October 9, 2024
- RBNZ cuts rates by 50 bps, as expected
- China may announce massive fiscal stimulus plan on Saturday.
- US dollar drifting inside well defined ranges, Yen underperforms.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3666, overnight range 1.3643-1.3679, previous close 1.3648
USDCAD is slowly grinding higher despite the 10-year CAD/US interest rate spread widening out to -79.1 bps (in Canada’s favour). The gains have occurred even as the odds of a odds of a 50 bp Bank of Canada rate cut on October 23 have been downgraded, although they are still over 50%. Friday’s jobs report and the Business Outlook survey may force a rethink.
USDCAD may also be bid due to speculation of a successful Alimentation Couche-Tard’s US dollar $47 billion bid for Japan’s Seven &I Holdings. That could result in a chunky sale of Canadian dollars to raise the funds.
WTI oil prices are trading in a 73.09-74.42 range. The weekly API data showed US crude stocks rose by 10.9 million barrels last week.
USDCAD technicals
The intraday USDCAD are bullish above 1.3640 and looking for a break above 1.3690 to extend gains to 1.3630 A break below 1.3640 targets 1.3580.
The longer term USDCAD technicals are unchanged from yesterday. They are bullish with the move above 1.3610 reverting to support. However, Bollinger band and RSI studies suggest USDCAD is approaching extreme overbought levels which suggests prices may need to consolidate in a 1.3610-1.3750 range.
For today, USDCAD support is at 1.3640 and 1.3610. Resistance is at 1.3690 and 1.3730.
Today’s Range 1.3640-1.3740
Chart: USDCAD daily
Source: Investing.com
Google Search Reveals Google May Be Broken Up
The US Department of Justice (DOJ) googled “companies with monopolies” and Alphabet topped the list. The DOJ claims that Google Ad Manager has 90% of the US publish ad market, and a judge has already ruled Google violated antitrust laws. When the DOJ ordered Standard Oil to break up in 1911, it spawned 34 companies. Get ready for “Gaggle, Giggle, and Gobble” in the search engine field.
Bond Traders Recalibrate
Last week’s surprisingly strong nonfarm payrolls data meant that the Fed wasn’t the only one recalibrating rates. Bond traders appear to have decided that US rates are not going to fall nearly as fast or as far as previously anticipated. Furthermore, the strength of the employment market, if supported by a strong weekly jobless claims report tomorrow, implies that consumers may revive inflation.
FOMC Minutes
The Fed cut rates by 50 bps on September 18. What else can the minutes reveal? Not much. The report has already gone mouldy as a series of Fed speakers since then have not only justified the cut, but also provided insight into the next moves, which will be 25 bps at most.
EURUSD
EURUSD is adrift in a 1.0951-1.0982 range, with the lack of data sidelining traders. No one cared that Germany’s trade surplus surged to €22.5 billion from €16.8 billion.
GBPUSD
GBPUSD traded sideways in a 1.3056-1.3106 range. The US and UK economic calendars are devoid of actionable data, and even this afternoon’s FOMC minutes release is unlikely to spark much interest ahead of Thursday’s US inflation and weekly jobless claims data, and Friday’s UK data dump.
USDJPY
USDJPY traded firmly in a 148.01-148.74 range with prices at 148.66 in NY. The steady-to-firm US 10-year Treasury yield at 4.02% contrasts with speculation that the BoJ will not raise interest rates in 2024, and even a January hike is open to debate. The daily chart suggests that there is not much resistance between 149.70 and 153.70. Japan’s new Prime Minister called a snap election for October 27.
AUDUSD and NZDUSD
AUDUSD traded choppily but with a bit of a bid in a 0.6723-0.6762 range. Prices were underpinned by AUDNZD demand after the RBNZ cut rates and news of a potential Chinese fiscal stimulus announcement on Saturday. Australian consumer inflation expectations data is due tomorrow.
NZDUSD got spanked, falling from 0.6144 to 0.6076 after the RBNZ cut its OCR rate by 50 bps to 4.75. The rate cut was expected, but the forward guidance was on the dovish side, which to some analysts meant another 50 bp rate cut is possible at the November 26 meeting.
USDMXN
USDMXN is awaiting fresh direction in a 19.3272-19.4010 range. That will come from Mexican inflation data today (forecast 4.62%, August 4.99%) and the US CPI data on Thursday. For now, the October 4 uptrend is converging on the October 1 downtrend (4-hour chart). A break above 19.4100 targets 19.5700, while a break below 19.27 puts 19.1100 in play.
Source: Investing.com
China Snapshot
PBoC fix: 7.0568 (prev. 7.0709)
Shanghai Shenzhen CSI 300 fell 7.04% to 3955.98
Chinese investors are disappointed that Xi Jinping didn’t follow-up the monetary stimulus with jumbo fiscal stimulus and took their frustrations out on stocks. The Finance Ministry got the message and is holding a press briefing on fiscal policy and economic development on October 12.
Chart: USDCNY and USDCNH
Source: Investing.com
