Source: Pixabay

August 3, 2021

Investors uneasy as China continues to stir the pot

US 10-year Treasury yields enigma, dip to 1.15% then rise to 1.195%

US dollar opens mixed, and still rangebound

USDCAD open 1.2513-17, Range since Monday Asia open, 1.2460-1.2535, Friday close 1.2467, Monday close 1.2504

FX at a Glance: July 30-Aug 3

Source: IFXA/RP

FX Recap and outlook

Markets are barking mad as the Dog Days of Summer (July 3 to August 11) enter their final week.  US 10-year Treasury yields tumbled to 1.15% yesterday.  Weak China PMI data and fears of a delta-variant fueled global economic slowdown weighed on prices.  Weaker than expected US  ISM Manufacturing PMI (actual 59.5 vs forecast 60.6) didn’t help.

The China official media described online gaming as “spiritual opium,” which crushed shares of Tencent (the worlds largest video games publisher).   That move helped drive the other major Asia equity indexes lower.

European investors drove the major equity indexes to new record highs, led by a 0.93% gain in the French CAC index.  Wall Street futures are higher as well.  Oil prices are firmer while gold is trading lower. US 10-year Treasury yields are at their overnight session high of 1.195%.

EURUSD traded in 1.1860-1.1895 since Monday.  Gains stalled despite higher than expected Eurozone Manufacturing PMI, partly due to talk of the latest US trillion-dollar fiscal stimulus plans. Traders are biding their time until Friday’s nonfarm payrolls data, which is expected to show a gain of 900,000 jobs.

GBPUSD continues to track toward 1.4000, supported by sentiment that the Bank of England may be a tad more hawkish than expected at Thursday’s meeting.  The GBPUSD technicals are bullish above 1.3880, with a break above 1.4000, targeting 1.4100.

USDJPY dropped from 109.75 in Asia on Monday to 109.11 today, mainly because of the plunged in US Treasury yields and safe-haven demand following China’s latest industry crackdown.  A break below 109.00 targets 107.50.

AUDUSD rallied  to 0.7407 today, from 0.7328 yesterday, thanks to the Reserve Bank of Australia (RBA). AUDUSD traders were short anticipating that the RBA would delay tapering plans due to the latest COVID-19 outbreak.  That didn’t happen and QE  tapering begins in September, as previously announced. 

NZDUSD rallied from 0.6948 to 0.7017, then consolidated those gains in a 0.6990-0.7017 range in early NY trading.  Prices got an added boost after the RBNZ warned it would tighten housing market restrictions.  Traders expect a 0.25% rate increase at the August 18 meeting.

USDCAD climbed from 1.2460-1.2524 in concert with a drop in WTI oil prices from $74.20/barrel to $70.60/b.

Oil traders are concerned about slowing demand from the spread of the delta-variant coronavirus. USDCAD direction continues to be determined by Wall Street price action and oil moves. Traders are cautious ahead of  US and Canadian employment, due Friday.

There are no economic reports of note from the US or Canada today.

USDCAD technical outlook

The intraday USDCAD technicals are bullish above 1.2420, looking for a break above 1.2540 to extend gains to 1.2600  A break below 1.2420 targets 1.2370. For today, USDCAD support is at 1.2460 and  1.2420. Resistance is at 1.2530 and 1.2570.   Today’s range 1.2470-1.2550

Chart USDCAD 4hour

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank