Source: Pixabay

November 10, 2022

  • Core CPI falls to 6.3% from 6.6%
  • S&P 500 futures soar 3.0% on cooler CPI
  • US dollar plummets after inflation data

FX at a glance: 

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3547-51, overnight range 1.3371-1.3569, close 1.3526

This week’s USDCAD bears are splayed out in front of fireplaces after market risk sentiment curdled on Wednesday. A mix of US election disappointment and stock market woes sparked a stampede into safe-haven US dollars. The rally continued overnight exacerbated by lower oil prices.

That all changed in the blink of an eye after US CPI was cooler than expected and USDCAD plummeted from 1.3530, pre-data to 1.3371 instantly in the wake of the news, then bounced to 1.3410.

WTI oil continued this weeks’ slide falling from $93.70/b Monday to $84.75, due to renewed covid issues in China, rising risks of a global recession, and higher US crude inventories.

The text of Bank of Canada Governor Tiff Macklem’s speech, The Evolution of Canadian Labour Markets, is available at 11:55 am.

USDCAD Technical outlook

The intraday USDCAD technicals flipped from bullish to bearish after the US CPI drove prices below the minor uptrend line at 1.3490. The subsequent move below support at 1.3440 targets 1.3380. If 1.3380 holds than USDCAD is likely going to trade in a 1.3380-1.3630 range for the rest of the month.  If prices fall below 1.3380, a test of 1.3190 is in the cards.

For today, USDCAD support is at 1.3380 and 1.3310.  Resistance is at 1.3490 and 1.3540.  Today’s range 1.3420-1.3520

Chart: USDCAD daily

Chart: USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

“Ya can’t keep the US dollar down.” That was the theme yesterday and overnight after reality intruded on market fantasies. But not after CPI.

US traders were disappointed over the mid-term election results which derailed a nascent stock market rally. Falling equity prices accelerated after cryptocurrency exchange FTX failed to secure a bail-out (It needed $8.0 billion). CEO Sam Bankman-Fried explained the demise thusly; “I f..d up” and investors and customers were truly Fried.

The stock market slide had FX traders rapidly unwinding short dollar positions established Monday and Tuesday, on fears things could get worse if today’s US inflation data surprised to the upside.

Everything changed with the release of the US inflation report. October CPI rose 7.7% y/y, well below the 8.0% forecast and 0.5% lower than in September. The monthly increase was 0.4% m/m, unchanged from September but cooler than the 0.6% increase expected. 

Core CPI Fell to 6.3% y/y (forecast 6.5%, September 6.6%) and it was off to the races.

S&P 500 futures shot up 3.0% on speculation the Fed will only raise rates 50 bps and that the rate cycle is close to peaking. The US 10-year Treasury yield sank to 3.919% from 4.102% this morning.

It was barely more than a week ago when Fed Chair Powell say “it was very premature “to consider pausing rate hikes.  Maybe today’s data changes his mind.

EURUSD plunged from 1.0083 yesterday to 0.9936 in early NY as traders realized that this week’s gains were unsustainable in the face of Russian aggression and a looming Eurozone recession, and a downbeat ECB bulletin.

It all changed after the US inflation data with EURUSD soaring to 1.0160 from 0.9945.

 The gains may be limited after the ECB Bulletin noted, “Economic activity in the euro area is likely to have slowed significantly in the third quarter of 2022, and the Governing Council expects a further weakening in the remainder of 2022 and the beginning of 2023.The incoming data confirm that risks to the economic growth outlook are clearly on the downside, especially in the near term.”

GBPUSD dropped to 1.1332 from 1.1565 yesterday then ripped higher to 1.1652 after CPI. Furth fains may be limited ahead of next week’s UK budget.

USDJPY is plunged to143.18 from an overnight peak of 146.73 range, weighed down by the drop in the US 10-year Treasury yield today. Bank of Japan Governor Kuroda said he informed Prime Minister Kishida that the BoJ will continue with monetary easing and that one-sided JPY moves were undesirable for the economy.

AUDUSD traded in a 0.6388-0.6440 range then spiked to 0.6564 in NY.

US Jobless claims rose 7,000 to 225,000.

Chart Bitcoin (BTCUSD) 1 year


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

Source: Saxo Bank

China Snapshot

Today’s Bank of China Fix: 7.2422, previous 7.2189

Shanghai Shenzhen CSI 300 fell 0.77% to 3685.69

Renewed US dollar strength and fresh covid lockdown concerns drive equities lower

Chart: USDCNY 1 month

Source: Saxo Bank