March 8, 2024

  • Fed Powell says, “rate cuts not far.”
  • Nonfarm payrolls top expectations but details are weak
  • US dollar inches lower, post NFP

FX at a Glance

Source: IFXA/RP

USDCAD Snapshot: open 1.3443-47, overnight range 1.3426-1.3465, close 1.3460

The Canadian employment number surprised to the upside, for the second consecutive month with a 40,700 gain in new jobs. The strength is bogus. The private sector lost jobs and self-employed people increased by 38,300.  It is a bit of a stretch to believe that Canadians are eagerly becoming self-employed and avoiding the security of full-time employment and benefits. The only  sector hiring is the government which means a bigger burden on fewer Canadian.

Selling USDCAD on the back of these numbers is not likely going to end well. The data underscores the weakness of the Canadian economy compared to the US and suggests limited downside.

Yesterday, USDCAD dropped on the back of improved risk sentiment after Powell put a June rate cut back on the table and was supported by CAD/US 2 year and 10-year interest rate differentials narrowing.

WTI oil prices are at the bottom of the $78.39-$79.98 overnight range.

USDCAD Technicals

The USDCAD technicals turned bearish with the break of the 2024 uptrend line (1.3520 daily chart)  and the hourly technicals are bearish while prices are below 1.3490. A break above 1.3490 suggests further gains to 1.3560.

Fibonacci retracement analysis of the January 1.3180 low and the March peak of 1.3606 suggests that a decisive break below the 1.3440 area (38.2% retracement) will set the stage for a drop to 1.3340. Failure to break below implies further 1.3440-1.3550 consolidation.

For today, USDCAD support is at 1.3430 and 1.3390. Resistance is at 1.3490 and 1.3530. Today’s range is 1.3410-1.3510

Chart: USDCAD daily

Source: Daily FX

G-10 FX recap

US nonfarm payrolls topped forecasts again with a gain of 275,000 (forecast 200,00). The details are weak. January’s results were revised down to 229,000 from 357,000, which is further evidence that the job market is normalizing.  Average hourly earnings rose just 0.1% (forecast 0.3%) and the January result was revised lower. The unemployment rate rose to 3.9% from 3.7%.

Fed Chair Powell is blowing hot and cold (much like March weather). One day he claims that the Fed needs to see further evidence that inflation is on a sustainable downtrend before cutting rates. The very next day he responds “not far” to a question from Senator Jon Tester of Montana,  who asked how close the Fed was to lowering rates. So, Mr Powell, what’s it gonna be?

President Biden delivered a “(Sorry) State of the Union Address last night. As expected, 50% of attendees, stood and cheered while the other half booed and jeered. FX markets ignored it.

EURUSD popped to 1.0981 after trading in a 1.0926-1.0956 range overnight, put prices have already retreated.  Yesterday’s ECB decision  was pretty much as advertised but President Lagarde hinted at a June rate cut. Policymaker and Austrian Central Bank Governor Robert Holzmann reinforced that view today when he said “One of the decision yesterday was no change but a change may be in preparation.” German January Industrial production rose 1.0% (forecast 0.6%) raised hopes that the German economy is starting to recover.

GBPUSD extended its overnight gains to 1.2893, after an overnight session in a  1.2801-1.2841, band. UK traders pretty much ignored the latest budget and were happy that authorities avoided a Liz Truss/Kwasi Kwarteng result.

USDJPY is trading negatively in a 146.49-148.12 range  as recent rate hike comments by BoJ officials weigh on the currency pair.

AUDUSD extend its overnight gains but is back in the middle of its  0.6619 to 0.6667.

USDMXN traded with a modestly negative bias, falling from 16.8975 to 16.8585, due to broad US dollar weakness. Yesterday’s slightly lower than expected inflation report points to Banxico cutting rates on March 21.

FX high, low, open (as of 6:00 am ET)


China Snapshot

PBoC fix: 7.0978 vs exp. 7.1863 (prev. 7.1002

Shanghai Shenzhen CSI 300 rose 0.43%  to 3544.91.

Chart: USDCNY and USDCNH daily