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Afghanistan chaos sparks market caution
Soft China data undermines global growth outlook
US opens soft consolidating losses from Friday
FX at a Glance:
USDCAD Snapshot Open 1.2546-50, Overnight Range 1.2514-1.2551, Previous close 1.2516
USDCAD rallied from the get-go in Asia climbing from Friday’s close to 1.2551 where it traded in early NY. The currency is underpinned by the slide in WTI oil prices from $68.23/barrel to $66.90 overnight but failed to react when crude prices climbed to $67.78 in NY.
USDCAD is tracking broad US dollar moves. FX risk sentiment tiptoed into negative territory due to the Taliban victory in Afghanistan, ongoing tensions between Iran, Saudi Arabia, and Israel, combined with weaker than expected Chinese data, and Fridays soft US consumer sentiment report.
USDCAD traders may get distracted by election headlines as Canada goes to the polls September 20, even though the results will not have an immediate impact on the currency.
Canada inflation will be the focus when July CPI data (forecast 3.4% y/y) is released Wednesday.
Technical view: The USDCAD technicals are bullish above 1.2510, looking for a break of 1.2605 to extend gains to 1.2730. The June uptrend line is intact above 1.2440. For today, USDCAD support is at 1.2530 and 1.2510. Resistance is at 1.2590 and 1.2605. Today’s range 1.2530-1.2610
Chart USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
The US dollar started the week on the defensive, a hangover from Friday’s retreat sparked by the weaker than expected Michigan Consumer Sentiment report. Weak Chinese Retail Sales and Industrial production exacerbated concerns, as did the lingering impact of coronavirus Delta-variant cases in many regions, and fears of another global outbreak. Geopolitics is another negative. Happy Monday.
Asia equity indexes closed in the red, and European bourses are posting losses across the board. S&P 500 futures are down 0.28%. Oil prices and gold are trading lower, while US 10-year futures are at 1.273%.
EURUSD consolidated Friday’s post-Michigan Consumer Sentiment gains in a tight 1.1779-1.1800 band. EURUSD gains are likely due to weak short EURUSD positions getting stopped out in thin summer trading. The ECB remains dovish while the Fed may turn hawkish. EURUSD technicals are modestly bullish above 1.1770, looking for a test of downtrend resistance at 1.1840.
GBPUSD tracked EURUSD moves but remains locked in a 1.3790-1.3890 range, ahead of a slew of UK economic reports this week. UK employment data is due Tuesday, followed by CPI, PPI, and Retail Price index Wednesday.
USDJPY dropped from 110.40 on Friday to 109.31 in early NY. The plunge is due to a mix of safe-haven demand, and expectations that Japanese coronavirus restrictions will be extended. A break below 109.20 will extend losses to 108.70.
AUDUSD suffered from the weak Chinese data, and increased COVID-19 restrictions, with AUDNZD selling adding to the downside pressure. AUDUSD fell from 0.7370 to 0.7332. NZDUSD is underpinned expectations the RBNZ raises interest rates by 0.25% on Wednesday, even though such a move is fully price in.
The US and Canadian economic calendars are empty.
FX open, high, low, previous close
Source: Saxo Bank
Today’s Bank of China Fix, 6.4717 Previous day 6.4799
Shanghai Shenzhen CSI 300 fell 0.1% to 494107
July Industrial Production 6.4% y/y (forecast 7.8% June 8.3%)
Retail Sales 8.5% y/y (forecast 11.5% June 12.1%
China crackdown continues-19 institutional investors punished tightening regulations around condo sales and tightening video game content dealing with history.