July 9, 2021

Canada adds 230,700 jobs in June

China cuts RRR by 0.50%

US dollar opens on the defensive

USDCAD open 1.2508-12,  Overnight range  1.2455-1.2555,  Previous close 1.2533

FX at a Glance

FX Recap and outlook

Canada’s headline June Labour Force survey (LFS)  was stellar.  Employment rose by 231,700 in June.  Unfortunately, the glossy exterior hid a rotten core.  All the growth was in part-time work, and concentrated in the 15-24 age group.

USDCAD declined from 1.2555 yesterday, in part due to expectations for a strong employment report.  Prices dropped from 1.2490 just before the data release and hit 1.2555 the quickly retraced the move.

US 10-year Treasury yields clawed back some gains, rising from 1.28% yesterday to 1.34% today.  Analysts are perplexed as to what drove prices from 1.447% on Tuesday to yesterdays low.  Some say it is “short covering” due to concerns the global economic recovery is faltering.  Other’s blame thin summer markets.  Back in the day, perplexing bond price moves higher were explained simply as “ more buyers than sellers.” Probably true today.

The Peoples Bank of China (PBoC) surprise markets when the cut the benchmark Reserve Requirement Ratio (RRR) by 0.50%.  Analysts suggest the move is in response to a slowing economy, which if true, suggests global economic growth may slow as well.

The G-20 Finance Ministers are meeting in Venice and have released a draft communique., which says in part, “we will continue to sustain the recovery and avoid any premature support withdrawal.” It also calls for a global tax discussion to resolve outstanding issues and design a detailed plan for implementation at the October meeting. 

EURUSD is consolidating gains at the top of its overnight 1.1826 to 1.1860 range.  Concerns that the COVID-19 delta variant could be a drag on the  global economic recovery and the dovish ECB monetary policy outlook is limiting the upside.  The EURUSD outlook is negative below the 1.1880-1.1900 area.

GBPUSD chopped about in a 1.3757-1.3793 range until the NY session started and prices rallied to 1.3812.  GBPUSD found a bottom in early European trading after a series of weaker than expected UK economic reports.   Industrial Production and Manufacturing Production were a tad lower than last month.  May GDP data was very disappointing, rising 0.8% m/m compared to 2.3% in April, and leaves the economy 3.1% below its pre-pandemic level.  The GBPUSD technicals are bearish below 1.3870.

USDJPY bounced in a 108.77-110.14 range.  Price action is dictated by US Treasury yield moves and global risk appetite.

AUDUSD and NZDUSD are tracking broad US dollar sentiment, although AUDUSD gains are hampered by spreading delta-variant coronavirus outbreaks in may parts of the country.

USDCAD  appears to be settling into a 1.2450-1.2600 range.  Prices are undermined by a modest rebound in S&P 500 futures, the bounce in crude oil prices from this weeks low, and the rise in US 10-year Treasury yields.

There are not any notable US economic reports today.

USDCAD technical outlook

The USDCAD technicals are bullish above 1.2260, the uptrend line from June 1.  This weeks break above resistance in the 1.2480-1.2505 area, and 1.2450 should limit downside moves, and keep the focus on 1.2650.   For today, USDCAD support is at 1.2480and 1.2450. Resistance is at 1.2550 and 1.2590   Today’s range 1.2450-1.2550

Chart USDCAD 4 hour

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank