Photo: IFXA

September 1, 2021

Eurozone data mixed, EURUSD soft

ADP  Employment below forecast

US dollar recoups yesterday’s losses

FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2600-04, Overnight Range 1.2585-1.2635, Previous close 1.2615

USDCAD ebbs and flows with shifting risk sentiment, oil prices and lingering month end action. USDCAD traded in a 1.2568-1.2650 range yesterday and 1.2585-1.2685 range overnight and is trading at session lows in NY.

Traders have forgotten their unhappiness with yesterday’s sharply weaker than expected June GDP data (actual -1.1% q/q vs forecast 2.5%) and the “flash” estimate for a soft start to Q3.  Instead, they are focused on the improved risk tone, supported by today’s ADP report.

Technical view:  The intraday USDCAD technicals are bearish below 1.2630 looking for a break below 1.2560 to extend losses, and target 1.2300.  A break above 1.2630 suggests a retest of 1.2700.  Longer term, the uptrend line from the 1.2020 low on the weekly chart is intact while prices are above 1.2550.  For today, support is at 1.2560 and 1.2520.  Resistance is 1.2630and 1.2670. Today’s range 1.2560-1.2640.

Chart USDCAD hourly-three weeks

Source: Saxo Bank

G-10 FX recap and outlook

Twenty years after the US invaded Afghanistan on a “nation-building “exercise, President Joe Biden declares “job done.”  Afghani’s say “huh? What has changed?”

Chinese officials may have noticed the damage their ham-fisted regulatory actions did to domestic equity markets and confidence. Despite weaker than expected Caixin August Manufacturing PMI data (actual 49.2 vs 50.3 in July), which suggests their economy is contracting, the Shanghai Shenzhen CSI 300 index surged 1.33%.   A cynic suggests sneaky government action may be behind the equity gains.

US ADP employment rose only 374,000 in August.  Analysts were expecting an increase of 613,000, and say the weaker than expected results are due to the resurgence of the COVID-19 delta variant.  They also pose downside risks to Friday’s NFP forecast of 750,000.

Weaker than expected employment data favours Fed Chair Powell’s view that it is too early to remove stimulus.

WTI oil prices were underpinned after the American Petroleum Institute reported crude inventories fell by 4.045 million barrels as of August 27.  Opec and friends are meeting in Vienna and are expected to announce another increase in crude production.

EURUSD rejected a move above 1.1850 yesterday and retreated to 1.1795 overnight.  Prices have risen to 1.1830 in early NY trading, supported by a mild improvement in risk sentiment and talk that the ECB may make a tapering announcement at next week’s meeting.  Eurozone July unemployment dipped to 7.6% m/m which was offset by June’s results being revised higher to 7.8%.  Eurozone Manufacturing PMI was a tad softer than expected, but it was due to supply issues.  The EURUSD technicals are bullish above 1.1770.

GBPUSD traded in a 1.3733-1.3765 range and is near the top in NY trading. Prices got a bit of support from PMI data. “The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) fell to a five-month low of 60.3, a tick below July’s 60.4 but above the long-run average of 51.9. slightly better than expected UK Manufacturing PMI, which rose to 60.3 from 60.1”. The Markit PMI statement said, “Robust confidence among manufacturers supported further job creation during August.”  GBPUSD needs to break above 1.3800 or risk further 1.3650-1.3750 consolidation.

USDJPY rallied from 110.00 to 110.41 with gains underpinned by a rebound in US 10-year Treasury yields to 1.321% from 1.277% yesterday. Japanese Prime Minister Suga is reportedly preparing an economic package to go along with another budget.

AUDUSD rallied from 0.7310 to 0.7348 on improved risk sentiment, and after Australia, GDP rose 9,6% y/y compared to the forecast of 9.2% y/y.  The news is surprising due to the recent COVID outbreak in the country.

US ISM Manufacturing PMI (forecast 58.6), and ISM Manufacturing Employment (forecast 51.4) is ahead.

Chart of the Day-Gold

Source:  Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank

China Snapshot

Today’s Bank of China Fix, 6.4680     Previous day 6.4679                        

Shanghai Shenzhen CSI 300 rose 1.33% to 4869.46

Caixin August Manufacturing PMI 49.2 (forecast 50.2, July 50.4)

Chart: USDCNY 1 month

Source: Yahoo Finance