Picture: Warner Bros.

October 15, 2021

Global equity traders ignore rising WTI oil prices

US Retail Sales expected to shrink 0.2% m/m in September

Commodity currency bloc soars-US dollar soars vs JPY

FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2344-48, Overnight Range 1.2339-1.2380, Previous close 1.2368

USDCAD sank as traders embraced “risk-on” sentiment. Yesterday’s better than expected US weekly jobless claims data helped set the tone (actual 293,000 vs forecast 319,000), with rising US equity markets the major catalyst. Oil traders ignored the EIA report that crude inventories rose 6.08 million barrels in the previous week, and instead remained focused on forecasts that oil demand will outstrip supply in the short-term.

Technical view:  The intraday USDCAD technicals are bearish. The intraday downtrend from the end of September is intact while prices are below 1.2440.  The overnight breach of 61.8% Fibonacci support (June-August range) suggests further losses to 1.2225 (76.4% Fibo level).

For today, USDCAD support is at 1.2340 and 1.2310.  Resistance is 1.2380 and 1.2410. Today’s range 1.2340-1.2410

Chart USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

“All aboard the rally bus.”

Global equities surged overnight following the upbeat handover from Wall Street. Japan’s Nikkei 225 gained 1.81%, helped by reports Prime Minister Kishida said he would steer the country from “Abenomics.” European bourses joined the party, but gains lagged those seen in Asia.

S&P 500 and DJIA futures added to overnight gains following the US retail Sales report which suggests Wall Street will open in positive territory.  Traders are  ignoring the potential negative impact  from high energy costs.

WTI oil prices pushed above $82.00/barrel to reach $82.27/b before easing to $82.00 in NY. Reports that global crude demand will outstrip demand on top of the OECD saying oil stocks are at their lowest levels since 2015 are underpinning prices.

US September Retail Sales were better than expected, rising 0.7% m/m, compared to the consensus forecast for a 0.2% decline.  It appears consumers are still spending, perhaps attempting to get ahead of a possible Christmas supply crunch from ongoing supply chain disruptions.

Chart: Retail Sales

Source: US Census Bureau/IFXA ltd

Bitcoin (BTCUSD) is in the spotlight again. Bloomberg reported the SEC would allow BTUSD ETF’s, with Proshares and Invesco offerings at the front of the pack. BTCUSD gained 2.7% overnight and has climbed to $59,276.00 in NY from $41,565 on September 27. The surge is a tad perplexing when you consider that Bitcoin was designed to avoid regulation, and the SEC exists to regulate.

EURUSD climbed to 1.1618 from 1.1589, then retreated to 1.1598 in NY trading. The Eurozone Trade Balance narrowed to €11.1 billion from €13.58 in July. ECB Governing council member Pierre Wunsch said the ECB will maintain an accommodative monetary policy after PEPP ends and added that the central bank is still below its inflation objective.

EURUSD is in an uptrend above 1.1580 and looking for a decisive break above 1.1660 to extend gains to 1.1750.

GBPUSD is at the top of its 1.3669-1.3757 overnight range. Prices are supported by the improved risk tone undermining the US dollar. Traders appear to have shrugged off yesterday’s dovish comments by two BoE officials, preferring to focus on earlier comments by other MPC officials suggesting a rate hike may be necessary. However, gains may be limited due to domestic supply chain issues and the ongoing EU/UK dispute over the Northern Ireland border.

The intraday GBPUSD technicals are bullish above 1.3570 with a break of 1.3660, targeting 1.3900.

USDJPY gained 0.92% between yesterday’s NY open and today, rising from 113.68 to 114.40 due to the jump in Treasury yields and improved risk sentiment.

AUDUSD and NZDUSD climbed on the back of broad US dollar weakness and higher commodity prices.

Michigan consumer confidence is ahead.

 Chart of the Day- Bitcoin (BTCUSD)-daily price action

Chart: CoinDesk

FX open, high, low, previous close

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.4386, Previous 6.4412

China injects $500 billion in 1 year MLF (Medium Loan Facility) offsetting maturing $500 billion

China is expected to ease cash banks need to hold in reserves

ANZ Bank forecasting a 50 bp Reserve Requirement Ration (RRR)

Chart: USDCNY 1 month

Source: Yahoo Finance