Photo: Metallica

November 3, 2021

  • FOMC to announce the start of QE tapering
  • Biden blames Opec for fueling inflation
  • US dollar opens steady, consolidating recent gains.

FX at a Glance:

Source: IFXA Ltd/RP

USDCAD Snapshot   Open 1.2412-16, Overnight Range 1.2407-1.2422, Previous close 1.2409

USDCAD drifted higher yesterday and continued the trend overnight, but the rally stalled just before resistance in the 1.2430-50 area. USDCAD gains were due to position adjustments ahead of the FOMC meeting and because of the 3.0% drop in WTI oil prices since Monday.

Oil prices saw renewed selling after the weekly API oil data showed inventories increased 3.59 million barrels last week. President Biden may have encouraged selling after he blamed Opec’s refusal to increase production for causing oil and gas prices to soar. However, it is unclear as to why Opec and Russia would bow to Biden’s wishes.

USDCAD direction is dependent upon whether the FOMC is more, or less hawkish then expected.

 Technical view:  The intraday USDCAD technicals are bullish. The break above the September downtrend line sets the stage for a move above 1.2450 which would extend gains to the 1.2500 area, but only a decisive breach above 1.2800 would negate the downtrend from March 2020. A move below 1.2380 returns the focus to 1.2250.

For today, USDCAD support is at 1.2380 and 1.2340.  Resistance is 1.2450 and 1.2500. Today’s range 1.2360-1.2450

Chart USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

It is a typical morning ahead of an FOMC meeting. Trading is subdued, and there is all manner of speculation about what the FOMC will say and do. To that end, an announcement that the Fed will begin tapering QE purchases is a given. The size, and duration, and what that means to interest rates are all up in the air.

The UN Climate Change Conference in Glasgow is resulting in a panacea of promises, and multi-billion dollar pledges, by virtue-signalling billionaires and world leaders. Unfortunately, the gathering is all for naught as the worst-polluting nations, China, and Russia, couldn’t be bothered to attend. Global weather patterns dictate the distribution of carbon emissions across the planet, and that movement is not halted by slapping a “pollution tax” on Canadians.

Asia equities ignored the record close on Wall Street, and the major indexes closed with losses except for Australia’s ASX 200, which rallied 0.93% as domestic yields retreated. European bourses are flat to lower as are Wall Street futures. Gold and oil are down and the US 10-year Treasury yield is 1.534%.

EURUSD drifted in a 1.1576-11596 band. ECB President Christine Lagarde didn’t give the single currency any support as she continued to push back against speculation of a 2022 ECB rate hike.  She said” “In our forward guidance on interest rates, we have clearly articulated the three conditions that need to be satisfied before rates will start to rise. Despite the current inflation surge, the outlook for inflation over the medium term remains subdued, and thus these three conditions are very unlikely to be satisfied next year.”

GBPUSD consolidated recent losses in a 1.3609-1.3634 range, with the floor underpinned by better than expected Nationwide Housing Price data and talk that the Bank of England will raise interest rates at Thursday’s meeting. BoE Governor Andrew Baily and Chief Economist Huw Pill gave strong hints that a rate hike was in the cards at this meeting. Meanwhile, the ongoing UK/EU and UK/France dispute is limiting GBPUSD gains.

USDJPY traded quietly in a 113.76-114.00 range with liquidity reduced due to a Japanese National holiday. Softer US Treasury yields, and modestly negative risk sentiment weighed on prices.

AUDUSD and NZDUSD are near the top of their respective overnight ranges. NZDUSD received a bit of support from a slightly stronger than expected employment report. The Unemployment Rate fell to 3.4% q/q from 4.0% q/q.

Today’s US data includes ADP Employment, ISM Services PMI, and Factory orders.

Chart of the Day:  

Picture of how carbon dioxide moves throughout the earth

Source:  NASA

FX open, high, low, previous close

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.4079, Previous 6.4009

Shanghai Shenzhen CSI 300 fell 0.39% to 4,821.11

Caixin Services PMI 53.8 vs forecast 50.7 and September 53.4

China stocks weighed down by latest COVID outbreak, described as most widespread since Wuhan.

Yahoo pulls out of China do to “challenging business and legal environment in the country.

European Parliament arrives in Taiwan much to China’s chagrin

Biden says it was a big mistake for China to skip COP26.

Chart: USDCNY 1 month

Source: Yahoo Finance