Photo: Frank Vanegas

October 26, 2021

Wall Street gains and US/China talks fuel positive risk sentiment

EU/UK resume Brexit talks

US dollar opens mixed compared to yesterday

FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2369-73, Overnight Range 1.2373-1.2392, Previous close 1.2384

USDCAD was adrift overnight. Selling pressure from the slide in US 10-year treasury yields to 1.622% today, from 1.669% yesterday was offset by the drop in WTI oil prices from $85.35/barrel to $83.27/b today. Russia’s oil minister is in favour of leaving the oil production increase schedule unchanged, which may limit WTI downside and help to cap USDCAD gains.

Markets are not expecting much from tomorrows BoC monetary policy meeting, although it will be interesting to see how Governor Macklem spins the inflation outlook.

The Trudeau government is expected to announce a new cabinet today, which will have zero impact on FX trading as it is akin to a clown car fire drill.

Source: YouTube

Technical view:  The intraday USDCAD technicals are modestly bullish above 1.2350, looking for a break above 1.2410 to extend gains to 1.2450. Even if that move occurs, it will just be a counter-trend rally, while prices are below 1.2450.  A break below 1.2280 targets 1.2240.

For today, USDCAD support is at 1.2350 and 1.2310.  Resistance is 1.2390 and 1.2450. Today’s range 1.2330-1.2390

Chart USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

Equity traders are in a good mood. Tesla (TSLA: Nasdaq) became a trillion-dollar company and then added to that number overnight, which is an extraordinary valuation for a company that only delivered 627,350 vehicles in H1 2021. In contrast, VW Group delivered 4,978,000 vehicles in the same period, and its market cap is a mere $149.3 billion.

News Hertz agreed to pay full price for 100,000 Tesla’s helped give Asia equities indexes a lift, except for those in China, which suffered from more developer woes. European bourses are higher, led by a 1.0% gain in the German Dax index. S&P 500 and DJIA futures have risen 0.39% and 0.30%, respectively. Gold and oil prices retreated, as did US Treasury yields.

Global risk sentiment got a positive nudge after news that Treasury Secretary Yellen and Chinese Deputy Premier Liu He spoke about strengthening bilateral coordination and macroeconomic policies.

EURUSD drifted aimlessly in a narrow 1.1595-1.1619 range, with traders cautious ahead of Thursday’s ECB meeting. The ECB is expected to stick to its dovish outlook and announce that PEPP will end on schedule in March.  The intraday EURUSD technicals are bullish above 1.1590.  The Euro area data calendar was empty.

GBPUSD has a mild bid after prices rose from 1.3758 to 1.3823 in early NY trading. Prices continue to be supported by expectations that the BoE hikes rates next week, but enthusiasm is tempered ahead of the UK budget due Wednesday.  A break above 1.3850 puts 1.3900 in play.

USDJPY traded in a 113.70-114.07 range with a mild upside bias while prices are above 113.50. Prices continue to track 10-year Treasury yields.

AUDUSD is trading near the top of its overnight 0.7486-0.7516. with prices underpinned by firm commodity prices and the improved risk tone.

Today US data includes Consumer Confidence and the  S&P Case Shiller Home Price index.

Chart of the Day: Tesla-after hour trading

Source:  Google Finance

FX open, high, low, previous close

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3890, Previous 6.3924

Shanghai Shenzhen CSI 300 fell 0.33%% to 4,963.10

Another China property developer defaults. Modern Land says it missed payment due to liquidity issues.

Chart: USDCNY 1 month

Source: Yahoo Finance