October 29, 2024

• Global equity markets in positive territory despite higher US Treasury yields.
• FX traders drifting toward the sidelines ahead of US election.
• US dollar opens with minor losses compared to Monday.

FX at a Glance

Source: IFXA/RP

USDCAD open 1.3880, overnight range 1.3876-1.3901,  close 1.3889

USDCAD is flitting around the 1.3900 area but unable to get any traction above that level. The BoC cut rates by 50 bps on October 23, and Governor Tiff Macklem will be justifying that move when he testifies before the House of Commons Standing Committee on Finance. He is hardly going to turn hawkish, so his comments are not likely to weigh on USDCAD. That leaves the US rate outlook, which at the moment is steady, with gradual rate cuts driving the greenback. But even that has taken a backseat to the US election, with the increased risk of a Trump win fueling USDCAD demand.

WTI oil prices consolidated recent losses in a 67.19-68.17 range. Israel’s rather tame retaliatory raid suggests Iran is motivated to avoid being embarrassed further, which suggests existing oil supplies will not be disrupted. The focus has shifted to a supply glut as OPEC plans to raise production while Chinese demand sputters.

There is plenty of US data on tap today, including October Consumer Confidence and the JOLTS Job Openings survey. In addition, the Redbook Index, Housing Price Index, and Case-Shiller Home Price Indices are also due. JOLTS data is likely to cause the biggest stir as the Fed looks for evidence of a weakening job market, but the US election is the main focus.  Unfortunately, it is likely to a worry for another day.

USDCAD Technicals

The intraday technicals are unchanged from Monday. They are bullish above 1.3870 and looking for a break above the 1.3910-1.3920 area to extend gains to 1.3950. A move below 1.3860 will lead to a re-test of 1.3830.

The weekly USDCAD chart highlights a 1.3100-1.3910 range that has contained price action since June 2023. The topside may contain gains until short CAD long US dollar speculative positions are reduced and RSI’s pull back from extreme levels.

For today, USDCAD support is 1.3860 and 1.3830. Resistance is 1.3920 and 1.3950.

Today’s Range 1.3860-1.3930

Chart: USDCAD weekly

Source: Investing.com

Earnings and Elections

Bloomberg reports that over 40% of the S&P 500 will report earnings this week which, in the proximity of next Tuesday’s presidential election, is motivating FX traders to stay on the sidelines. Equity traders, not so much. Alphabet (GOOGL) headlines the quarterly earnings releases today, and traders are expecting positive news. Asian equities closed higher, led by a 0.91% rise in Japan’s Topix with Australia’s ASX 200 gaining 0.34% and Hong Kong’s Hang Seng up 0.47%. European bourses are in the green, led by a 0.56% rise in the French CAC 40 index, while S&P 500 futures are flat. The US 10-year Treasury yield is 4.302% compared to 4.275%, where it closed yesterday.

EURUSD

EURUSD traded uneventfully in a 1.0805-1.0827 range overnight. Rising US 10-year Treasury yields contrast with the dovish outlook for the ECB, which is weighing on prices. ECB policymaker Luis de Guindos tried to push back against the dovish view by noting “substantial risks” around the inflation outlook. It didn’t help as traders are in park ahead of the US election.

GBPUSD

GBPUSD traded uneventfully in a 1.2959-1.2990 band, supported by bullish intraday technicals while prices are above 1.2960. Traders lack motivation ahead of Wednesday’s UK government budget, where tax hikes and spending cuts are on the agenda. The BRC shop price index was -0.8%, compared to the forecast for a -0.5% decline, but it was not a factor for traders.

USDJPY

USDJPY traded sideways in a 152.75-153.46 range after gapping higher at Monday’s open. The rise in the US 10-year Treasury yield to 4.31% from 4.26% overnight is supporting prices. Traders are contemplating the impact of the Japanese election, where the ruling LDP coalition lost its majority. Japan’s unemployment rate ticked down to 2.4% from 2.5% in August.

AUDUSD and NZDUSD

AUDUSD traded lower in a 0.6558-0.6586 range and is sitting in the middle of the band in NY. Support from last week’s comments by RBA Governor Michelle Bullock suggesting the need for restrictive rates for “a year or two” is offset by ongoing Chinese economic weakness. In addition, broad-based US dollar strength is weighing on the currency. NZDUSD traded sideways in a 0.5968-0.5990 range due to the US election sparking US dollar demand ahead of the RBNZ meeting on Thursday, where a 50 bp rate cut is expected.

USDMXN

USDMXN is consolidating last week’s gains in a 19.9753-20.0579 range. The increasing risk of another tariff-happy, wall-building Trump presidency, combined with higher US Treasury yields, is supporting prices.

BTCUSD (Bitcoin)

Bitcoin is trading near the top of its 68,292-71,477 range mainly due to hopes for a Trump victory next Tuesday. Donald Trump seemed to endorse digital assets during his campaign, which has empowered BTCUSD bulls.

FX high, low, open (as of 6:00 am ET)

Source: Investing.com

China Snapshot

PBoC fix:  7.1283  (prev. 7.1307)

Shanghai Shenzhen CSI 300 fell 1.00% to 3924.65

Chart: USDCNY and USDCNH

Source: Investing.com