German IFO data suffers from supply bottlenecks
Fed Chair Powell speaks today at 10: am ET
US dollar mixed. commodity bloc currencies underperform
24-hour FX at a Glance:
USDCAD Snapshot Open 1.2684-88, Overnight Range 1.2643-1.2729, Previous close 1.2656
USDCAD closed at the session low yesterday, undermined by a mix of positive risk sentiment, rising WTI oil prices which climbed 2.4%, while ignoring a spike in US Treasury yields. Oil prices held on to most of their gains overnight, but USDCAD rallied anyway as Asia and European traders sold stocks due to rising US rates.
Canada Retail Sales fell a lower than expected 0.6% in July, but the news was ignored as the focus is on Wall Street and the Fed’s interest rate intentions.
USDCAD direction continues to be determined by broad US dollar moves and Wall Street price action.
Technical view: The intraday USDCAD technicals are bullish above 1.2640 looking for a break above 1.2710 to extend gains to 1.2760. A break below 1.2640 targets 1.2610.
For today, support is at 1.2640 and 1.2610. Resistance is 1.2710 and 1.2750. Today’s range 1.2660-1.2750.
Chart USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
Global markets are skittish. The Evergrande Group crisis sounds more like a Chinese domestic issue rather than a worldwide contagion event. Fed Chair Powell and ECB President Lagarde downplayed risks to their economies if Evergrande went bankrupt.
China cracked down on cryptocurrencies again. They banned overseas exchanges from providing services to mainland investors and banned financial institutions from facilitating trading. Bitcoin (BTCUSD dropped to $40,750.00 from $45,142.50 on the news.
Today, Fed Chair Powell, Vice Chair Clarida, and Board member Bowman will be chatting during the “Fed Listens” virtual event.
US 10-year Treasury yields rallied from 1.334% yesterday to 1.4465% in Asia and are 1.434% in NY%. Analysts are perplexed as to the trigger for the rally, suggesting gains are driven by hawkish FOMC and Bank of England outlooks and downgrading of global contagion fears from and Evergrande meltdown.
Gold bulls are getting skewered by soaring Treasury yields and bearish technicals. Risk aversion sentiment from Evergrande was not enough to counter the more hawkish than expected FOMC meeting, and XAUSUD dropped through support at $1765.00 to $1740.00 and are at $1747.00. XAUUSD technicals are bearish below $1790.00.
EURUSD traded quietly in a 1.1711-1.1736 range. ECB President Lagarde is doing her part to limit EURUSD upside. She reiterated that inflation increases are temporary, and there is a lot of slack in employment. German Ifo Data was mostly dismissed as the weaker results were blamed on supply chain bottlenecks.
GBPUSD is retreating from resistance in the 1.3750 area. While prices are below 1.3720, there is a risk that 1.3650 is revisited. Traders appear to be more concerned about the risk of higher gas prices derailing economic growth near term, than the prospect of higher interest rates down the road. GfK Consumer Confidence dropped to -13 from -8.
USDJPY extended its post-FOMC rally with prices climbing from 109.42 Wednesday to 110.56 overnight.
The rally is powered by surging Treasury yields and the 2.06% gain in the Nikkei 225 overnight.
AUDUSD and NZDUSD peaked in Asia and traded lower into NY on renewed hawkish Fed concerns and lower US stock futures.
There are no Canadian and US economic reports of note today. Traders are looking ahead to next week’s month-end activities, followed by the US employment report.
Chart of the Day- US 10-year Treasury yield
Chart: Yahoo Finance
FX open, high, low, previous close
Source: Saxo Bank
China Snapshot -Closed
Today’s Bank of China Fix, 6.45999, Previous 6.4749
Shanghai Shenzhen CSI 300 fell .008% to 4849.43
Evergrande fails to make coupon payments on offshore bonds but negotiated a 30 day grace period.
Fed Powell and ECB Lagarde say US and Eurozone have limited exposure to Evergrande
China cracks down on cryptocurrency, says cryptocurrency transactions are illegal.
Chart: USDCNY 1 month
Source: Yahoo Finance