Source: pintrest

November 4, 2022

  • Canada gains 108,300 new jobs
  • Upside surprise to NFP-261,00 vs forecast 200,000
  • US dollar trading defensively ahead of jobs data, extends losses afterwards

FX at a glance: 

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3642-46, overnight range 1.3514-1.3749, close 1.3746

USDCAD plunged following the hotter than hot Canadian employment report.

Canada gained 108,300 jobs compared to estimates for a 10,000 gain while the unemployment rate remained unchanged at 5.2%. It is not all peaches and cream as average hourly earnings rose 5.5% compared to 5.2% in September. More importantly, the pace of public sector employment (government workers) outpaced that of the private sector, rising 3.0% y/y vs 2.7%. Nothing improves productivity like more bureaucrats.

WTI oil climbed from $87.87/barrel to $91.88 in the wake of the NFP data and helping to undermine USDCAD. In addition, oil prices were supported by renewed chatter about China easing Covid restrictions which if true, paves the way for higher demand.

Deputy Prime Minister and Finance Minister unveiled the Fall Economic Statement. She warned of a recession and tax increases. She also gave away more money, this time interest free loans for students. She plans significant incentives for green energy while ignoring that green energy initiatives are a key factor in the energy crisis in Germany and EU countries.

 Ms Freeland said, “It’s important, as both the Deputy Prime Minister and the Minister of Finance, that I’m honest with Canadians about the challenges that lie ahead.”  Does that mean she usually tells lies about her governments policies?

Canada Ivey PMI data is ahead.

USDCAD Technical outlook

The intraday USDCAD technicals reflect a Downchild Blues Band pattern. Yup, Flip, flop & Fly. They have been alternating between bullish and bearish since the middle of September.

Today, they are bearish after breaking below the November 1 uptrend line at 1.3680.  The break below 1.3580.  targets 1.3540 then 1.3510.

Longer term, the latest price action is merely noise inside the 1.3550-1.3970 range that has controlled price action since September 22.

For today, USDCAD support is at 1.3540 and 1.3510.  Resistance is at 1.3630 and 1.3680.  Today’s range 1.3520-1.3620

Chart: USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

The US nonfarm payrolls report surprised to the upside. Employers added 261,000 jobs in October, easily beating the consensus forecast for a 200,000 gain. Today’s results did nothing to support hopes the Fed slows the pace of rate hikes.

The employment results were strong, and which boosted the US 10-year Treasury yield to 4.209% before it slipped to 4.177%. FX traders didn’t care and sold US dollars, while stocks fell then rallied.

Overnight, a whiff of positive risk sentiment drifted across markets although whether or not it is justifiable is up for debate.

The origin of the sentiment is China where traders ramped up speculation of an imminent easing in Xi Jinping’s covid rules. That helped propel the Shanghai Shenzhen CSI 300 index up 3.27% with a helping hand from the government a distinct possibility. The stock rally drove USDCNY lower, and it closed well below the official fix rate.

The improved risk sentiment tone drove the US dollar lower against the G-10 major currencies as traders trimmed long dollar positions ahead of today’s nonfarm payrolls data.

EURUSD traded in a 0.9744-0.9796 range then popped to 0.9851 post-NFP. Support from slightly better than expected Eurozone Services and Composite PMI reports was offset by weak German Factory orders data. The EURUSD technicals are bearish below 0.9860.

GBPUSD climbed from 1.1152 to 1.1248 but didn’t get much more traction after the US data, and only reached 1.1274. Yesterday’s dovish Bank of England rate hike and dire recession warnings will limit gains. The technicals are bearish below 1.1370, looking for a test of support at 1.0950.

USDJPY dropped from 148.40 to 147.55, then extended the slide after todays data, dropping to 147.12. Traders ignored the steady but firm US 10-year yield s that traded in a 4.15-4.21 range after NFP. They also dismissed comments from Finance Minister Suzuki who continued to spout nonsense about having no intention to use intervention to drive FX rates to certain levels.

AUDUSD rallied from 0.6287 to 0.6444 in NY on the back of broad-based US dollar selling vs the majors. The RBA Statement on Monetary Policy said rates will rise further downgraded economic growth while lifting its inflation forecast.

NZDUSD traded in a 0.5759-0.5883. range with prices boosted by broad US dollar weakness.

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

Source: Saxo Bank

China Snapshot

Today’s Bank of China Fix: 7.2555, previous 7.2472

Shanghai Shenzhen CSI 300 rose 3.27% to 3767.17

Optimistic traders boosted Chinese equities on rumours that authorities would end covid restrictions.

Chart: USDCNY 1 month

Source: Saxo Bank