August 21, 2024
- FOMC minutes overshadowed by Jackson Hole
- NFP Benchmark revisions could unveil a nasty surprise,
- US dollar continues to slide on Fed rate cut outlook.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3609, overnight range 1.3592-1.3626, previous close 1.3620
USDCAD is sliding on rails greased by negative US dollar sentiment, but steady CAD/US 10-year yield spreads and soft oil prices are acting as a brake.
Canada’s inflation rate rose 2.5%, with Core inflation up 2.7%, slightly lower than June’s figures, improving the prospects for a series of Bank of Canada rate cuts at each meeting for the rest of this year and into 2025. However, these rate cut expectations haven’t significantly impacted the CAD/US 10-year yield spreads, which remain essentially unchanged.
Oil prices are steady within a 72.91-73.66 range, with fading hopes for a Hamas/Israel ceasefire limiting further losses. The API report showing US crude inventories rose by 0.347 million barrels last week wasn’t a significant factor.
Canada Industrial Product Price Index was unchanged at 0% rather than the -0.3% expected. Raw Materials Price Index rose 0.7% in July, well above the -0.7% forecasted. New Housing Price Index rose 0.2% m/m.
USDCAD technicals
The intraday USDCAD technicals are bearish following the break below 1.3700 and a downtrend channel between 1.3630 and 1.3580 is guiding prices lower. A move above 1.3630 would negate the selling pressure and suggest a1.3590-1.3690 consolidation range is likely.
Longer term, USDCAD is testing the support cluster in the 1.3590-1.3600 area representing the April low and the 200 day moving average. RSI studies show that USDCAD is in oversold territory.
For today, USDCAD support is at 1.3590 and 1.3560. Resistance is at 1.3660 and 1.3690. Today’s Range 1.3570-1.3630
Chart: USDCAD daily
Source: DailyFX
Juggling Job Numbers
The Bureau of Labor Statistics (BLS) reported that the US economy gained 2.9 million jobs in the 12 months leading up to March 2024. Or did it? We’ll find out this morning at 10:00 am EDT when the BLS releases the Nonfarm Payrolls Benchmark revisions. JPMorgan expects a revision down by about 360,000, but if Goldman Sachs is right, we could see a drop of 1.0 million. A large downward revision would suggest a much weaker US labor market than anticipated, potentially reigniting expectations for jumbo Fed rate cuts and putting Fed Chair Powell’s Jackson Hole remarks under the microscope.
FOMC Minutes are Stale
The minutes from the July 31 FOMC meeting drop this afternoon, but with the looming BLS NFP revision and Powell’s upcoming speech, they’ve already been relegated to the back shelf.
Equities Treading Water
Asian equity indexes drifted around flat, with Japan’s Topix down 0.21% and Australia’s ASX 200 up 0.16%. European bourses are modestly higher, led by a 0.36% increase in the German Dax. S&P 500 futures are flat. The 10-year US Treasury yield slid from 3.885% yesterday to 3.797% in early Asia before inching up to 3.816% in early NY trading.
EURUSD
EURUSD is trading quietly within a 1.1110-1.1133 range, with a slight bid due to broad US dollar weakness. Enthusiasm is muted with little Eurozone data ahead of Thursday’s German and Eurozone PMI reports. Short-term EURUSD technicals are bullish above 1.1010, eyeing a break of 1.1150 to extend gains to 1.1250.
GBPUSD
GBPUSD is slightly bid within a 1.3010-1.3039 range, buoyed by divergent UK and US interest rate expectations. The Bank of England may hold rates steady in the near term, while the Fed is expected to cut rates on September 18. GBPUSD technicals are bullish above 1.2970, targeting a break of 1.3050 to aim for 1.3180.
USDJPY
USDJPY climbed steadily overnight, rising from 144.97 to 146.24 before easing to 146.06 in NY. Japanese trade data showed exports surging 10.3% y/y in July (forecast 11.5%), far better than the 5.4% seen in June, suggesting the economy is recovering. A Reuters survey indicates 57% of economists expect the Bank of Japan to hike rates before year-end.
AUDUSD and NZDUSD
AUDUSD traded within a 0.6733-0.6753 range, supported by recent hawkish comments from RBA Governor Michele Bullock. NZDUSD drifted aimlessly in a 0.6132-0.6164 range.
USDMXN
USDMXN continued to consolidate within an 18.9301-19.0692 range, sitting near the top in NY. USDMXN is underpinned by concerns over looming constitutional reforms and the unwinding of JPYMXN carry trades.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1307 vs exp. 7.1303 (prev. 7.1325).
Shanghai Shenzhen CSI 300 fell 0.33% to 3321.64
Chart: USDCNY and USDCNH
Source: Investing.com
