Picture: CBC.ca

October 12, 2021

Oil prices surge as Opec ignores White House pleas for relief

Equities sink, China regulators set sights on financial institutions

US dollar opens mixed; Commodity bloc currencies outperform

FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2464-68, Overnight Range 1.2453-1.2497, Previous close 1.2480

Energy prices are soaring and sinking USDCAD in the process.  WTI oil jumped 8.0% since Thursday morning, reaching $80.88/barrel in Europe before sliding to $80.49/b in early NY trading.  Expectations for increased post-pandemic demand from China and other importers, European natural gas shortages, and Opec’s decision to continue its plan of measured production increase to restore production to pre-pandemic levels, are fueling demand.  

USDCAD continued to benefit from Friday’s 157,100 rise in Canadian employment which easily beat forecasts for a 60,000 increase.  Canada has recovered all the jobs lost in the pandemic.  The news suggests the October 28 BoC monetary policy statement may be more hawkish than expected.

Technical view:  The intraday USDCAD technicals are bearish below 1.2530 which guards the September 20 downtrend line which comes into play at 1.2830.  While trading below these levels, USDCAD risks breaking support in the 1.2420-40 area to extend losses to the June 1.2005-1.2040 area.

For today, USDCAD support is at 1.2430 and 1.2405.  Resistance is 1.2490 and 1.2530. Today’s range 1.2410-1.2490

Chart USDCAD daily three months

Source: Saxo Bank

G-10 FX recap and outlook

Canadians returned from a long Thanksgiving weekend to find oil prices higher, USDJPY above 113.00, the UK and EU still yammering about Brexit, and the Chinese brain-trust aiming for financial institutions.  The damage from Evergrande and other Chinese property woes is still being tabulated and unnerving global equity traders.

US President Biden is expected to have a virtual meeting with the G-20 to discuss the global supply chain, but the talks should have zero impact on FX.  Instead, traders will be looking ahead to Wednesday’s US inflation data and the release of the FOMC minutes from September 22.

The major Asia equity indexes closed deep in the red, spooked by Chinese developments and concerns about soaring energy prices boosting inflation and forcing central banks to raise rates.  European bourses are mixed after spending the European morning in negative territory. S&P 500 futures turned positive in early NY trading, rising 0.26%. Oil and gold prices squeezed out small gains while US 10-year Treasury yields, at 1.600% are just below their overnight peak of 1.628%.

EURUSD is at the bottom end of its Monday-Tuesday range of 1.1534-1.1586 range. Gains were limited in part because of German ZEW and Eurozone Survey data. Economic Sentiment and Current situation results were lower than expected but the results were due to supply chain issues.  More ECB dovish-speak, this time from Greek Central Bank President Yannis Stournaras saying those predicting rates hikes are “probably in a hurry.”  EURUSD technicals are bearish below 1.1580.

GBPUSD rallied to 1.3672 on Monday, then dropped to 1.3570 in Europe today.  Prices are supported by rising UK yields and hawkish talk from BoE officials that has some analysts forecasting a rate hike in December. However, and ongoing fishing dispute with France, hostile rhetoric around Northern Ireland border issues, and ongoing energy and supply chain issues in the UK, are weighing on prices.  The UK employment report was in line with forecasts. The intraday GBPUSD technicals are bullish above 1.3560.

USDJPY soared from Friday’s low of 111.55 to 113.77 in NY overnight on the back of rising oil prices and the US 10-year Treasury yield rising from 1.564% Friday to 1.628% overnight.

AUDUSD and NZDUSD gained on higher commodity prices and on reports that New South Wales has emerged from a 107 day coronavirus lockdown. However, concerns that slower growth in China and higher energy prices are limiting upside.

Chart of the Day- US 10-year Treasury Yield

Chart: CNBC

FX open, high, low, previous close

Chart: Saxo Bank

China Snapshot -Welcome Back

Today’s Bank of China Fix 6.4447, Previous 6.44479,  

Shanghai Shenzhen CSI 300 fell 1.06% to 4,883.84

Chart: USDCNY 1 month

Source: Yahoo Finance