February 9, 2024
- Chinese markets begin week-long holiday tomorrow.
- Canada employment gains all due to government hiring
- US dollar opens narrowly mixed after quiet overnight session.
FX at a glance
USDCAD Snapshot: open 1.3456-60, overnight range 1.3414-1.3467, close 1.3460.
USDCAD dropped to 1.3415 from 1.3452 on a headline showing Canada gained 37,300 jobs in January, more than doubling the consensus forecast of 15,000. Even more impressive that instead of rising to 5.9% as expected, the unemployment rate ticked down to 5.7%.
Unfortunately, if you get your news from CTV Vancouver, you won’t hear about the unemployment report because BCE, fresh off a 5.3% jump in quarterly earnings to $435.0 million, can’t make ends meet and fired the weekday news staff. Even worse, they probably can’t get a Federal government job because the government may be trying to hire all of the 1 million immigrants that came to Canada in 2023. The results are terrifying. Fewer and fewer private sector workers are paying for more and more government employees.
If you think that todays employment results will reinforce risks that the Bank of Canada will raise rates or even leave them elevated for longer than expected, give your head a shake. BoC officials repeatedly suggested that rates have peaked, and they would be loath to admit they got it wrong again.
USDCAD has bounced back to 1.3440 in post-data trading.
Oil prices are firm inside a $75.98-$76.61 range, which is modestly bearish for USDCAD. A survey by S&P Global Platts noted that Opec and friends’ production fell the most in the six months to January 2024.
The Canadian data calendar is empty for most of next week as well, which means the outlook for the Fed and US data will dictate USDCAD direction.
The USDCAD intraday technicals are bearish below 1.3470. The post employment data drop below 1.3440 is likely a false break as prices quickly reversed the move Support at 1.3410 guards the 1.3390 area, which is the base of the uptrend channel from the begin of January. If USDCAD stays above 1.3390, the move from the 1.3550 is just a correction and not a trend change.
For today, USDCAD support is at 1.3440 and 1.3410. Resistance is at 1.3510 and 1.3550. Today’s range is 1.3410-1.3510
Chart: USDCAD daily
Source: Daily FX/RP
G-10 FX recap
US Special Counsel Robert Hur’s report on President Joe Biden’s retention of classified documents when he was vice-president concluded that no charges should be laid. He felt sorry for the octogenarian he described as an “elderly man with a poor memory.” The world can feel safe knowing that the apocalypse could begin because “Sleepy Joe” keyed in nuclear launch codes thinking he was merely unlocking his iPhone.
The US Bureau of Labor Statistics releases its annual CPI seasonal adjustment report. Last year was a big deal because the upward revisions forced the Fed to become more hawkish, which is why this year’s report is on the radar screen.
EURUSD is quietly inching higher and has climbed from 1.0762 to 1.0795 supported by downgraded expectations for an early ECB rate cut. EURUSD remains in an intraday downtrend channel (hourly chart) that began on January 3 and is intact while prices are below 1.0860.
GBPUSD is treading water in a 1.2599-1.2637 band ahead of a truckload of UK economic data next week. UK unemployment , PPI, CPI, and Retail Prices are released Wednesday followed by GDP on Thursday.
USDJPY chopped about in a 149.01-149.57 range and retreated from the peak when the US 10-year Treasury yield dipped from 4.17% to 4.13%. . Traders ignored a report from the IMF that called for the BoJ to end its yield curve control (YCC) policy and to start gradually raising rates.
AUDUSD firmed in a 0.6487-0.6513 band. Traders were uninspired because of ongoing Chinese economic weakness and due to poor liquidity from the onset of Lunar New Year holidays begin. RBA Governor Michele Bullock warned that rates could go higher if inflation remains elevated. She said, “An inflation rate with a four in front of it is not good enough and still some way from the midpoint of our target.”
USDMXN traded uneventfully in a 17.1223-17.1750 range. Banxico left its benchmark overnight rate unchanged at 11.25% as widely expected. The statement was balanced. The hawkish elements, which included upwardly revised CPI forecasts for Q1, Q2, and Q3 (Q4 CPI was unchanged), were offset somewhat by the decision to leave rates unchanged and awaiting incoming data.
FX high, low, open (as of 6:00 am ET)
PBoC fix: today 7.1036, expected 7.1996, previous 7.1063
Shanghai Shenzhen CSI 300 was closed- Feb. 8/24- 3364.93.
Chinese markets will be closed next week for Lunar New Year
The Biden administration is considering using data security fears to restrict imports of Chinese smart cars, electric vehicles and components.
Chart: USDCNY and USDCNH 4 hour.