November 6, 2024
- Trump trounces Harris-Greenback soars, Bonds crater.
- FOMC expected to cut rates by 25 bps Thursday
- US dollar soars on Trump win
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3893 overnight range 1.3822-1.3945 close 1.3826
USDCAD erased all of yesterday’s losses as Trump inched closer to victory and climbed to 1.3945 in NY. The Loonie is being pummeled by a virtual smorgasbord of woes, with the Trump victory soaring to the top of the list. Mr. Trump’s disdain for Justin Trudeau is widely known, and any hopes that Canada may avoid Trump’s new tariffs are toast. The jump in US Treasury yields has been described as bond traders expressing concerns over the prospect of a widening US deficit, which will also hamper the Fed’s ability to reduce interest rates aggressively. The FOMC may have something to say about that issue at tomorrow’s meeting, where a 25 bp rate cut is expected.
WTI oil retreated from 72.15 to 70.23 as a Trump victory may lead to slower global growth if he follows through with his latest tariff plans. In addition, Iran may be rethinking its plans to attack Israel out of fear of further antagonizing Trump, who is not a fan of that regime.
The fall-out from the US election and the countdown to Thursday’s FOMC meeting will drive FX direction today. So far, the greenback is bid.
There are no top-tier US or Canadian economic reports today.
USDCAD Technicals
The intraday USDCAD technicals bullish. The 1.3905 level is acting as a pivot between bullish above, targeting 1.3960 and bearish below, looking for a test of 1.3860.
The daily chart shows USDCAD is an uptrend channel from October 10, with 1.3820 as the floor and 1.3980 as the ceiling. A topside break risks at test of 1.4060 while a move below 1.3820 would lead to a test of 1.3740.
For today, USDCAD support is 1.3880 and 1.3840. Resistance is 1.3960 and 1.3990.
Today’s Range 1.3890-1.3990
Chart: USDCAD daily
F. Scott Fitzgerald Got it Wrong
The author claimed that “there are no second acts in American lives.” He never met Donald J. Trump, the former 45th President of the United States, who this morning officially became the 47th President. His victory proved that polls are best used for flying flags and not for predicting presidential election outcomes—at least, those that didn’t have respondents putting their money where their mouth was. The betting polls were accurate, the mainstream media polls, not so much. The House of Representatives is still up for grabs, and the winner may determine whether the expiring tax provisions are extended or not.
Global Markets Churn
The S&P 500 closed with a 1.23% gain yesterday, and the futures soared overnight, up 2.21% in early trading. Asian markets followed suit as Trump’s tax-cutting plans are seen as good for equities. Japan’s Topix climbed 1.94%, while Australia’s ASX 200 gained 0.83%. European bourses are higher, led by a 1.41% gain in the French CAC 40. Bond traders bailed and drove the US 10-year Treasury yield from 4.25% to 4.48% before it settled at 4.55% in early NY. Bond traders fear the inflationary impact of Trump’s massive tax cut plans.
Geopolitical Landscape Reformed
Uncle Sam is back, and he has a mean streak. The new Trump administration may force Iran’s Ayatollah Khamenei to rethink his plans to retaliate against Israel over fears of a US military response. Russian President Vladimir Putin may be smiling, as Trump could offer him a face-saving exit from Ukraine. China’s Xi Jinping’s plans to jump-start the domestic economy will be in tatters if Trump follows through on his plan to hike China import tariffs by 60–100%.
EURUSD
EURUSD got trashed and fell from 1.0938 to 1.0682 before rising to 1.0710 in NY. The spike in US Treasury yields and the risk of a new US/EU trade war weighed on the currency. The risk that US inflation heats up, forcing the Fed to slow or abandon plans to cut rates, is also weighing on the currency pair. German and Eurozone economic reports were slightly better than expected, but they were ignored. German factory orders rose 4.2% m/m in September (forecast 1.5%), while Service PMI rose to 51.6 from 51.4. Eurozone Services PMI is 51.6 compared to 51.2 in September. EURUSD technicals are bearish, with a break below 1.0670 targeting 1.0600.
GBPUSD
GBPUSD plunged from 1.3049 to 1.2841 and is sitting at 1.2857 in NY. The expectation that the Bank of England will cut rates by 25 bps tomorrow, combined with the surge in US Treasury yields and the rising risk of a US trade war, sparked the sell-off, while weaker-than-expected construction PMI (actual 54.3 vs. forecast 56 and previous 57.2) didn’t help sentiment. GBPUSD technicals suggest a retest of support at 1.2670 on a break of 1.2840.
USDJPY
USDJPY soared from 151.29 to 154.46. The rally was driven by the Trump victory, which led to a sharp spike in Treasury yields.
AUDUSD and NZDUSD
AUDUSD got walloped and fell to 0.6512 from 0.6645 because Trump’s plans to slap tariffs of up to 100% on Chinese imports may wreak havoc on the Chinese economy. That doesn’t bode well for Australia, as China is its largest trading partner. The RBA’s somewhat hawkish interest rate outlook revealed yesterday was forgotten. NZDUSD suffered the same fate, trading negatively in a 0.5912–0.6021 band. Soft New Zealand employment data did not help sentiment.
USDMXN
USDMXN rallied from 20.0940 to 20.8088 as the risk of higher tariffs comes closer to a reality. USDMXN has been underpinned by ongoing fears over the government’s plans for judicial reform, and another Trump administration adds another layer of risk to the currency and the country.
BTCUSD (Bitcoin)
Bitcoin reached a new record high, rising from 68,719 to 75,252. Take a bow, Mr. Trump. The incoming president campaigned as the pro-crypto candidate and promised to launch a strategic crypto stockpile.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.0993 (prev. 7.1016)
Shanghai Shenzhen CSI 300 fell 0.50% to 4024.28
USDCNY spike sharply, rising from 7.1051 to 7.1788 on the news of Trump’s victory and the likelihood of another US/China trade war. The steep rallyreportedly led to state banks selling USDCNY to slow the gains.
Chart: USDCNY and USDCNH
Source: Investing.com
