Picture: Pixabay

September 30, 2021

US Q2 GDP beats forecast but weekly jobless claims miss

German September inflation hotter than expected at 4.1% y/y

US dollar opens softer as month-end pressures fade

Month-to-Date FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2726-30, Overnight Range 1.2713-1.2761, Previous close 1.2754

USDCAD rallied yesterday and peaked at 1.2773.  The gains were due to sliding US equity prices, and broad US dollar demand, in part due to month end flows. The S&P 500 fell 3.6% month-to-date, suggesting US dollar demand for portfolio rebalancing. USDCAD got an added lift after the Energy Information Administration reported crude inventories rose 4.5 million barrels in the week ending September 17.  Analysts were forecasting a decline of 1.6 million barrels.

USDCAD will continue to track broad US dollar sentiment and Wall Street price action.  There is no domestic data on tap.  Canadian banks and federally charted companies are closed today as are bond markets.  Stock markets are open.

Technical view:  The USDCAD rally from September 3 stalled at 1.2894 and this week’s month-end rally ran out of gas at 1.2772, suggesting a move below 1.2700 will extend losses to 1.2630.  A break below the 1.2570-80 area would negate the June uptrend and shift the focus to 1.2000.

For today, support is at 1.2705 and 1.2660.  Resistance is 1.2760 and 1.2810. Today’s range 1.2710-1.2810

Chart USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

FX markets are skittish as the month draws to a close.  Overnight price action was mixed.  AUD, JPY, and GBP outperformed while NZD led the rest lower. NZD was also the worst-performing major G-10 currency in September, losing 2.57% since the NY open on September 1. Rising oil prices helped CAD limit its losses to 1.0%. Gold bulls were the unhappiest as the shiny metal lost 4.65%.

US GDP surprised to the upside, rising 6.7% q/q rather than the 6.6% expected.  The news was offset by weekly jobless claims data which rose 11,000 to 362,000.  Claims have risen by 50,000 in the past three weeks.  The US dollar inched lower after the data.

In Asia, China’s official NBS and Caixin PMI reports were mixed, which didn’t do much to settle markets already worried about China’s regulatory crackdown and Evergrande Group’s financial issues. Trading enthusiasm was also curbed as China kicks off Golden Week tomorrow.

The US Congress appears to have averted shutting down the government until December 3, which removes a bit of uncertainty from financial markets.

EURUSD is consolidating losses after falling below 1.1650 support yesterday.  The single currency is trading at the bottom of its overnight 1.1569-1.1609 range as month-end portfolio rebalancing flows weigh on the currency. Traders ignored slightly better German and Eurozone employment data ahead of US Q2 GDP.   Former French President was sentenced to one-year in jail for illegal campaign funding.  It is his second conviction, having previously been convicted of influence peddling. 

Canadian’s just look to Ottawa and say “WE (charity foundation) WISH”

GBPUSD traded in a 1.3417-1.3478 range.  The currency continues to suffer from the domestic energy crisis and a dash of uncertainty as the UK furlough scheme ends. The government plucked another £500 million from the money tree to help poor families cope.  The short-term technicals suggest GBPUSD is oversold and due to bounce.

USDJPY is consolidating gains at the top of its 111.81-112.07 overnight range.  Prices are supported by the US 10-year Treasury yield at 1.532%, and month end demand for US dollars. The Japanese government trimmed its industrial production outlook blaming a shortage of chips.

AUDUSD and NZDUSD are suffering from month-end US dollar demand in addition to a bout of nervousness over the weak to soft Chinese PMI data.

Gold (XAUUSD) has taken a beating in September.  It started the much with a bullish bias but failed to crack resistance in the $1835.00 area. Sentiment turned bearish with the break of $1780 support and the slide was exacerbated by the mix of higher US interest rates and broad US dollar demand. The Gold downtrend is intact while prices are below $1765.00.

Chart of the Day- Gold

Chart: Saxo Bank

FX open, high, low, previous close

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix, 6.4854,   Previous 6.4662

Shanghai Shenzhen CSI 300 rose 0.67% to 4866.38

NBS September Manufacturing PMI 49.6 vs August 50.1

NBS Non-manufacturing PMI 53.2 vs August 47.5

Caixin China Manufacturing PMI 50 (forecast 49.5),

China &-day Golden Week holidays start Friday

Chart: USDCNY 1 month 

Source: Yahoo Finance