Photo: IFXA/Pinewood Studios
China PMI data misses forecasts
Canada June GDP as expected
US dollar slides on month-end portfolio rebalancing flows
FX at a Glance:
USDCAD Snapshot Open 1.2584-88, Overnight Range 1.2572-1.2624, Previous close 1.2606
USDCAD peaked at 1.2624 in Asia then dropped steadily to 1.2572 just as Europe opened. Prices bounced between 1.2572 and 1.2590, until opening at 1.2586 in NY. Steady to firm WTI prices ($68.52/b) are contributing to the bearish USDCAD bias, but the bulk of the overnight move is due to month end rebalancing flows. The S&P 500 is up 2.95% MTD, which forces some portfolio managers to sell US dollars to rebalance their portfolios.
Canada Q2 GDP fell 1.1% q/q, which is old news and impacted by third wave COVID-19 restrictions. StatsCanada blamed slow housing sales for the decline. June GDP rose 0.7% m/m, as expected.
Traders are more concerned about Friday’s NFP data after Fed Chair Jerome Powell reiterated his focus on achieving maximum employment, which means domestic data is ignored.
Technical view: The intraday USDCAD technicals are bearish with Fibonacci support in the 1.2580 area (June -August range) crumbling, leaving the June uptrend line as the last barrier ahead of 1.2473, the 50% Fibonacci level. For today, Support is at 1.2550 and 1.2520. Resistance is 1.2590 and 1.2630. Today’s range 1.2550-1.2640
Chart USDCAD 4-hour, 4 month
Source: Saxo Bank
G-10 FX recap and outlook
Chinese PMI data was weaker than expected. Analysts blamed the dip in August Manufacturing PMI to 50.1 from 50.2 because of chip shortages. The Chinese government regulatory assault is responsible for the slide in Non-Manufacturing PMI to 47.5 from 53.3 in July. The news had a brief impact on AUDUSD, but month-end flows portfolio rebalancing flows overshadowed the data.
EURUSD cracked 1.1800 again, but this time got some legs with prices rising from 1.1796 to 1.1836. Prices got an added boost from a better-than-expected German employment report, and Eurozone Cpi jumped to 3.0% m/m in August, its highest level since 2011. The inflation rise was due to transitory effects of higher energy costs, supply bottlenecks, and other “one-off” items. The intraday EURUSD technicals are bullish while prices are above 1.1770.
GBPUSD traded in a 1.3757-1.3800 range overnight. Prices rallied in Asia and then retreated when UK traders came back from a long weekend. Month-end flows underpin prices, while a recent spate of weaker than expected UK economic reports caps gains. The intraday technicals are bullish above 1.3720.
USDJPY trade traded choppily in a 109.79-109.98 range. Soft US 10-year Treasury yields in the wake of Powell’s Jackson Hole speech are keeping downward pressure on prices, while the unwinding of safe-haven trades underpins USDJPY.
AUDUSD and NZDUSD traded sideways in Asia, with prices undermined by the weaker-than-expected Chinese data. However, both currency pairs rallied in Europe on the back of month-end demand. AUDUSD underperformed against NZDUSD due to Australia’s coronavirus issues.
US Consumer Confidence, Chicago PMI, and S&P Case-Shiller Home Price data are on tap today.
Chart of the Day-S&P 500 August Performance
FX open, high, low, previous close
Source: Saxo Bank
Today’s Bank of China Fix, 6.4679 Previous day 6.4677
Shanghai Shenzhen CSI 300 fell 0.16% to 4805.61
NBS August Manufacturing PMI 50.1 (forecast 50.2, July 50.4)
NBS Non-manufacturing PMI 47.5 (forecast 52.8, July 53.3
Chart: USDCNY 1 month
Source: Yahoo Finance