November 22, 2024

  • Geopolitical tensions and trade fears weigh on sentiment
  • Canadians are shopping-Retail Sales rise.
  • US dollar opens mixed from yesterday, rallies overnight.

FX at a Glance

Source: IFXA/RP

USDCAD open 1.3988, overnight range,1.3958-1.4021, close 1.3975

USDCAD bears got a rude awakening overnight. They were feeling smug after USDCAD appeared to have snapped its recent uptrend after downward revisions for BoC rate cut expectations. Expectations. The revisions which started after mixed Canadian economic data were reinforced following the governments latest fiscal stimulus. Trudeau finally realized that he could get a bump in the polls if he got Canadians drunk and to facilitate that, he not only cut taxes on beer and wine he plans to send $250 cheques to everyone who earned less than $150,000 last year.

Canadians are in a spending mood. Statistics Canada reported Core retail sales—which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers—were up 1.4% in September. And the advance estimate for October is predicting a 0.7% increase. Perhaps shoppers will be the catalysts for a rebound in economic growth.

WTI oil prices rose after Putin appeared to escalate geopolitical tensions with his latest choice of weaponry. Prices declined from the overnight peak of 70.75 to 69.50 just before NY opened due to a report that Saudi Arabia is pondering raising production in December which could lead to a supply surge.

US Michigan Consumer Sentiment is forecast at 73.7 (previous 73) and a higher than expected result will underpin the US dollar.

USDCAD Technicals

The intraday technicals flipped to bullish with the move above 1.3980 which snapped the two day downtrend,  A break above 1.4040 suggests further gains to 1.4105.

The USDCAD outlook is bullish supported by the uptrend from September (daily chart) and momentum studies that suggest prices have not reached extreme overbought levels.  The Bollinger band 3rd STD is at 1.4150 while the RSI is in the middle.  

For today, USDCAD support is 1.3960 and 1.3940. Resistance is 1.4020 and 1.4060

Today’s Range 1.3960-1.4060.

Chart: USDCAD daily

Source: Oanda.com

Fed Officials, Putin, and Weak Eurozone Data Spur US Dollar Rally

Fed officials have been throwing cold water on rate cut hopes for a while, and yesterday New York Fed President John Williams and Chicago Fed boss Austan Goolsbee added their voices to the chorus. Mr. Williams stated inflation is “not quite there yet” and that the job market needed to cool further before cutting rates. Mr. Goolsbee said he expected to see lower rates, but it made sense to slow the pace.

Putin raised the stakes in his quest for the conquest of Ukraine after reportedly firing a nuclear warhead-capable missile into the country. Then a series of weaker-than-expected German and Eurozone PMI reports overnight sent the greenback soaring.

US Thanksgiving Holiday Season Begins Monday

Thanksgiving is on Thursday, November 28, and it marks the official start of the holiday season. Black Friday (the day after Thanksgiving) deals are an American tradition, but they have transcended borders and time as retailers have made the sales a global phenomenon.

Many Americans take the entire week off, and trading activity quickly dries up. This year will be no different, and Trump’s return to the White House gives traders an added incentive to stay sidelined.

EURUSD

EURUSD traded in a 1.0333–1.0499 range, with the bottom seen in Europe following the release of disappointing Eurozone data. Germany avoided falling into a recession, but Q3 GDP growth was lower than expected, rising just 0.1% compared to the forecast of 0.2% q/q.

ING economists are suggesting that a recession isn’t a matter of “if” but “when.” EURUSD retreated on the German data, then plunged after Eurozone PMI reports showed the economy dropped into contraction territory. S&P Global wrote: “Things could hardly have turned out much worse. The eurozone’s manufacturing sector is sinking deeper into recession, and now the services sector is starting to struggle after two months of marginal growth.”

GBPUSD

GBPUSD was hammered and fell to 1.2487 from 1.2595 following a disappointing PMI report and weak Retail Sales data. Retail sales were -0.7% in October, while September’s results were revised down to +0.1% from +0.3%.

Analysts are blaming the drop on UK budget uncertainty. UK PMIs fell into contraction territory. S&P Global had this to say: “The first survey on the health of the economy after the Budget makes for gloomy reading. Businesses have reported falling output for the first time in just over a year, while employment has now been cut for two consecutive months.”

USDJPY

USDJPY dropped then popped while trading in a 153.97–154.96 range. Japanese core inflation was a tick higher than expected (actual 2.3% vs. forecast 2.2%), while Manufacturing PMI dipped to 49 from 49.5.

The data did nothing to resolve the debate over the BoJ’s plan for interest rates in December.

AUDUSD and NZDUSD

AUDUSD dropped from 0.6522 to 0.6471 before rebounding to 0.6502 in NY. Broad US dollar strength and the plunge in Chinese equity indexes (Hang Seng lost 1.89%) triggered the sell-off.

NZDUSD mirrored Aussie moves and traded in a 0.5823–0.5861 range.

USDMXN

USDMXN rallied from 20.3747 to 20.5170, then retreated to 20.4152 in early NY trading. Weaker-than-expected Retail Sales, which fell 1.5% y/y (forecast -1.2%, August -0.8%), compounded a dovish Banxico outlook, ongoing concerns over Mexican judicial reforms, Trump’s tariff plans, and a resurgence of broad US dollar-fueled demand overnight.

BTCUSD (Bitcoin)

BTCUSD traded with a bullish bias in a 95,559–99,334 range and is within spitting distance of the $100,000 level. Trump campaigned on more favorable crypto regulations, and since his election, BNN Bloomberg says the crypto market as a whole has gained about $1 trillion.

FX high, low, open (as of 6:00 am ET)

Source: Investing.com

China Snapshot

PBoC fix: 7.1942 vs exp. 7.2502 (prev. 7.1934)

Shanghai Shenzhen CSI 300 fell 3.1% to 3865.70

Chinese equity Investors were already in fear Trump 2.o and then weak earnings from AI tech and search engine company Baidu and an on-line shopping platform, PDD, fueled a wave of selling which trashed Chinese equity indexes.

Chart: USDCNY and USDCNH

Source: Investing.com