Source: Pixabay Sunil Kargwal

September 7, 2021

  • RBA delays taper taper.
  • Eurozone data reports underpin EURUSD
  • FX markets rangebound, still digesting weak NFP report

FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2574-78, Range (including Monday) 1.2512-1.2579, Friday close 1.2525, Monday close 1.2535

USDCAD recouped Friday’s post-NFP losses and drifted higher yesterday and overnight. WTI oil prices rejected price action above $70.00/b, again, an area which capped gains throughout August. Opec reportedly cut prices for some Asia exports and it undermined prices.  The Bank of Canada monetary policy meeting is Wednesday.  It is a statement-only affair and since it occurs in the middle of a federal election, it is unlikely to provide anything that rocks the boat.

USDCAD direction will be dictated by broad US dollar moves.

Technical view:  The intraday USDCAD technicals are a tad bullish and attempting to break above 1.2590. the downtrend line from August 23.  If successful, it will extend gains to 1.2710, although price action will be sticky in the 1.2650 area.  A break below 1.2500 targets 1.2440.

For today, support is at 1.2540 and 1.2505.  Resistance is 1.2590 and 1.2650. Today’s range 1.2550-1.2640

Chart USDCAD 4 hours

Source: Saxo Bank

G-10 FX recap and outlook

The US dollar has caught a bid due to US 10-year Treasury yields jumping to 1.363% (6:33 am ET) from 1.288% on Friday.  Traders appear to have dismissed the weaker than expected NFP report (actual 235,000 vs forecast 750,000) as a summer anomaly, and unlikely to delay the need for the Fed to start tapering before year-end.

There is a whiff of risk aversion in the air due to China’s slowing economic growth, regulatory actions, and hostile overtures in Hong Kong and Taiwan.

Asia equity indexes closed with gains.  Japan’s Nikkei 225 is getting some support from the leadership convention, which may result in another stimulus happy Prime Minister.  Chinese stocks rose, but it wouldn’t be a stretch to assume it’s because of official action to prop up equities following the regulatory assault on many companies.  European indexes are lower, in part due to caution ahead of Thursday’s ECB monetary policy meeting. US equity futures are slightly lower, and both gold and oil prices are down.

The ECB is expected to slow the pace of PEPP purchases and provided upwardly revised 2021 growth and inflation forecasts.

EURUSD is consolidating recent gains in a 1.1861-1.1884 band.  Weaker than expected German ZEW data capped gains, but prices found support from better-than-expected Eurozone Q2 GDP (actual 2.2% q/q vs 2.2% previously).   The ZEW statement said sentiment was weak due to “Global chip shortages in the automobile sector and the shortage of building materials in the construction sector have caused a significant reduction in profit expectations for these sectors, dampening economic expectations”

The intraday EURUSD technicals are bullish above 1.1830.

GBPUSD price action mirrored EURUSD moves.  GBPUSD peaked at 1.3890 post-NFP, then slid to 1.3788 in NY today. Traders ignored comments from Bank of England policymaker Michael Saunders who suggested interest rates may rise next year. The intraday GBPUSD technicals are bearish below 1.3805, looking for another test of support at 1.3750.

USDJPY traded quietly in a 109.61-109.99 range since Monday’s Asian open, with prices supported by the surge in US Treasury yields.

AUDUSD dropped from 0.7467 to 0.7395 after the RBA left interest rates and tapering plans unchanged.

The RBA will continue to purchase bonds to the tune of $4.0 billion/week but, instead of reducing the program in November, will delay reductions until at least November.  NZDUSD tracked AUDUSD lower.

The US and Canadian economic calendars are empty.

Chart of the Day: AUDUSD

 Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank

China Snapshot

Today’s Bank of China Fix, 6.4533     Friday, 6.4577, Monday 6.4519                        

Shanghai Shenzhen CSI 300 rose 1.2% to 4992.83

China August Trade surplus US $58.34 billion vs July $56.59 billion

August Foreign Reserves US $3.232 trillion vs July $3.236 trillion

PBOC Governor says “will not resort to flood-like stimulus

Chart: USDCNY 1 month

Source: Yahoo Finance