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November 23, 2023
- Euro area-PMI’s improve but remain in recession territory.
- US closed-Canadian traders will take a break as well.
- US dollar opens modestly higher from the close but mixed from Wednesday’s open
FX at a Glance
USDCAD Snapshot: open 1.3682-86, overnight range 1.3651-1.3698, close 1.3689
USDCAD is flirting with the support area which has contained downside since the middle of October. The Loonie was caught up in broad US selling in thin markets ahead of today’s Thanksgiving holiday. Yesterday’s drop in weekly jobless claims, which supports the “robust American economy” narrative, hardly justified the move.
Later, Bank of Canada Governor Tiff Macklem declared success in the fight against inflation. He said, “The tightening of monetary policy is working, and interest rates may now be restrictive enough to get us back to price stability.” As declarations go, it was typical BoC “wishy-washy,” as he qualified his statement by saying, “If high inflation persists, we are prepared to raise our policy rate further.”
As a former colleague asked, “Why should you believe anything this guy says?” He’s got a point. Macklem emphatically declared that interest rates would remain low for a very long time in July of 2020 before embarking on a rapid rate hiking program 18 months later. He is also the guy who jumped all over the “Inflation-is-transitory” bandwagon. That was the term he used to justify ignoring the surge in inflation from 4.1% in August 2021, to 5.1% in January 2022 despite having an inflation target of 2.0%. He is the same guy who teased Canadians about a rate peak when he left rates unchanged in March and April this year, before raising them twice more in June and July. So yeah, his forecasting ability is sadly lacking.
The USDCAD retreat occurred against the backdrop of soft oil prices. WTI chopped in a $75.82-$76.81 range overnight after touching $74.32 yesterday. The Energy Information Administration reported that crude inventories rose by 8.7 million barrels last week, which may have prompted OPEC to push out their planned November 26 meeting to November 30. That sparked rumors that the rumored production cuts would be smaller than expected, if they even occur.
The intraday USDCAD are bearish below 1.3705 which guards the November 11 downtrend line at 1.3760. Traders are looking for prices to chew through support in the 1.3630-1.3650 area to extend losses to 1.3550. A move below 1.3550 targets 1.3370. A topside break above 1.3710 targets 1.3670.
For today, USDCAD support at 1.3650 and 1.3630. Resistance is at 1.3710 and 1.3740. Today’s range 1.3640-1.3720
Chart: USDCAD daily
G-10 FX recap
US and Japanese markets are closed today, which sapped trading motivation in Asia and Europe. It is ludicrous, but Hamas has managed to convince Western politicians that it is a good idea to swap known terrorists for innocent civilian hostages. That news is providing the distraction for traders whiling away the hours in front of a computer.
EURUSD climbed steadily, rising from 1.0884 to 1.0931 despite November PMI data hanging around in contraction territory and suggesting that the Eurozone is in a recession. The currency also defied recent comments by ECB officials suggesting ECB rates have peaked.
GBPUSD caught a bid and rallied from 1.2490 to 1.2573 after UK Manufacturing rose to 46.7 (forecast 45) and Services PMI popped into expansion territory with a 50.5 reading compared to expectations of 49.5. Yesterday’s Autumn Statement did not cause much of a stir, unlike last year’s debacle which took down Prime Minister Liz Truss and Chancellor Kwasi Kwarteng.
USDJPY traded in a 148.89-149.60 range in a thin market as Japan was closed. The US 10-year Treasury yield at 4.40% continues to weigh on the currency pair.
AUDUSD drifted in a 0.6538-0.6575 range, with price action tracking broad US dollar price movements. November preliminary Manufacturing and Services PMI was little changed and not a factor for traders. Prices continue to be supported by yesterday’s somewhat hawkish comments from RBA Governor Michele Bullock.
There is no US or Canadian data today.
FX high, low, open (as of 6:28 am ET)
PBoC fix: today 7.1212, expected 7.1512, previous 7.1254.
Shanghai Shenzhen CSI 300 rose 0.40% to 3561.52.
Chart: USDCNY (onshore) vs USDCNH (offshore)