Picture: Pixabay/IFXA Ltd

September 22, 2021

  • Markets marketing time until Fed statement, Powell press conference
  • Evergrande Group makes interest payment soothing global contagion fears
  • US dollar opens mixed; commodity currency bloc underperforms

FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2789-93 Overnight Range 1.2772-1.2825 Previous close 1.2812

USDCAD closed with a bid tone at 1.2812 Tuesday, rising in concert with the sliding S&P500 index. The rally reversed in Asia after reports that Evergrande Group made a domestic bond interest payment. Prices consolidated inside a 1.2772-1.2804 range into the NY open.

The price action is just noise ahead of today’s FOMC and a new Summary of Economic projections. If the meeting result is hawkish, USDCAD will revisit Monday’s 1.2894 peak. A dovish outcome, which is the expected result, will leave USDCAD in a 1.2650-1.2850 band.

USDCAD may see some volatility around the 10:00 am option expiry window as there are chunky strikes rolling off in the 1.2750-1.2775 area.

Technical view:  The intraday USDCAD technicals are bearish bullish above 1.2760, looking for a break above1.2820 to extend gains to 1.2870.  A move below 1.2760 targets 1.2690.

Longer term, USDCAD rallied from 1.3210 in February 2020 at the onset of the coronavirus pandemic, spiking to 1.4050 by March 18, 2020. Prices retreated and bounced off of the 1.3800-50 area until vaccinations June 2020 when massive amounts of central bank and government stimulus began a USDCAD downtrend that continues while prices are below 1.2910.  A decisive break below 1.2610 puts 1.2270 in play.

For today, support is at 1.2760 and 1.2630.  Resistance is 1.2810 and 1.2850. Today’s range 1.2730-1.2830.

Chart USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

“There’s a kind of a hush all over the world tonight.”  Those words aptly describe FX markets overnight. Who knew the Nostradamus-like foresight of some 1960’s British pop bands?

News that China’s Evergrande Group made an interest payment on a domestic bond helped soothe contagion fears trashing global bonds and stock markets. Those markets were already trading cautiously ahead of today’s FOMC meeting.

Chinese markets reopened after a four-day weekend. The Hong Kong Hang Seng Index posted a 0.51% gain while Japan’s Nikkei 225 index lost 0.67%. European bourses are trading higher, led by a 1.15% rise in the UK FTSE100 index. Wall Street futures are in the green, WTI oil rose 1.65% while gold is flat. US 10-year Treasury yields are 1.34%.

The FOMC meeting is likely to disappoint those expecting a tapering announcement, and it is not because FOMC members are too busy trading for their own accounts to decide. It’s because the cabal of insider traders will defer to Fed Chair Jerome Powell’s outlook. On August 27, Mr. Powell said substantial slack remained in the labor market, and it is unlikely the slack has disappeared. However, a more aggressive dot-plot forecast will roil markets.

EURUSD traded sideways in a 1.1718-1.1737 band. There were not any top-tier Euro area economic reports. Germany’s IFO institute trimmed German GDP growth in 2021 to 2.5% from 3.3% while raising their 2022 forecast to 5.1% from 4.3%. The intraday EURUSD technicals are bearish below 1.1760, looking for a break of 1.1700 to target 1.1600.

GBPUSD remains on the defensive after peaking at 1.3910 September 14 and consolidated overnight in a 1.3632-1.3677 range. Rising natural gas prices are a GBPUSD negative as traders await today’s FOMC decision.

USDJPY climbed steadily overnight, rising from 109.13 to 109.60, supported by US 10-year Treasury yields, which climbed to 1.341% from 1.317%. The Bank of Japan surprised no one when it left rates and stimulus unchanged. The BoJ predicted the economy would rebound as COVID-19 dissipates.

AUDUSD and NZDUSD were rangebound and tracking broad US dollar sentiment.

There are no top-tier economic releases from Canada and the US today.

Chart of the Day- FOMC Dot-Plot June 16, 2021

Chart: FOMC

FX open, high, low, previous close

Source: Saxo Bank

China Snapshot -Closed

Today’s Bank of China Fix, 6.4693,   Previous 6.4527

Shanghai Shenzhen CSI 300 fell 0.77% to 4821.77

Evergrande Group (3333.HK) said it negotiated a deal to make interest payments on a domestic bond, soothing, but not alleviating fears of global contagion.

In addition, Evergrande did not mention payments for other bonds due Thursday.

PBoC injects CNY 90 billion into market.

Chart: USDCNY 5 day

 Source: Yahoo Finance