To be fair, Fed Chair Jerome Powell did not roil markets, overnight. That was done by silly FX traders reacting to headlines from his remarks at the Atlantic Festival at the end of the day, yesterday. The headline read “Powell says we are a long way from neutral rates. Rates are still accommodative.” Those traders still around in New York and the “early birds” in Asia scrambled to buy US dollars sparking an early Asia dollar rally. The problem was that the headline was old news. Last week, the Fed Chair told reporters at his post-FOMC press conference, “the Fed funds rate is still below the long-run estimates for neutral. Policy is still accommodative.”
Traders soon realized the error of their ways. The US dollar retreated (somewhat) in Asia and then erased the entire move during the European session. EURUSD dropped from 1.1518 to 1.1462 and opened in New York at 1.1495.
Soaring US Treasury yields are the flavor of the day.10-year Treasury yields are 3.22%, and 30 year are at 3.38. Robust US economic data has fueled the gains.
USDJPY traders are back to tracking Treasury yields. The currency pair rallied from 1213.60 yesterday, touched 114.54 then consolidated those gains overnight, trading in a 114.22-114.54 range. IMF Head Christine Lagarde said Japan needs to overhaul its economic policies.
GBPUSD tracked EURUSD lower after the Powell headlines, dropping from 1.2978 to 1.2923 in Asia before rebounding to 1.2982 in early New York trading. Brexit headlines continue to drive currency moves.
AUDUSD and NZDUSD were hammered on the US dollar’s surge, and neither currency really recovered. The currencies are still under pressure due to differing Fed and RBA/RBNZ monetary policies.
USDCAD rallied alongside the G-10 major currencies and came close to filling the gap from the Sept.28 close/Oct.1 Asia open. High oil prices and the prospect of a more hawkish Bank of Canada interest rate policy will help off-set USDCAD demand from the American economic outlook.
The Ivey Purchasing Managers Index for September is the only Canadian data available. US data includes Jobless Claims, Factory Orders and Challenger Job Cuts
USDCAD Technical Outlook
The USDCAD downtrend from September 10 is intact below 1.3000, a level guiarded by resistance at 1.2900 and 1.2960. The mild uptrend from Monday is intact above 1.2830. A move below 1.2830 points to 1.2770 and then 1.2740. A break above 1.3000 is required to relieve the downward pressure.
Todays Range 1.2830-1.2910