- US 10-year Treasury yield climbs to 4.321%, highest since 2008
- Canada Retail Sales rise 0.7% m/m, higher than expected
- US dollar starts session on mixed note
FX at a glance-one week view
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.3712-16, overnight range 1.3766-1.3853, close 1.3764
USDCAD opened in NY today right where it opened on Monday while the British pound, Euro, and Swiss franc bear the brunt of the fall-out from the UK political chaos and bond market volatility. USDCAD has since rallied then retreated, in tandem with S&P 500 futures.
Canada Retail Sales rose 0.7% m/m in August, compared to the upwardly revised -2.2% m/m in July. Core Retail Sales (ex-autos, gas and auto parts) rose 0.9%, better than the 0.4% m/m expected.
USDCAD traders didn’t care. They took note of the falling US equity futures and the increase in the 10-year US Treasury yield and bought USDCAD.
The slightly hotter-than expected Canadian inflation report which strongly suggests the Bank of Canada hikes rates 75 bps next week hasn’t filtered into the bond market. The yield on the Government of Canada 10-year bond is 59.2 bps lower than the US 10-year Treasury yield, as of 6:15 am ET. The negative spread is underpinning USDCAD.
Source: World government bonds
WTI oil prices are consolidating yesterday’s losses in a $83.18/b-$85.16 range. Prices are weighed down by ongoing fears of a global economic slowdown, and wide-spread US dollar strength. Prices are getting a bit of support after Saudi Arabia and China talk about cooperating to maintain stability.
USDCAD Technical outlook
USDCAD chopped about in a 1.3660-1.3880 range this week with prices tracking the ups and downs of the S&P 500 index and the US 10-year Treasury yield. The intraday technicals turned bearish with break of 1.3770 and are targeting 1.3710 then 1.3660. A topside break targets 1.4000 where plenty of offers reside.
For today, USDCAD support is at 1.3710 and 1.3660. Resistance is at 1.3830 and 1.3880. Today’s range: 1.3730-1.3830
Chart: USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
It has been an uneventful overnight session. No Prime Ministers or Presidents have lost their jobs while one wannabe emperor polishes his tiara (he’s not quite sure about the headwear).
Traders are largely ignoring the war in Ukraine and so far, only have passing interest in reports the US government is contemplating a security review of Elon Musk holdings, including Twitter and Starlink.
Asia equity indexes closed in negative territory with Australia’s ASX 200 losing 0.80% and the Nikkei 225 sliding 0.42%. The German Dax is down 1.56%, leading European bourses lower while S&P 500 futures are down 0.62%.
Global stock markets are feeling the pressure as the US 10-year Treasury yield grinds higher, climbing to 4.291% from yesterday’s close of 4.219%.
EURUSD is in the middle of its 0.9706-0.9801 range. Traders are very aware of a string of chunky option strikes expiring at 10:00 am ET. $2.95 billion expire between 0.9700 and 0.9725, and $3.1 billion between 0.9745 and 0.9800. Traders are also cautious ahead of next week’s ECB monetary policy meeting.
GBPUSD traded with a negative bias and dropped from 1.1236 to 1.1062 due to a mix of broad US dollar demand and political uncertainty in the UK. UK data didn’t do the currency any favours, with Retail Sales dropping 1.4% m/m in September compared to expectations for just a 0.5% decline.
USDJPY’s second attempt above 150.00 went through the level like a hot knife through butter and then shredded the 151.00 area. USDJPY traded in a 150.07-151.94 range underpinned by the firm US 10-year Treasury yield.
AUDUSD and NZDUSD were range bound but poised to end the week with small gains.
There are no top tier US economic reports today.
FX open, high, low, previous close as of 6:00 am ET
Source: Saxo Bank
Today’s Bank of China Fix: 7.1186, previous 7.1188
Shanghai Shenzhen CSI 300 fell 0.32% to 3742.89
Reuters reports China state-owned banks selling USDCNY in an attempt to keep prices below 7.25
.Chart: USDCNY 1 month
Source: Saxo Bank