US debt ceiling crisis delayed
Putin promises more gas to Europe, but wants Nord Stream 2 approval
US dollar opens lower compared to Wednesday, but is close to unchanged from close
FX at a Glance:
USDCAD Snapshot Open 1.2582-86, Overnight Range 1.2566-1.2598, Previous close 1.2592
USDCAD prices are flip-flopping in time with the risk seeking-risk averse pendulum swings. Tik-sell, Tok-buy.
Progress on the debt ceiling negotiations may result in the US debt ceiling being extended until December, but as this was being written, no deal has been finalized. That means yesterday’s USDCAD losses may become today’s USDCAD gains (again) especially since the Yellen deadline isn’t until October 18. That’s still plenty of time for Congressional “busywork.”
USDCAD ignored the drop in oil and gas prices, in part because both remain at elevated levels.
USDCAD dropped from 1.2645 yesterday, closed at 1.2592, then traded in a 1.2566-1.2598 range overnight, as prices tracked broad US dollar, and major equity index movements.
BoC Governor Tiff Macklem speaks at a video conference before the Council on Foreign Relations, but he is not likely to offer any earth-shattering monetary policy comments.
Technical view: The intraday USDCAD technicals are bearish below 1.2630, looking for a break below the 1.2530-1.2550 support zone to negate the rising channel from June and shift the focus to a retest of 1.2380. A break above 1.2650 targets 1.2750.
For today, USDCAD support is at 1.2550and 1.2510. Resistance is 1.2630 and 1.2660. Today’s range 1.2550-1.2630
Chart USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
The global financial worldview turned from doom and gloom to sunshine and unicorns yesterday and overnight. Reports US politicians may agree to delay shutting down the government until December, combined with chatter that President Biden and China President Xi Jinping may have a virtual summit sparked another bout of “risk-on” trades.
Russia President Putin joined the party. He said Russia would possibly increase supply, but “gosh darnit,” it sure would be easier if the EU approves the Nord Stream 2 pipeline.
The US is considering releasing oil from its Strategic Petroleum Reserve to help ease oil price pressures.
Nevertheless, the news is mostly a distraction ahead of Friday’s nonfarm payrolls release. Once again, analysts are revising estimates higher following the forecast-beating ADP employment results.
The major Asia equity indexes followed Wall Street’s lead and closed higher, led by a 3.07% jump in the Hing Kong Hang Seng index. European bourses are trading higher, and S&P 500 futures point to a positive open on Wall Street. WTI oil is modestly lower, while Gold eked out a small gain. US 10-year Treasury yields are trading at 1.52%.
US weekly jobless claims fell 38,000 to 326,000 in the week ending October 1. The results were better than expected but failed to generate much interest in FX markets ahead of Friday’s US employment report.
EURUSD started the NY session, where it ended on Wednesday after drifting in a 1.1550-1.1570 range overnight. Weaker than expected German August Industrial Production data ( -4% vs July 1.3%) limited gains. The ECB minutes indicated that policymakers are less benign about rising inflation which could mean a less dovish than usual ECB outlook at the October 28 meeting.
GBPUSD caught a bid and rallied from an overnight low of 1.3572 to 1.3616 in early NY trading. Hawkish comments from Bank of England Chief Economist Huw Pill warned that” the balance of risks is currently shifting towards great concerns about the inflation outlook.”
USDJPY remains rangebound in a 111.24-111.52, with prices underpinned by steady US Treasury yields and due to expectations for a strong US NFP report on Friday.
AUDUSD and NZDUSD rallied on the back of improved risk sentiment with AUDUSD getting added support as COVID-19 restrictions begin to ease in some regions.
Chart of the Day- US Natural Gas-hourly
Chart: Saxo Bank
FX open, high, low, previous close
Chart: Saxo Bank
China Snapshot -Closed Golden Week holidays
Today’s Bank of China Fix, 6.4854,
Shanghai Shenzhen CSI 300 closed
Chart: USDCNH (offshore)
Source: Saxo Bank