Canada CPI rises4.4% y/y, fastest since Feb. 2003
Global equity rally stalls as Treasury yields rise
US dollar claws back losses, AUD and NZD outperform
FX at a Glance:
USDCAD Snapshot Open 1.2348-52, Overnight Range 1.2337-1.2366 Previous close 1.2366
USDCAD is consolidating this weeks losses in the context of the downtrend that began at the end of September. Prices are weighed down by broad US dollar weakness, positive risk sentiment from rising equity markets, and firm to higher oil prices.
WTI oil slipped from Tuesday’s $83.17 peak to $82.09 just ahead of the NY open. The American Petroleum Institute reported crude inventories rose 3.29 million/barrels last week which is on top of the 5.2 million barrel increase the week before.
Canada inflation is starting to sizzle. The monthly CPI rose 0.2% in September, the same growth rate as in August. Month-over-month CPI growth has been positive for nine consecutive months. USDCAD inched higher on the news.
Technical view: The intraday USDCAD technicals are bearish below 1.2390 (hourly chart) looking for a break below 1.2305 to extend losses to 1.2270. A break above 1.2390 targets 1.2450 then 1.2500.. Longer term, Bollinger Bands and RSI’s suggest USDCAD is oversold.
For today, USDCAD support is at 1.2330 and 1.2305. Resistance is 1.2390 and 1.2430. Today’s range 1.2330-1.2390
Chart USDCAD 4 hour
Source: Saxo Bank
G-10 FX recap and outlook
The US dollar found its footing and is recouping earlier losses, except against AUD and NZD, which continued to climb due to favorable risk sentiment and the rising interest rate outlook in those countries. The greenback is underpinned by rising 10-year Treasury yields, which climbed 1.593% yesterday morning to 1.677% in Asia before sliding to 1.622% in early NY trading.
Asian equity indexes closed modestly higher except Hong Kong’s Hang Seng index, which gained 1.35%. European bourses and S&P 500 futures are flat. WTI oil prices are down, while gold rose. Compared to Tuesday’s NY close.
EURUSD traded choppily in a 1.1618-1.1651 range as the surge in US Treasury yields and the stalled equity rally capped gains. Eurozone inflation was as expected at 3.4% y/y. Bundesbank President and ECB hawk Jens Weidmann announced he was stepping down at the end of the year. EURUSD intraday technicals are bullish above 1.1600.
GBPUSD dropped from 1.3830 to close at 1.3792 yesterday, then attempted to recoup those losses in Asia. It didn’t work. The rally stalled at 1.3813, and GBPUSD dipped 1.3753 by the NY open. The sell-off was exacerbated by lower than expected UK September inflation data (actual 0.3% m/m vs forecast 0.4%, and 0.7% in August).
The results eased concerns that the BoE would raise interest rates sooner than expected. Nevertheless, the short-term technicals are bullish while prices are above 1.3680.
USDJPY rallied to 114.69 from 114.30 as US 10-year Treasury yields climbed, then dipped to 114.44 when yields slipped lower. The Japanese Trade deficit narrowed in September.
AUDUSD and NZDUSD extended yesterday’s gains with prices underpinned by the hawkish rate outlook for NZ and higher commodity prices for Australia. Australia unemployment is due tomorrow.
The US data calendar is empty except for the Beige Book.
Chart of the Day-USDJPY and S&P 500
Chart: Saxo Bank
FX open, high, low, previous close
Chart: Saxo Bank
Today’s Bank of China Fix 6.4069, Previous 6.4307
Shanghai Shenzhen CSI 300 index fell 0.25% to 4,910.18
PBoC left interest rates (Loan Prime Rate) unchanged at 3.85% China FX Regulator-China is better able to absorb short term currency disturbances. Repeated plans to keep yuan stable
Chart: USDCNY 1 month
Source: Yahoo Finance