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November 23, 2021

  • Powell Re-nominated-Markets react like he is a hawk
  • Biden speech on economy may announce release of crude from SPR
  • US dollar soars on Powell news

FX at a Glance:

Source: IFXA Ltd/RP

USDCAD Snapshot   Open 1.2735-39, Overnight Range 1.2697-1.2741, Previous close 1.2701

USDCAD soared on broad US dollar demand after President Biden re-nominated Jerome Powell as Fed Chair. USDCAD climbed from 1.2628 to 1.2705, then accelerated higher overnight as traders became convinced the Fed will likely raise rates at least twice in 2022.

The soaring US dollar and the prospect President Biden will use today’s speech on the economy to announce releasing Strategic Petroleum Reserves, toppled crude prices. WTI dropped to $75.45/barrel from $77.10 yesterday, with a move below $75.00 suggesting further losses to $71.00/b. Falling oil prices exacerbated USDCAD gains.

BoC Deputy Governor Paul Beaudry speaks to the Ontario Securities Commission. His topic is “Assessment of risks to the stability of the Canadian financial system.”

Technical view:  The intraday USDCAD technicals are bullish while trading above 1.2660 with a decisive break above 1.2750-60 area putting 1.3000 in play. However, momentum indicators including stochastics, RSI and Bollinger bands are in extreme overbought territory, warning a correction is overdue. A break below 1.2660 would alleviate the upside pressure.

For today, USDCAD support is at 1.2690 and 1.2660.  Resistance is 1.2760 and 1.2840. Today’s range 1.2680-1.2780

Chart USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

Traders transformed Jerome Powell from a dove to a hawk after Biden renominated him to be Fed Chair. They determined that he was far more likely to raise interest rates in 2022 than Lael Brainard if she secured the nomination. That is a tad perplexing as they are both considered doves, and their differences are like picking between two colors of vanilla.

US Treasury yields soared on the Powell news, rising from 1.548% yesterday to 1.65% in NY today.

EURUSD traded sideways in Asia and rallied in Europe, rising from 1.1227 to 1.1274 after German, and Eurozone Manufacturing PMI reports were better than expected. The rally didn’t last, and prices dropped to 1.1245 in NY, in part due to more dovish comments from ECB officials, stating Eurozone interest rates will be unchanged in 2022.

GBPUSD peaked at 1.3408 after UK Manufacturing and Services PMI data was released, then dropped to 1.3356 in NY. Prices are on the defensive due to slightly diminished prospects for a December rate hike and broad US dollar strength.

USDJPY is choppy around 115.00, with prices boosted by the rise in 10-year Treasury yields. FX trading was subdued as Japan was closed for a holiday.

AUDUSD outperformed NZDUSD after New Zealand Q3 retail sales fell 8.1% q/q. The result was largely expected due to New Zealand coronavirus restrictions that were in effect.

The US and Canadian economic calendars do not have any top-tier data, leaving Biden’s speech as the highlight.

Chart of the Day: US 10-year Treasury yield

Source: Investing.com

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3929 Previous 6.3952

Shanghai Shenzhen CSI 300 rose 0.02% to 4,913.35

Analysts predicting RRR cut before year end

French politicians demanding China allow tennis player Peng Shuai to speak publicly or face diplomatic consequences.

China claims US warship transiting the Taiwan Strait created a security risk and undermines regional stability.

Chart: USDCNY 1 month

Source: Yahoo Finance