Picture: Wikipedia Otto Godfrey

November 16, 2021

  • US Retail Sales rose 1.7% m/m in October, compared to 1.2% forecast
  • UK data underpins GBPUSD
  • US dollar opens firm, GBP outperforms.

FX at a Glance:

Source: IFXA Ltd/RP

USDCAD Snapshot   Open 1.2529-33, Overnight Range 1.2495-1.2542, Previous close 1.2514

USDCAD snapped a mild downtrend that originated Friday when prices fell from 1.2603 to 1.2495 in Asia overnight. Prices were weighed down by broad US dollar selling pressures and by the lingering impact from comments by BoC Governor Tiff Macklem. He wrote a letter published in the UK Financial Times. He said “For the policy interest rate, our forward guidance has been clear that we will not raise interest rates until economic slack is absorbed. We are not there yet, but we are getting closer.” Although the gist of his remarks was not anything new, traders focused in on the part about “getting closer,” and sold USDCAD.,

He also said ““What our resolve does mean is that if we end up being wrong about the persistence of inflationary pressures and how much slack remains in the economy, we will adjust.”  Some traders saw that comment as a hint that Mr Macklem’s belief in “transitory” inflation was wavering.

WTI oil prices rebounded after touching $79.35/b yesterday in part because the Paris-based International Energy Agency (IEA) predicted higher world oil demand in 2021, despite lowering the 2022 forecast.

Canada Housing starts data is on tap.

Technical view:  The intraday USDCAD technicals flipped to modestly bullish with the move above 1.2510 while needing a decisive break above 1.2540 to extend gains to 1.2590.  Failure to take out 1.2540 suggests renewed downside pressure to the 1.2450-70 area. The uptrend from the October 27 low is intact above 1.2450 but prices need to break above 1.2600 to put the May 2020 downtrend line at 1.2850 in play.

For today, USDCAD support is at 1.2490 and 1.2470.  Resistance is 1.2550 and 1.2590. Today’s range 1.2490-1.2550

Chart USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

US Retail Sales rose a higher than expected 1.7% m/m in October, easily beating forecast for a 1.2% gain.  The US dollar waffled on the news and remains largely unchanged. However, US 10-year Treasury yields popped to 1.63% from 1.60% after the data.

The Biden/Jinping virtual meeting ended without upsetting markets, and there were no Twitter explosions.

Wall Street closed flat, but Asia equity traders were mildly positive. Hong Kong’s Hang Seng climbed 1.2%, and the Nikkei closed with a small gain. Australia’s ASX lost 0.67%. European bourses are in positive territory, while S&P 500 and DJIA futures are flat.

Bank of America’s monthly fund managers survey claims investors are overweight US stocks and in “risk-on” mode. Goldman Sachs analysts are predicting the S&P 500 will rise to 5,100 by the end of 2022.

EURUSD messed the bed yesterday after ECB President Christine Lagarde repeated that interest rates would remain unchanged until at least 2023. She said that higher rates would be harmful to the economy. EURUSD smashed below support at 1.1500 and dropped to 1.1352. A decisive break below 1.1450 suggests further losses to 1.1170.

GBPUSD rallied from 1.3407-to 1.3471, powered by better than expected data and speculation that the Bank of England will raise rates in December. The unemployment rate fell to 4.3% compared to 4.5% in September, which Chancellor of the Exchequer Rushi Sunak claims was evidence of the success of the government’s furlough scheme. Analysts believe today’s employment data was the last box BoE policymakers needed to tick before hiking rates. GBPUSD is in an uptrend while prices are above 1.3410.

USDJPY remained rangebound inside a 114.11-114.30 band with prices underpinned by firming 10-year Treasury yields which inched up to 1.60% today.

AUDUSD rallied from 0.7346 to 0.7367 then dropped to 0.7332 after the November 2 RBA meeting minutes were released. The minutes did not offer any surprises, saying the OCR rate would be unchanged until it meets its wages and inflation goals. However, Governor Phillip Lowe reiterated that the latest data and forecasts did not warrant a rate hike in 2022.

Chart of the Day:  EURUSD daily

Source: Yahoo Finance.com

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

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3924 Previous 6.3896

Shanghai Shenzhen CSI 300 rose 0.012% to 4,883.32

Xi Jinping and Joe Biden met. Mr Biden managed to suck and blow simultaneously. He said the US was committed to the “one China” policy but guided by the Taiwan Relations act.

China’s EU envoy: “China’s position on Taiwan will never change, there is only one China. Desire for the complete reunification of China and Taiwan is growing stronger. Peaceful reunification is the goal, prepared to take decisive measures

Chart: USDCNY 1 month

Source: Yahoo Finance