October 30, 2024
- BoC Governor plans more rate cuts.
- Upside surprise for ADP (actual 233,000 vs forecast 115,000)
- US dollar opens slightly softer-CAD underperforms.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3915, overnight range 1.3902-1.3937, close 1.3915
USDCAD traders ignored the broad-based, but relatively shallow, US dollar retreat yesterday and overnight after the JOLTS data suggested the US employment market wasn’t as robust as thought. Opps, too soon, today’s ADP data suggests the American job market is hale and hearty, thank you very much, and USDCAD popped to its session high.
Yesterday BoC Governor Tiff Macklem’s testimony to the House Finance Committee served to remind traders that Canadian rates are still heading lower, although he framed such a move as a cautious approach to avoid the resurgence of inflation.
The prospect of sharply lower Canadian rates compared to the US is powering USDCAD higher, but that trade is looking rather stale. Risk/Reward suggests selling USDCAD at current levels with a stop loss above 1.4010 for a retest of support in the 1.3740 area.
Oil prices continue to consolidate recent losses in a 67.31-68.19 range with the market focus shifting to the risk of rising crude supplies and weaker crude demand.
The Canadian data calendar is empty.
USDCAD Technicals
The intraday technicals are bullish above 1.3890 and looking for a decisive move above 1.3950 to extend gains to 1.4000. A move below 1.3890 argues for 1.3830-1.3930 consolidation.
Longer term, the steep uptrend line from September 25 is intact while prices are above 1.3740. However, the 1.3910-50 level has capped gains since June 2020, and it may do so again. In addition, MACD studies also suggest USDCAD is overbought.
For today, USDCAD support is 1.3890 and 1.3860. Resistance is 1.3950 and 1.3990.
Today’s Range 1.3860-1.3950
Chart: USDCAD daily
Source: Investing.com
Data Downpour
US GDP showed Q3 GDP expanding at 2.8% y/y, just a tad lighter than the 3.0% forecast and further evidence that the US economy is healthy. That news followed on the heels of a robust ADP employment report (actual 233,000 vs forecast 115,000 and September 143,000). The US dollar rallied across the board and the 10-year Treasury yield climbed to 4.273% from 4.23% at the open.
Quarterly earnings reports are another flashpoint with traders hoping that Microsoft and Meta earnings after the close will be like yesterday’s Alphabet results, and surprise to the upside.
All of the above is occurring against the backdrop of the US election, which is on the home stretch.
Gold is Shining
Gold traders are enjoying the confluence of events that have boosted XAUUSD from 2380.00 on August 9 to 2790.00 overnight, a 17.2% gain. It was a perfect storm of events that fueled the rally, including the outlook for lower Fed interest rates, geopolitical tensions in the Middle East and South China Sea, and uncertainty around the US election. Prices are in uncharted territory but are approaching extreme overbought territory
EURUSD
EURUSD rose from 1.0813 to 1.0859 following news that Germany avoided a recession when Q3 GDP rose 0.2% q/q instead of -0.1% as was expected. Eurozone Q3 GDP rose 0.4%, beating the forecast for a 0.2% gain. The results should not deter the ECB from cutting rates further because they suggest that policymakers are on the right track.
GBPUSD
GBPUSD traded in a 1.2982-1.3027 range with the low occurring in early NY. Traders are sidelined ahead of today’s UK budget release, the US GDP data, and quarterly earnings reports.
USDJPY
USDJPY is steady in a 152.80-153.47 range. Traders are sidelined due to the ongoing political drama following the latest election, which left the ruling coalition without a majority. The Bank of Japan monetary policy meeting is tomorrow.
AUDUSD and NZDUSD
AUDUSD is near the top of its 0.6537-0.6586 range following lower-than-expected inflation (actual 0.2% q/q, forecast 0.3%, previous 1.0%). The results could prompt the RBA to trim rates ahead of schedule. NZDUSD traded firmer in a 0.5950-0.6002 range with gains capped by expectations that the RBNZ will cut rates by 50 bps in November. Some analysts are suggesting that a 75 bp cut is in the cards.
USDMXN
USDMXN chopped about in a 20.0059-20.0790 range, with prices underpinned by escalating political uncertainty and the US election. Supreme Court Justice Alfredo Mena resigned due to the government’s pending judicial reforms. He said, “Today, I am facing a constitutional reform that reduces the mandate that I was sworn into.”
BTCUSD (Bitcoin)
Bitcoin is in rally mode, rising from 70,993 to 73,525, just a few hundred bucks below its all-time high of 73,737.94 last March. Donald Trump, take a bow. Mr. Trump is promising a supportive cryptocurrency regulatory regime, which is helping to fuel gains.FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1390 (prev. 7.1283)
Shanghai Shenzhen CSI 300 fell 0.090% to 3889.45
The Chinese economy got a taste of positive news after the city of Shenzhen (population 17.8 million) reported GDP rose 5.4% over the first three quarters, according to the SCMP.
China and the EU kicked off a trade war after the EU slapped tariffs on Chinese-made EV’s.
Chart: USDCNY and USDCNH
Source: Investing.com
