Source:  Pixabay

February 4, 2022

  • EUR consolidates gains after Lagarde comments
  • US NFP surges, Canada jobs shrink
  • CAD underperforms as WTI reaches $92.30

FX at a Glance

Source: IFXA Ltd/RP

USDCAD Snapshot: Open 1.2722-26, Overnight Range-1.2665-1.2784, previous close 1.2675

USDCAD bottomed out in Asia and rallied non-stop to 1.2784 following the release of weaker than expected Canadian jobs data and higher than forecast US nonfarm payrolls.

Canada lost 200,000 jobs and the unemployment rate jumped to 6.5% from 6.0% in January.  USDCAD reacted like the results were meaningful.  They aren’t.  The losses are entirely due to strict health measures imposed by many provinces due to the Omicron outbreak and will probably be fully recouped in February.

USDCAD got an added lift from another plunge in S&P 500 futures as  the US data supports the outlook for aggressive Fed rate hikes.

Traders ignored surging oil prices with WTI rising over 6.0% % since yesterday morning. Middle East tensions are ratcheting higher. The US is sending ships and jets to help protect Arab allies from what has been described as Iran sponsored attacks. Prices are underpinned by falling US inventories and expectations for rising demand as economies reopen.

The last time WTI was at this level was October 6,2014 and USDCAD was 1.1200. One or the other price is out of whack.

Technical view:  The intraday USDCAD technicals are unchanged from yesterday. They are bullish above 1.2660, looking for a break above 1.2750 to extend gains to 1.2860.  A decisive move below support in the 1.2660 (uptrend line) and 1.2620 (100 day moving average targets would shift the focus to the 1.2500 area.

For today, USDCAD support is at 1.2660 and 1.2620.  Resistance is at 1.2750 and 1.2810.  Today’s Range 1.2660-1.2760

Chart USDCAD daily-4 hour

Source: Saxo Bank

G-10 FX recap and outlook

The US employment report highlighted the impact from contrasting Canadian and US Omicron policies.  Canada closed business and hunkered down, while American’s  kept on trucking.

The US added 467,000 jobs in January and Decembers results were revised 309,000 higher.  More importantly, Average hourly earning rose 0.7% m/m.

Bond traders reacted and drove the US 10 year Treasury yield to 1.90% from 1.817% prior to the data.  S&P 500 futures tumbled to 4445 before drifting higher.

Geopolitical tensions are elevated. CNN tells a tale about a Russian plot to justify invading Ukraine, using a fake video. CNN was also all over the CIA claims of Weapons of Mass Destruction stockpiled in Iraq, the pretext for the US-led invasion of that country. What’s good for the goose is good for the gander.

EURUSD is on a tear, rising from 1.1268 pre-ECB press conference to 1.1483 in NY this morning. The outlook from the monetary policy statement and Lagarde’s press conference was as different as night and day. The statement was nearly identical to Decembers, but during her presser, Ms. Lagarde signaled a hawkish shift which pundits took to mean a rate hike in 2022. The EURUSD technicals are bullish above 1.1370 with a break above 1.1500 targeting 1.1620.

GBPUSD rallied after the Bank of England hiked rates 0.25% (as expected), but the rally stalled at 1.3628. EURGBP demand, worsening political problems for PM Johnson, and rising Brexit tensions over the Northern Ireland border limited gains.

USDJPY is riding a roller-coaster. Prices rose to 115.14 from 114.82 in Asia, then erased the entire move in Europe. The popped to 115.38 after the NFP data.

AUDUSD gave back Asia gains in European trading, falling from 0.7150 to 0.7050 due to broad US dollar strength and a somewhat dovish RBA monetary policy statement.

Chart of the Day: EURUSD hourly

Source: Saxo Bank

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3746, previous 6.3746-Closed

Shanghai Shenzhen CSI 300 closed

Chinese New Year-January 31 to February 15.

Chart:  USDCNH (offshore yuan) 30 minute

Source: Saxo Bank