US 10-year Treasury yields hit 1.55%, Global equities slide
Fed Powell’s testimony repeat of FOMC statement
US dollar extends rally, except against CAD, since Monday open
24-hour FX at a Glance
USDCAD Snapshot Open 1.2648-52, Overnight Range 1.2596-1.2656, Previous close 1.2629
USDCAD had a brief look below 1.2600 in Asia on selling pressure from soaring oil prices. WTI climbed to $76.64/barrel as traders fear cold weather and lower US inventories will drive prices to $85.00/b before year end. However, USDCAD clawed back losses in Europe, climbing steadily until finding a short term top at 1.2655, in a move driven by plunging US stock futures, and rising US Treasury yields. Even so, the Canadian dollar is the best performing currency against the US dollar since yesterday’s NY open.
USDCAD trading may be messy around the 10:00 am option expiry window, due to sizeable strikes in the 1.2615 and 1.2650-55 area rolling off. The Canadian data calendar is empty, leaving USDCAD direction at the whim of US dollar sentiment.
Technical view: The intraday USDCAD technicals are bearish below 1.2670 which is both the hourly downtrend line from September 20 and a double top from September 24. A break below 1.2580 targets 1.2550, while a move above 1.2670 will test 1.2750.
For today, support is at 1.2610 and 1.2570. Resistance is 1.2670 and 1.2730. Today’s range 1.2605-1.2670
Chart USDCAD 1 hour
Source: Saxo Bank
G-10 FX recap and outlook
Interest rates are rising, and traders are taking notice. The benchmark 10-year Treasury yield soared to 1.55% overnight, a level last seen in June, before easing down to 1.52% in NY.
The FOMC’s hawkish tilt and projection for a rate hike in 2022 fueled the gains. Asia stock markets closed mixed. Australia’s ASX 200 fell 1.47%, Japan’s Nikkei lost 19%, while the Hong Kong Hang Seng index gained 1.29%. European bourses are deep in the red but off their worst levels. Wall Street stock futures are lower, with S&P 500 futures down 0.85%. Gold prices fell 0.71% due to broad US dollar strength.
Today, Fed Chair Jerome Powell and Treasury Secretary Janet Yellen testify before the US Senate Committee on Banking, Housing, and Urban Affairs. Powell’s opening statement has already been released. It reads like it has been “cut and pasted” from his FOMC press conference.
Yesterday a gaggle of FOMC officials helped fuel the rise in Treasury yields. NY Fed President John Williams and Fed Governor Lael Brainard believe the conditions for the labour market can be met soon allowing the pace of bond buying to be reduced.
The FOMC will be shy of two members as Boston Fed President Rosengren and Dallas Fed President Kaplan, both insider traders, are stepping down.
The World Bank said they expect China to grow 8.5% in 2021. World Bank officials did not disclose how much China paid for this upgraded forecast.
EURUSD is trading at the bottom of its 1.1673-1.1702 range due to rising Treasury yields and higher energy prices amid political uncertainty in Germany. A break below 1.1750-60 area will extend losses to 1.1600.
GBPUSD plunged to 1.3564 from 1.3716 due to broad US dollar demand from soaring Treasury yields and downgraded UK growth outlook due to the domestic fuel crisis. MP’s are calling for the army to drive fuel trucks. If implemented, it has the added bonus of preventing hijacks as not too many bandits will want to tangle with the SAS.
USDJPY continued to climb, rising from 110.95 to 111.57 due to the jump in US interest rates. USDJPY is also bolstered by the rise in oil prices as Japan imports nearly all its oil and gas.
AUDUSD and NZDUSD dropped on the back of broad US dollar demand from the rise in Treasury yields. Australia Retail Sales fell 1.7% in August, which was an improvement on July’s 2.7% slide. The drop was blamed on COVID-19 lockdown measures and restrictions.
Today’s US data includes Wholesale Inventories, Case-Shiller Housing Price Index, and Consumer Confidence.
Chart of the Day- US 10-year yield
FX open, high, low, previous close
Source: Saxo Bank
Today’s Bank of China Fix, 6.4608, Previous 6.4695
Shanghai Shenzhen CSI 300 rose 0.13% to 4883.83
Chart: USDCNY 1 month
Source: Yahoo Finance