September 3, 2024
- China gets belligerent
- US ISM Manufacturing and employment Index on tap
- US dollar consolidating gains.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3535, overnight range 1.3476-1.3548, previous close 1.3496
USDCAD has inched higher ever since bouncing off of support at 1.3440 last Thursday but the rally may just be temporary. Even after speculative traders unwound a chunk of short CAD/long US positions, CAD is still the most shorted currency against the US dollar -as of August 27, Commitment of Traders report.
Friday’s Canadian GDP data (actual 2.1% vs forecast 1.6%) was not as robust as the results indicated with Statistics Canada noting that the gains did not keep pace with the population growth
USDCAD will be supported in the 1.3500 area this morning and until 10:00 am when a $1.5 billion option strike rolls off. The results will not deter the Bank of Canada from cutting rates by 25 bps tomorrow.
WTI oil rallied on news that Libya declared Force Majeure on its El-Feel field as it was expected due to previously announced plans to halt oil exports due to an internal political dispute. However, China’s economic growth concerns more than offset supply disruption fears and WTI dropped from 74.41 to 72.06.
USDCAD technicals
The intraday USDCAD technicals are bullish while trading above 1.3500. However the rally is merely a correction unless prices break above resistance in the 1.3620 area.
The daily chart shows USDCAD in a 1.3440-1.3620 consolidation zone albeit with a bearish bias are below 1.3620
For today, USDCAD support is at 1.3505 and 1.3480. Resistance is at 1.3560 and 1.3590. Today’s Range 1.3510-1.3590.
Chart: USDCAD daily
Source: DailyFX
Miss a Day—Miss Very Little
Regional German elections delivered yet another wake-up call to politicians as voters appear to reject ultra-left policies. Meanwhile, China was at its belligerent best, with a Chinese coastguard ship ramming a Philippine vessel on the Sabina Shoal—140 km from the Philippines and a distant 1,200 km from China’s closest island, though Beijing insists the shoal is their territory. Beijing is also threatening trade sanctions against Japan and Canada.
Today’s US economic data includes the ISM Manufacturing and ISM Employment Index, which might stir the market as US jobs data takes center stage. Inflation? That’s so yesterday.
EURUSD
EURUSD traded within a 1.1034-1.1079 range on Monday and overnight. Traders seemed unfazed by the success of the German far-right party AfD in regional elections. Despite their gains, they didn’t secure enough seats to form a government, and other parties are expected to shun any coalition with them. EURUSD price action may get choppy around 10:00 AM when $2.0 billion in 1.1040-50 option strikes expire.
GBPUSD
GBPUSD is consolidating Friday’s losses in a 1.3109-1.3151 range, with price action largely driven by US dollar sentiment. Yesterday’s UK Manufacturing PMI met expectations at 52.5, and now traders are holding their breath for the UK Services PMI data tomorrow and Friday’s US employment data.
USDJPY
USDJPY rallied on Monday but reversed overnight, trading in a 145.62-147.21 range before opening at 145.95 in New York. Traders shrugged off the still-weak Manufacturing PMI for August (actual 49.8, forecast 49.5, unchanged from July) and the surge in the US 10-year Treasury yield from 3.847% on Friday to 3.939% yesterday. Instead, they focused on BoJ Governor Kazuo Ueda’s comments about potentially raising rates if the economy and prices perform as expected, which slammed USDJPY. Also in play: China’s threat of severe economic retaliation if Japan tightens chip restrictions.
AUDUSD and NZDUSD
AUDUSD moved choppily within a Monday-Tuesday range of 0.6730-0.6798, sitting near session lows in New York. Weaker-than-expected August Manufacturing PMI data (actual 48.5 vs. forecast 48.7, previous 48.7) capped gains. Prices are under pressure from weak Chinese data and soft iron ore prices.
NZDUSD dropped from 0.6265 on Monday to 0.6183 just ahead of the New York open, weighed down by weak Chinese manufacturing data and general US dollar strength.
USDMXN
USDMXN traded sideways with a modest upward bias, rising from 19.6222 on Monday to 19.8746 overnight. Traders are uneasy about planned judicial reforms that threaten the independence of the judiciary. Mexican jobless rate data is due today.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: Monday 7.1027 vs exp. 7.1030 (prev. 7.1124).
PBoC fix: Tuesday 7.1112 vs exp. 7.1120 (prev. 7.1127)
Shanghai Shenzhen CSI 300 closed 3273.43
NBS August Manufacturing PMI 49.1 (forecast 49.5, July 49.4), Non-Manufacturing PMI (50.3 vs forecast 50, July 50.2).
Caixin August Manufacturing PMI 50.4, forecast 50, July 49.8).
China threatens Japan with retaliation if Japan imposes new chip export rules. China threatens anti-dumping investigation on canola imports from Canada.
