Photo: IFXA/Vistaprint

August 30, 2021

Trading subdued due to UK holiday

Hurricane Ida blows oil prices higher

US dollar consolidating post-Powell speech losses

FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2614-18, Overnight Range 1.2606-1.2633, Previous close 1.2620

USDCAD dropped on the back of a broad US dollar after Fed Chair Jerome Powell’s Jackson Hole speech, successfully countered hawkish comments from a handful of Fed officials. Mr Powell left the door wide open to a taper kick-off by year end, but if so, it would be on his terms.  And his terms include the economy reaching maximum employment, which he said, “requires a lot of ground to cover.”

Surging oil prices also weighed on USDCAD but to a lesser extend.  Hurricane Ida has shut 95% of Gulf of Mexico production, which lifted WTI to $69.58/barrel in early Asia trading.  Prices have slid steadily since then and opened in NY at $68.31/b.

The combination of steady to firm oil prices, broad US dollar weakness, and the risk of USDCAD selling for month-end portfolio rebalancing will continue to weigh on prices.

Technical view:  The intraday USDCAD technicals are bearish and looking for a break below key support in the 1.2580 area, representing multiple-bottoms and the uptrend line from the beginning of August.  A break below support would extend losses to 1.2480.   A break above 1.2670, shifts the focus to 1.2850.  For today, USDCAD support is at 1.2580 and 1.2530.  Resistance is 1.2640 and 1.2680. Today’s range 1.2580-1.2640

Chart USDCAD hourly, 1 month

Source: Saxo Bank

G-10 FX recap and outlook

Fed Chair Jerome Powell did not say anything that was a whole lot different from his previous remarks, but his comments roiled markets.  That’s because a pack of yapping Fed hounds, including Dallas Fed President Robert Kaplan, Philadelphia Fed President Patrick Harker, and St Louis Fed President James Bullard, claimed the time to begin tapering was a soon as September.  Traders bought what they were selling and were positioned for tapering news from Powell.  The problem is that those hounds aren’t voters, and Powell can ignore them. He did.

Mr Powell reiterated the importance of maximum employment, which puts the spotlight on Friday’s nonfarm payrolls report, which will overshadow this week’s top-tier regional data.

EURUSD traded quietly in a 1.1795-1.1809 range due to the UK Bank holiday, sapping liquidity.  Eurozone ESI confidence index was a tad weaker than expected, but it did not impact trading.  The intraday EURUSD technicals are bullish above 1.1730, looking for a break above 1.1810 to target 1.1850.

GBPUSD traded in a 1.3750-1.3774 range, supported by broad US dollar weakness.  The UK was closed for a holiday.

USDJPY consolidated Friday’s losses with prices pressured by broad US dollar weakness and the drop in US 10-year Treasury yields to 1.307% from 1.38% on Friday.  Japanese Retail Trade data was better than expected, rising 1.1% m/m in June.

AUDUSD and NZDUSD retreated from the session peaks, tracking broad US dollar moves.  NZDUSD topside may be limited as the government extended lockdown measures for Auckland for two more weeks.

Canada’s Current Account, US Pending Home Sales, and Dallas Fed Manufacturing reports are due

Chart of the Day- WTI oil

Source:  Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank

China Snapshot

Today’s Bank of China Fix, 6.4677Previous day 6.4863                        

Shanghai Shenzhen CSI 300 fell 0.29% to 4813.27

Chart: USDCNY 1 month

Source: Yahoo Finance