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November 27, 2023

  • VIX index at 2020 low
  • Global equities trading with small negative bias.
  • US dollar opens lower compared to Friday, but higher from the close.

FX at a Glance

Source: IFXA/RP

USDCAD Snapshot: open 1.3636-40, overnight range 1.3622-1.3662, close 1.3595

USDCAD plunged Friday, falling from 1.3715 to 1.3595 without any domestic catalysts behind the drop. Perhaps it was a Black Friday special. The move was somewhat dubious.

Friday was hardly one of the most liquid days, with most of the US enjoying an extended long weekend. Canadian Retail sales numbers were nothing to write home about. The gains were due to increased auto sales, which is a usual phenomenon in September as dealers make room for 2024 models.

Bank of Canada Governor Tiff Macklem’s comments earlier last week were dovish and hardly a reason to buy Canadian dollars.

The USDCAD slide was exacerbated when stop-loss selling occurred with the break below 1.3640.

WTI oil prices are trading with a negative bias and are in the middle of the overnight $74.07-$75.70 range. Traders are awaiting the results of this week’s OPEC meeting but do not seem too concerned about the possibility of new production cuts.

USDCAD Technicals:

The intraday USDCAD are bearish while prices are below 1.3660 with a move below the overnight low of 1.3620 setting the stage for a test of the uptrend line from mid-July at 1.3580. A move above 1.3660 suggests further gains to 1.3780 and imply further 1.3600-1.3800 consolidation.

For today, USDCAD support at 1.3610 and 1.3580.  Resistance is at 1.3660-1.3680.  Today’s range 1.3610-1.3680

Chart: USDCAD daily


G-10 FX recap

There may be Fear and Loathing in Las Vegas, but there is no fear on Wall Street. The VIX index dropped to 12.46 on Friday, a low last seen in 2020. The Chicago Board Options Exchange (CBOE) Volatility Index, or “the VIX,” reflects traders’ expectations of 30-day volatility of the US stock market, using S&P 500 option prices. A high reading means traders are scared while a low reading means “no worries, be happy.”

The decline is a bit of a head-scratcher considering the wars in Gaza and Ukraine. Chinese warships reportedly chased away a US warship from international waters in the South China Sea. Japan is playing war games with a mock invasion of an island, which some see as a practice run to seize the disputed Kuril islands from Russia.

The US dollar recouped some of Friday’s losses as the US 10-year Treasury yield scraped higher. Asian equity indexes closed in the red with the ASX 200 down 0.75% and Japan’s Nikkei 225 index down 0.53%. European bourses are lower with the UK FTSE 100 index falling 0.46% and S&P 500 futures down 0.10%. Traders took a shine to gold and lifted prices to $2012.85 from Friday’s close of $2000.82.

EURUSD traded inside Friday’s range, in a 1.0926-1.0960 band with upside momentum thwarted by renewed US dollar demand. The German government is trying to suspend the country’s “debt brake” after the Constitutional Court ruled repurposing funds to finance a green agenda was illegal. Papiermark, anyone? The intraday EURUSD technicals are in an uptrend channel between 1.0930 and 1.0980.

GBPUSD traded in a 1.2596-1.2628 range supported by a favorable reception of last week’s Autumn Statement and predictions for a slower pace of Bank of England rate cuts. The House of Lords is demonstrating some wisdom. The UK Telegraph writes, “Its Economic Affairs Committee (EAC) said the Bank of England risks becoming politicized because policymakers have too many priorities, including monitoring climate change risk. The group warned of a “democratic deficit” because a small number of unelected officials were responsible for significant decisions without enough scrutiny.”

USDJPY traded sideways in a 148.78-149.68 range with price action mirroring US Treasury yield moves.

AUDUSD is at the top of its 0.6566-0.6608 range, garnering lingering support from Friday’s US dollar sell-off and recent hawkish comments by RBA Governor Michel Bullock.

NZDUSD tracked AUDUSD higher in a 0.6061-0.6098 range. The Reserve Bank of New Zealand monetary policy meeting is Wednesday. No change in rates is expected.

US New Home Sales for October and the November Dallas Fed Manufacturing Business Index are ahead.

FX high, low, open (as of 6:28 am ET)


China Snapshot

PBoC fix: today 7.1159, expected 7.1461, previous 7.1151

Shanghai Shenzhen CSI 300 fell 0.74% to 3511.94.

Stocks slumped because profits at Industrial companies rose just 2.7% y/y in October which analysts suggest, is more evidence that China’s economic recovery is fragile.

Source:  Bloomberg.

­Chart: USDCNY (onshore) vs USDCNH (offshore)