Source: Pixabay

November 14, 2022

  • Chinese yuan (CNY) soars
  • Biden meets Xi Jinping at Bali G-10
  • US dollar extends last week’s losses overnight

FX at a glance: one week-Nov 4 open to Nov 11 close

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3292-96, overnight range 1.3241-1.3304, close 1.3254

USDCAD surfed the bearish dollar wave with the price action determined solely by external forces. For the most part, domestic data and the Bank of Canada are sideshows in this circus while the Fed hogs the center ring.

GBPUSD traders are worried about the governments finances and how officials are going to address the large deficit. How long before bond traders take a close look at Canada? Justin Trudeau continues to spend tax-dollars like the piggybank is bottomless. He popped into Cambodia on the weekend and dropped $330 million in aid promises. Meanwhile, provinces are begging for health care funding.

Canada inflation data may give USDCAD some home grown direction on Wednesday

USDCAD Technical outlook

The USDCAD technicals are bearish while trading below 1.3450, a level guarded by resistance 1.3390 area. The downside is supported by previous resistance at 1.3210 and the 100-day moving average at 1.3230.  A break below the1.3210 zone suggests further losses to 1.3080 then 1.2980. A topside move above 1.3350 would suggest a short-term bottom is in place an argue for 1.3250-1.3450 consolidation

For today, USDCAD support is at 1.3240 and 1.3210.  Resistance is at 1.3330 and 1.3370.

Today’s range 1.3240-1.3330.

Chart: USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

The whispers that the 2022 US dollar rally has turned became a roar at the end of the week after long term technical trend lines were shattered. The plunging greenback snapped this years EURUSD and GBPUSD downtrend lines along with the USDJPY uptrend line.

Traders embraced the “US rates are peaking” view which was sparked by the cooler-than expected inflation data last Wednesday. Wall Street stocks surged, and the 10-year Treasury yield plunged. The only thing missing were munchkins dancing and singing “ding dong, inflation is dead.”

Positive risk sentiment got an added lift on news Chinese authorities unveiled a 16-point plan to boost the rea estate sector and that the Peoples Bank of China (PboC) fixed USDCNY 10-big figures lower to 7.0899 from 7.1907.

Fed Governor Christopher Waller disagreed with the rate peaking chatter. He said “These rates are going to stay — keep going up — and they’re going to stay high for a while until we see this inflation get down closer to our target. We’ve still got a ways to go. This isn’t ending in the next meeting or two.”

Meanwhile, the G-20 are meeting in Indonesia which is occurring against the backdrop of the 2022 UN Climate Change Conference.

 The Climate change delegates will issue dire warnings about global warming and all the things the “little people” need to do to save the planet but delegates flying around the globe to conferences rather than using Zoom or Skype won’t be one of the recommendations.

President Joe Biden meets with Chinese emperor Xi Jinping today with analysts hoping for an improvement in US/China relations. Jinping is expected to demand the US mind its own business about Taiwan and to ease up on technology restrictions. Biden hopes to remember what it is he needs to say.

EURUSD is consolidating Friday’s gains in a 1.0276-1.0366 range. The single currency is supported by talk that US rates are close to peaking while ECB officials stress the need for higher Euro area interest rates. ECB Governing Council member Fabio Panetta advocates tightening as long as inflation expectations remain anchored but cautioned against overtightening.

The EURUSD technicals are bullish supported by the break above the 100-day moving average at 1.0028 which sets the stage for a test of the 200-day ma at 1.0440.

GBPUSD rallied on the back of broad US dollar weakness, trading in a 1.1745-1.1847 range. Traders are cautious ahead of Thursday’s UK budget. The UK press is rife with articles about the governments need to “live within its means” and fear the bond market reaction to unfunded spending.

The GBPUSD technicals are bullish following the break above the 100-day ma at 1.1664.  The subsequent breach of resistance at 1.1770 targets 1.2000.

USDJPY dropped below its 100-day ma and traded in a 138.54-140.80 range. Prices are weighed down by the steep drop in the US 10-year Treasury yield which fell from 4.10% on Wednesday to 3.811% Friday, before bouncing to 3.89% today.

AUDUSD traded in a 0.6665-0.6720 range overnight. Prices are underpinned by China’s latest stimulus announcement and hopes China eases covid restrictions.

Fed Vice Chair Lael Brainard speaks at 8:30 am PT.

FX open, high, low, previous close as of 6:00 am ET

Source: Saxo Bank

China Snapshot

Today’s Bank of China Fix: 7.0899, previous 7.1907 (strongest fix since September 27

Shanghai Shenzhen CSI 300 rose 0.15% to 3794.02

Authorities issue 16-point plan to shore up real estate sector. Measures include credit support for debt-laden housing developers and financial support to ensure completion and handover of projects to buyers.

Nomura economists believe the new measures demonstrates Beijing’s willingness to reverse almost all of its financial tightening measures.

Chart: USDCNY 1 month

Source: Bloomberg