- Risk sentiment turns positive on news of Biden/Jinping call
- Canada recovers 94,000 jobs in August
- US dollar opens with losses across the board, compared to Thursday.
FX at a Glance:
USDCAD Snapshot Open 1.2610-14, Overnight Range 1.2597-1.2671, Previous close 1.2665
The Loonie is having a Red Bull moment-it got wings. USDCAD traded uneventfully in Asia but dropped rapidly in Europe. News that President Biden and Chinese President Xi Jinping chatted on the phone sparked turned risk sentiment positive.
USDCAD dipped to 1.2587 from 1.2605 after Statistics Canada reported a gain of 90,200 jobs in August with 68,500 of the jobs being full-time. The unemployment rate fell for the third consecutive month to 7.1%
The impact of the data should be fleeting as it follows a benign speech by BoC Governor Macklem. Yesterday, Mr Macklem repeated that economy requires extraordinary monetary policy support, and that a rate increase will not occur until the second half of 2022.
Steady oil prices are also undermining USDCAD. WTI recovered from yesterday’s news that China will sell some oil reserves to “better stabilize domestic market supply and demand.”
In the big picture, Canadian economic data is at the back of the bus in terms of providing USDCAD direction. The focus is on external factors, particularly US growth and the Fed’s interest rate outlook.
Technical view: The intraday USDCAD technicals are bearish with the break while trading below 1.2650 and looking for a break of the June uptrend line at 1.2510 to extend losses to 1.2420. A break above 1.2660 negates the intraday downside pressure and shifts the focus to 1.2750.
For today, support is at 1.2580 and 1.2550. Resistance is 1.2640 and 1.2670. Today’s range 1.2560-1.2650.
Chart USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
“China calling to Washington-town, no war is declared and no battle come down.” (apologies to The Clash)
Joe Biden and Xi Jinping reportedly spent ninety minutes on the phone in what the White House said was a test to see if direct leader-to-leader engagement could move relations forward.
The press statement said, “President Biden underscored the United States’ enduring interest in peace, stability, and prosperity in the Indo-Pacific and the world, and the two leaders discussed the responsibility of both nations to ensure competition does not veer into conflict.
The call hinted that US/China relations might improve, which was all the excuse traders need to revert to riskier assets.
US PPI rose 0.7% m/m and PPI excluding Food and Energy rose 0.6% m/m in August, a tick higher than forecast.
EURUSD chopped about in a 1.1820-1.1850 range overnight and is stuck in the 1.1800-50 band seen all week. Great Expectations for yesterday’s ECB meeting became “lunch bag letdown.” The ECB delivered a “dovish taper.” The stamen said, “favourable financing conditions can be maintained with a moderately lower pace of net asset purchases under the PEPP than in the previous two quarters.” Traders ignored German inflation data, which was as expected. The intraday EURUSD technicals are bearish below 1.1860.
GBPUSD caught a bid in Asia and then accelerated in Europe, rising from 1.3834 to 1.3887, despite weaker than expected UK July GDP, which rose 0.1%, compared to forecasts for a 0.6% increase. A surge in industrial production tempered the negative sentiment from that report (actual 3.8% y/y in July vs previous 3.0% y/y). The soft GDP result was blamed on the uptick in COVID-19 cases and a worker shortage. A break above 1.3900 targets 1.4000.
USDJPY traded in a 109.71-109.98 range. Prices were supported by improved risk sentiment while gains were capped by the tick lower in US-10-year Treasury yields to 1.319% from 1.373% on Wednesday.
AUDUSD and NZDUSD rallied on the back of broad US dollar weakness, and both currency pairs are near the top of their overnight ranges in NY trading.
Chart of the Day- GBPUSD
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank
Today’s Bank of China Fix, 6.4566 Previous 6.4674
Shanghai Shenzhen CSI 300 rose 0.88%% to 5013.52
PBOC calls for lower financing costs for SME’s,
Chart: USDCNY 1 month
Source: Yahoo Finance