March 11, 2022

  • Canada adds 337,000 jobs, unemployment rate drops to 5.5%
  • Global risk sentiment improves on Putin comments
  • US dollar opened higher but gains have been eroded;  CAD outperforms

FX at a Glance 24 hours

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.2767-71, overnight range-1.2719-1.2792, close 1.2769

USDCAD extended yesterday’s sell-off following the surprisingly strong Canadian employment report.  Canada gained 337,000 new jobs, fully recouping the 200,000 lost in January due to Omicron restrictions, as the hospitality and food services sectors reopened.  This is the first report to show that domestic employment has returned to pre-covid levels.

The Bank of Canada may take note of the 3.1% y/y rise in average hourly earnings, which suggests transient inflation may be becoming entrenched.

USDCAD was in retreat overnight after risk sentiment improved following comments by Russian President Putin, which also sparked a rebound in the S&P 500 index which rallied from yesterday’s low of 4,209.80 to 4,330.00 in early NY trading.

USDCAD price action may be distorted around 10:00 am if prices are in the 1.2750 area, as a $1.53 billion option strike matures.

USDCAD technical outlook

The intraday and longer term USDCAD technicals flipped to bearish with the move below the 1.2770-80 area yesterday.  A break below 1.2730 targets 1.2680. A break above 1.2805 targets 1.2840.  Longer term, the uptrend from May 2021 on a weekly chart, is intact above 1.2550.

For today, USDCAD support is at 1.2680 and 1.2650.  Resistance is at 1.2760 and 1.2790. Today’s Range 1.2710-1.2790.

Chart USDCAD weekly

Source: Saxo Bank

G-10 FX recap and outlook

It is a sloppy Friday trading session thanks to the ECB’s hawkish turn and policymaker’s comments on the action against the backdrop of Russian/Ukraine war headlines.

Risk sentiment turned modestly positive after Russia President Vladimir Putin said “there are certain positive shifts in talks with Ukraine,” while boasting that “sanctions made Russia stronger in the past”

Those comments sparked a jump in European equity indexes and S&P 500 futures, but the gains have been retraced in early as the remarks are hardly the foundation for an end to hostilities.

There is another war brewing in Europe.  The EU and UK are ganging up on Meta and Google, accusing the two companies of “fixing” advertising rates.

President Biden is expected to announce he is cancelling Russia’s Preferred Trade status, a move that should have occurred when Russian proxies shot down Malaysia Airlines Flight 17, eight years ago.

Wall Street closed with losses but well above its worst intraday levels, and Asian equity markets followed suit. Japan’s Nikkei fell 2.05%, partly because of the plunging yen, while Australia’s ASX 200 closed down 0.94%.  Chinese markets finished with gains, recouping earlier losses on fears that NASDAQ would delist some major Chinese tech stocks.

EURUSD peaked at 1.1115 yesterday after the ECB announced that it would speed up tapering and end bond purchases by the end of Q3 2022.  Analysts concluded that it meant ECB rate hikes would occur as soon as the summer.

President Christine Lagarde pushed back against higher rates by noting “some time” after QE ends could be weeks or months.  Ms Lagarde also noted that the risks to the ECB’s outlook are “tilted to the downside.”

EURUSD traded choppily in a 1.0961-1.1043 range overnight, with the top resulting from the Putin headlines.  Prices have since dropped to 1.0995 weekend due to the Russian/Ukraine risks and next week’s FOMC meeting.

GBPUSD tracked EURUSD, trading in a 1.3053-1.3102 until Putin’s comments lifted prices to 1.3119.  GBPUSD didn’t get any benefit from today’s UK data dump.  January GDP rose a higher than expected 0.8% m/m, and Manufacturing and Industrial production reports beat estimates.

USDJPY rallied from 116.15 to 117.05 after the US 10-year Treasury yield touched 2.018%.

AUDUSD and NZDUSD are stuck in the middle of their respective overnight ranges.  Higher commodity prices underpin both currency pairs.

A speech by President Biden and the Michigan Consumer Sentiment Index  are on tap.

Chart of the Day: USDJPY

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 6.3306 previous 6.3105

Shanghai Shenzhen CSI 300 rose 0.32% to 4,306.52

CSI 300 turns a morning loss into an afternoon gain.  Stocks were sold on fears major Chinese tech names would be de-listed from the NASDAQ. It would come as no surprise to discover the hand of the Chinese government manipulating the afternoon rally.

Chart: China 1 month

Source: Saxo Bank