FX markets are wobbly. A gust of risk aversion has blown through markets stemming from the 4.30% plunge in China’s Shanghai Shenzhen CSI 300 index and the steep rise in USDCNY on Monday, after the “Golden Week” holidays. The CSI was flat on Tuesday. Trader’s were unhappy with the decline in the IMF global growth forecast, from 3.9% to 3.7%, which was due to trade fears.
Japan, Canada, and the US return from a Monday holiday to a mostly empty economic calendar, ongoing concerns about the Italian budget, and angry rhetoric between China and the US.
EURUSD traded in a 1.1460-1.1525 range since Friday’s close. Dutch Central Bank (DNB) and ECB Governing Council member Klaas Knot said yesterday: “If our baseline scenario is confirmed in the next few months, we might think again about the pace of our normalisation and might not have to wait that long.” His remarks fell on deaf ears, and EURUSD traded with a negative bias. Stop losses were triggered in early New York trading today, and EURUSD dropped through 1.1460 to 1.1442.
GBPUSD is testing the bottom of its 1.3035-1.3130 Friday-Tuesday range. Traders appear to have forgotten about earlier comments from EU President Jean Claude Juncker suggesting that a Brexit deal was “doable” by November and instead focused on weaker than expected BrC Like-for-like Retail Sales data. (Sept. Actual; -0.2% vs forecast 0.1%, y/y)
USDJPY traders seem to have shrugged off high US Treasury yields and decided to worry about US/China trade woes and the sharply lower fix for the Chinese yuan. USDJPY plunged from 113.74 at Friday’s close to 112.80 yesterday and is hovering around 113.10 in early New York trading, today. AUDUSD and NZDUSD are at the bottom of their recent ranges.
USDCAD direction is at the mercy of broad US dollar moves and global risk sentiment. The positive sentiment from the new USMCA deal is fading, but oil prices are providing a bit of support. BoC Deputy Governor Carolyn Wilkins is speaking today, but her remarks will be of zero interest to financial markets
USDCAD Technical Outlook
The intraday USDCAD technicals are bullish above 1.2960 looking for a break of 1.3010 to extend gains to 1.3080 and then 1.3130. A move below 1.2960 targets 1.2920
Todays Range 1.2760-1.2860. Longer term, the downtrend from the end of June is intact while prices are below 1.3120.
Today’s Range 1.2950-1.3040