10-year Treasury yield is 4.986%, the DXY is 99.62 and gold is $4,271.66..
EURUSD | Range 1.1530-1.1601
EURUSD dropped on a mix of increased risk aversion sentiment from the latest Middle East developments and the ensuing rise in crude prices. There was a lack of top-tier EU economic data and traders ignored hawkish comments from ECB policymaker Isabel Schnabel. She was concerned about rising energy prices and said that inflation would remain well above the ECB target for an extended period.
GBPUSD | Range 1.3474-1.3537
GBPUSD drifted lower in sympathy with the broad-based greenback demand and due to a lack of UK economic drivers. Prices are also pressured by the prospect of a Fed rate hike on Wednesday while the Bank of England will leave UK rates unchanged on Thursday.
USDJPY | Range 153.38-154.84
USDJPY rallied hard despite the surge in risk aversion sentiment. The rise in oil prices and the 80% chance for a Fed rate hike on Wednesday overshadowed the almost guaranteed Bank of Japan rate hike expected Friday. Rising US Treasury yields are underpinning USDJPY.
AUDUSD | Range 0.7116-0.7171
AUDUSD dropped due to fresh negative risk sentiment and the 86% odds for a Fed rate hike on Wednesday. The sell-off snapped the uptrend line that had guided prices higher since the beginning of August and could extend losses to 0.7020.
USDMXN | Range 16.9665-17.1189
USDMXN pushed to the top of its range as broad dollar strength and the sourer risk backdrop drove prices higher,
CHINA
- PBoC Fix: 6.7698 vs Exp. 6.7083 (prev. 6.7743
- Shanghai Shenzhen CSI 300 fell 0.67% to 4,440.08
Sources: Investing.com, Bloomberg, Reuters, Yahoo Finance, US Census Bureau, Trading Economics, Tradingview
