Omicron is a 1963 film in which alien variant takes over dead body
- Hopes for a mild Omicron lifts markets
- S&P 500 futures recoup 50% of Friday’s losses, so far
- US dollar retreats: Commodity bloc outperforms
FX at a Glance:
Source: IFXA Ltd/RP
USDCAD Snapshot Open 1.2738-42, Overnight Range 1.2723-1.2773, Previous close 1.2791
USDCAD closed at 1.2791 Friday, then gapped lower at the Asia open, falling from 1.2773 to 1.2723. Prices consolidated in a 1.2723-1.2758 in Europe, with ongoing chatter that the Omicron strain may prove to be mild, weighing on prices. USDCAD is also pressured by sharply rebounding WTI prices are at $72.02/barrel are 5.6% higher compared to $68.20 /b at Friday’s close. WTI is underpinned by reports Opec may delay the planned December 1 production increase over fears that new Omicron related travel restrictions will limit demand.
Traders are looking ahead to sloppy price action from Canada GDP data and month-end rebalancing flows Wednesday, Canadian and US employment reports Friday, and a gaggle of central bank-speak throughout the week.
Canada Industrial Production rose 1.3% and Raw Material Price index data gained 4.8% which suggests domestic inflation will not be easing, anytime soon.
Bank of Canada Governor Tiff Macklem speaks at a New Zealand conference today.
Technical view: USDCAD rallied hard Friday but failed to sustain a break of the downtrend line from May 2020. The intraday technicals are bullish while prices are above 1.2670, a level which will be tested on a break below 1.2720.
For today, USDCAD support is at 1.2720 and 1.2670. Resistance is 1.2770 and 1.2790. Today’s range 1.2660-1.2760
Chart USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
The latest coronavirus variant is officially dubbed Omicron. The Daily Mail reported officials decided against the next Greek letters, Nu and Xi to avoid confusion and offence. Chinese authorities reportedly aggressively campaigned to prevent the variant being labeled Xi. They persevered.
Global markets jumped aboard another rally bus, betting that the reaction to the Omicron virus was overdone and exacerbated by thin market conditions. Moderna officials said they would be able to ascertain the current vaccines ability to protect against the variant said it is working to develop an Omicron-specific booster.
Asia equity markets closed deep in the red led by a 1.64% plunge in Japan’s Nikkei 225 index. Japan closed its borders to all international travelers. European bourses rallied, with the UK FTSE 100 rising 1.20%, even as European countries race to enact new travel restrictions. S&P 500 futures are higher. WTI oil prices gained 5.5%, while gold rose modestly. The US 10-year Treasury yield is 1.553%.
EURUSD traded in a 1.1261-1.1312 range. ECB President Christine Lagarde didn’t seem too phased by the latest COVID-19 news. Sunday, she said, “There is an obvious concern about the economic recovery [of the euro zone] in 2022, but I believe we have learnt a lot. We now know our enemy and what measures to take. We are all better equipped to respond to a risk of a fifth wave or the Omicron variant.” Other ECB officials are reiterating the need for monetary policy to remain accommodative.
Eurozone Economic Sentiment and Industrial Confidence data were ignored.
GBPUSD recouped some losses, but the latest COVID-19 news and the ongoing France/UK immigration feud are limiting gains as are reduced risks that the Bank of England raises rates next month.
USDJPY plunged to 113.00 from 115.38 on Friday due to the Omicron variant sparking safe-haven demand for yen and the lower US 10-year Treasury yield.
AUDUSD and NZDUSD rallied on the improved risk tone.
Chart of the Day: S&P 500 Index 30 minute
Source: Saxo Bank
FX open, high, low, previous close as of 6:00 am ET
Chart: Saxo Bank
Today’s Bank of China Fix 6.3872 Previous 6.3936
Shanghai Shenzhen CSI 300 fell 0.18% to 4,851.42
Chart: USDCNY 1 month
Source: Yahoo Finance