November 29, 2024
- Black Friday in US, Blacker Friday in Kyiv
- Canada September GDP weaker than expected.
- US dollar continues to slide-CAD unchanged.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.4006, overnight range,1.3981-1.4018, close 1.4016
USDCAD is under pressure mainly due to month end portfolio rebalancing flows occurring in thin holiday markets.
Statistics Canada’s advance estimate for GDP in September missed the mark. They forecast September GDP growth at 0.3% and it came in a 01%. The news lifted USDCAD to 1.4040. Nevertheless, the advance estimate is meaningless in the face of the latest Federal government stimulus and the return of Donald Trump to the Oval office.
The stimulus plan may not have as big a boost to the economy as policymakers hope. That’s because the dogs breakfast of what is and what isn’t included in the GST holiday increases costs for retailers who have to reprogram their systems. Who do you think will pay for that?
The Trump effect is really the elephant in the room. Who cares how much the domestic economy grew two months ago when the spectre of growth-crushing 25% tariffs loom? Fortunately, Americans will share the pain which may force Trump to have a re-think. Goldman Sachs analysts warn that unless Canadian oil imports are excluded, the tariffs will result in higher gas and energy prices for all US consumers.
WTI oil prices are trading softly in a 68.23-69.22 band as the Israel/Hezbollah ceasefire eases Middle East production disruption concerns and because Opec is still on track to boost production in December or January.
FX trading is likely to be muted today because many Americans have taken today off although portfolio rebalancing could cause some volatility.
USDCAD Technicals
The intraday technicals are bearish. The USDCAD downtrend channel (hourly chart) from the beginning of the week is intact while prices are below 1.4010 with the base of the channel at 1.3930. A topside break would negate the pressure and target 1.4060, then 1.4080.
USDCAD is boxed in a 1.3900-1.4100 range which has contained prices since November 15. The uptrend line from October 10 comes into play at 1.3940.
For today, USDCAD support is 1.3980 and 1.3960. Resistance is 1.4040 and 1.4070.
Today’s Range: 1.3980-1.4060.
Chart: USDCAD daily
Source: Investing.com
Greenback on Sale for Black Friday
It would appear that the US dollar was a featured sale item for the annual post-Thanksgiving shopping spree. The greenback fell sharply across the board overnight with the US dollar index (DXY) dropping from 1.0692 yesterday to 1.0560 overnight, before rebounding to 105.97. The DXY has dropped 2.3% since November 22.
Arguably, the chief reason for the sell-off is month-end portfolio rebalancing flows thanks to the S&P 500 gains in November. Pre-Thanksgiving position adjusting also played a role.
The Despots are Restless
The problem with electing a wild card as President is that, well, he is a wild card. Mr. Trump does not appear to have a filter and says whatever he chooses. That may worsen because at his advanced age, dementia could become a factor—he is only four years younger than Biden, after all.
Despots around the world are cognizant of this fact, including 71-year-old Xi Jinping of China and 72-year-old Putin. They both fear the “Trump factor” and, to that end, are reminding the world that they are still forces to be reckoned with.
China and Russia warplanes entered the South Korea air defense identification zone, forcing the ROK to scramble fighter planes. In addition, Putin threatened to hit “decision-making” sites in Ukraine, which include the President’s office and parliament.
Global Equities Adrift
Asian equity indexes traded softer with Australia’s ASX 200 losing 0.10% and Japan’s Topix closing down 0.24%. Hong Kong’s Hang Seng index squeezed out a 0.29% gain on the back of stimulus hopes. European bourses are flat, while S&P 500 futures are up 0.28%. The 10-year US Treasury yield declined from 4.25% to 4.20%. Gold (XAUUSD) gained $25.60.
EURUSD
EURUSD dropped to 1.0549 from 1.0597 with traders still debating about a 25 or 50 bp rate cut at the December 12 ECB meeting. Analysts suggest the modest tick higher in Eurozone Core HICP inflation will not deter the ECB from cutting rates because economic activity continues to be weak. The EURUSD technicals are bearish and looking for a test of support at 1.0370.
GBPUSD
GBPUSD rose, then fell, in a 1.2682-1.2750 range, with gains due to portfolio rebalancing demand for sterling and losses due to profit-taking as many see the US dollar sell-off as a buying opportunity.
USDJPY
USDJPY dropped from 151.56 to 149.54 before rebounding to 150.05 because of higher inflation in Tokyo. CPI, ex-food and energy, rose 2.2% compared to 1.8% in October, while the headline number jumped to 2.6% from 1.8%.
That was enough to raise expectations that the BoJ will cut rates by 25 bps in December.
AUDUSD and NZDUSD
AUDUSD bounced in a 0.6492-0.6520 range in thin trading but is seeing some support from month-end demand. Prices continue to be underpinned by comments from RBA Governor Michelle Bullock on Thursday claiming that inflation remains too high to cut rates.
NZDUSD tracked AUDUSD moves and traded in a 0.5886-0.5929 range, but gains were capped by comments from RBNZ officials suggesting another 50 bp rate cut was likely in February.
USDMXN
USDMXN consolidated yesterday’s gains in a 20.3704-20.4755 range. The currency pair is undermined after Trump’s comments following a conversation with Mexican President Claudia Sheinbaum were seen as easing trade frictions.
BTCUSD (Bitcoin)
BTCUSD drifted higher in a 94,183-97,210 range, supported by broad US dollar weakness and hopes for fresh demand on the possibility that the SEC grants approval of the Bitwise Crypto Index fund as an ETF on the NYSE.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC Fix: 7.1894 (prev. 7.1982)
Shanghai Shenzhen CSI 300 rose 1.14% to 3916.58
Chinese stocks rally on hopes of further stimulus announcements ahead of the Central Economic Work Conference
Chart: USDCNY and USDCNH
Source: Investing.com
