September 24, 2024
- China pumps in another $141.0b of stimulus into economy.
- RBA leaves rates unchanged.
- US dollar trading defensively with yen underperforming.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3510, overnight range 1.3499-1.3542, previous close 1.3541
USDCAD dropped to 1.3487 yesterday on dovish Fed speak that suggested policymakers could consider another 50 bp rate cut. Chicago Fed President Austan Goolsbee (non-voter) said rates need to be lowered significantly saying “if we want a soft-landing, we can’t be behind the curve.”
USDCAD was also undermined by the jump in WTI oil prices from 70.73 to 72.36 overnight. The gain is due to escalating tensions between Israel and Hezbollah/Iran. China’s latest stimulus package also supported prices as traders hoped it would increase Chinese demand for crude.
Bank of Canada Governor speaks about “Growth During Uncertainty” today. The text is available at 12:55 pm EDT.
Today’s US data includes Housing Price Index, and Consumer Confidence
USDCAD technicals
The intraday USDCAD technicals are bearish and attempting to break below support at 1.3480 to test the resilience of the 1.3440 area. Only a move above 1.3560 will negate the downward pressure.
Fibonacci retracement analysis suggests that a decisive break below 1.3470 sets the stage for further losses to 1.3330.
For today, USDCAD support is at 1.3480 and 1.3440. Resistance is at 1.3540 and 1.3560.
Today’s Range 1.3480-1.3540
Chart: USDCAD daily
Source: Tradingview.com
Just What the Doctor Ordered
Chinese authorities announced they were injecting a heavy dose of economic steroids into the domestic economy. PBoC Governor Pan Gongshen said the latest measures were worth $142.0 billion. Analysts suggest the measures will help remove downside risks to domestic growth while helping to end the downward spiral in the property market.
The Temperature is Rising
It began with Hezbollah, a declared terrorist organization by the US, UK, Canada, and several other countries, flinging missiles from Lebanon into Israel. Then Israel made a few phone calls, and many of the terrorists exploded—and in anger as well. Now the region is on the verge of a full-scale war, and Iran is not just arming the terrorists but directing the attacks. The news has already lifted oil prices, but things could get a lot worse if it disrupts shipping in the area.
Equities Rise with Improved Risk Sentiment
Asian equity indexes followed Wall Street’s lead and closed with gains, except for Australia’s ASX 200, which dipped 13%. The China stimulus news fueled a 4.13% rally in Hong Kong’s Hang Seng Index. European bourses are in positive territory with a 0.72% rise in the German Dax leading the parade higher. S&P 500 futures are up a marginal 0.13%.
EURUSD
EURUSD is wallowing in a 1.1103-1.1146 range and trading with a negative bias due to poor economic data. Weak PMI data yesterday followed by another drop in the German Ifo index. The Business Climate Index fell in September to 85.4 points, from 86.6 points in August, the fourth decline in a row. The short-term EURUSD technicals are bid above 1.1100.
GBPUSD
GBPUSD rallied from 1.3331 to 1.3383, supported by improved risk sentiment and comments from BoE Governor Andrew Bailey. Mr. Bailey said that the path for “interest rates is downwards—gradually.”
USDJPY
USDJPY rallied in a 143.38-144.68 range alongside the surge in US 10-year Treasury yields, which rose from 3.74% to 3.804%. The gains occurred despite somewhat hawkish comments by BoJ Governor Kazuo Ueda, who said that if inflation rises in line with forecasts, it would be appropriate to raise rates. Japan’s Manufacturing PMI slipped to 49.6 from 49.8.
AUDUSD and NZDUSD
AUDUSD popped and dropped around the RBA meeting announcement. The RBA left rates unchanged at 4.35%, as expected, and delivered a wishy-washy statement. Australian interest rates are not going lower anytime soon, with the statement saying, “Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range.” However, interest rates were not even discussed, which took some of the sting out of the message. The Chinese stimulus announcement is underpinning prices.
NZDUSD is at the top of its 0.6259-0.6281 range thanks to the Chinese stimulus news.
USDMXN
USDMXN bounced around in a 19.3573-19.4539 range overnight and little changed from yesterday’s band. Core-inflation data cooled to 3.95% from 4.01% which is now just inside Banxico’ s 3.0% +/- target which supports the majority view for Banxico to cut rates by 25 bps to 10.5% on Thursday.
Bitcoin (BTCUSD)
Bitcoin traded sideways in a 62,857-64,128 range which was inside yesterday’s band. The September uptrend line is intact above 60,900 but the August downtrend line is capping gains at 65,000.FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.0510 vs exp. 7.0495 (prev. 7.0531)
Shanghai Shenzhen CS! 300 rose 4.33% to 3351.91
Chinese equity indexes soared and USDCNY sank, after the PBoC announced another $142.0 billion of monetary stimulus would be injected into the economy. The stimulus included lowering the rate for existing mortgages by 50 bps and reducing the down payment for purchases of second homes to 15% from 25%. The PBoC also slashed the Reserve Requirement Ratio (RRR) by 50 bps. Julian Evans-Pritchard of Capital Economics wrote: ”This is the most significant PBOC stimulus package since the early days of the pandemic. But on its own, it may not be enough.”
Chart: USDCNY and USDCNH
Source: Investing.com
