Source: Coca Cola
US weekly claims fall 6,000 to 290,000 (forecast 300,000)
Equities bulls leery with Evergrande and other China property developers in focus
US dollar opens weaker compared to yesterday, but recoups overnight losses
FX at a Glance:
USDCAD Snapshot Open 1.2332-36, Overnight Range 1.2290-1.2344 Previous close 1.2320
USDCAD dropped to 1.2290, a level last seen at the beginning of July, on the back of positive risk sentiment stemming from Wall Street’s near record close and rising WTI oil prices. The move didn’t last as renewed fears of contagion from China’s property developer woes and caution due to rising Treasury yields sparked a wave of profit taking in late Asian, and European markets.
Yesterday’s Canadian CPI data showing a 4.4% y/y surge in September, compared to 4.1% in August had limited impact on USDCAD, but served to suggest the BoC will adopt a more hawkish tone at the October 27 meeting.
WTI oil prices gained after the EIA reported US crude inventories fell by 430,000 barrels last week which weighed on USDCAD.
USDCAD direction continues to be driven by Wall Street price action with oil prices providing an assist. Domestic news is largely irrelevant
Technical view: The intraday USDCAD technicals are modestly bullish with the bounce from 1.2990 and break above 1.2360 targets 1.2400. A move below 1.2290 will lead to a test of support in the 1.2240-50 area. However, the long-term downtrend from March 2020 on a weekly chart, is intact while prices are below 1.2850.
For today, USDCAD support is at 1.2290 and 1.2240. Resistance is 1.2360 and 1.2390. Today’s range 1.2310-1.2380
Chart USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
Global markets are unsettled. Wall Street futures have retreated from yesterday’s peak. Even Tesla’s (TSLA: Nasdaq) report of record revenue and profit in Q3 failed to spark enthusiasm. Renewed concerns around China’s property developers, a drop in commodity prices from recent peaks, rising US Treasury yields, and a lack of actionable Tier-one economic data in the Eurozone, soured risk sentiment.
US weekly jobless claims continue to revisit levels last seen in March 2020, with 290,000 claims in the week ending October 16.
The Philadelphia Fed Manufacturing Index fell 7 points to 23.8 from 30.7 in September. The index report said “The price indexes remain elevated and continue to suggest widespread increases in prices. The survey’s future indexes indicate that respondents continue to expect growth over the next six months.
EURUSD fell from 1.1667 in Asia to 1.1633 just before NY opened and then recovered slightly. Gains were capped by fears of higher US interest rates, rising energy costs and supply chain issues in the Eurozone. EURUSD technicals are bullish above 1.1620.,
GBPUSD topped out in the1.3830 area and fell to 1.3787 before climbing to 1.3810 in NY. Prices continue to be supported by recent hawkish comments from BoE Governor Andrew Bailey, but ongoing Brexit and supply chain concerns are limiting gains. Nevertheless, GBPUSD uptrend from the end of September is intact while prices are above 1.3700.
USDJPY moves mirrored US 10-year Treasury price action. USDJPY dropped from 114.41 to 113.92 when the 10-year yield dropped from 1.673% to 1.649%.
AUDUSD and NZDUSD retreated from overnight peaks on lower commodity prices, profit taking and higher treasury yields. Aussie traders will be awaiting this afternoons speech by RBA Governor Lowe.
FX open, high, low, previous close
Chart: Saxo Bank
Today’s Bank of China Fix 6.3890, Previous 6.4069
Shanghai Shenzhen CSI 300 rose 0.36%% to 4,928.02
Evergrande Group secures three-month extension of $250 million Jumbo Fortune bond that matured October 3
China’s Beijing Daily tells citizens not to travel to overseas or domestic medium and high risk areas.
Chart: USDCNY 1 month
Source: Yahoo Finance