Photo: Bing AI
September 18, 2023
- Slow start to week with FOMC meeting looming.
- Canada CPI data due Tuesday.
- US dollar opens narrowly mixed after quiet overnight session.
FX at a Glance
USDCAD Snapshot: open: 1.3506-10, overnight range: 1.3496-1.3529, close 1.3532
USDCAD quietly consolidated Friday’s losses which were partly fuelled by higher oil prices. The oil price rally stalled overnight and USDCAD found support in the 1.3490 area. The price action is not a Canadian story at all but driven by speculation of the Fed’s intentions for monetary policy.
That may change tomorrow when Statistics Canada releases the August inflation report. Headline CPI is expected to surge to 3.8% y/y from 3.3% in July which may lead to fresh BoC rate hike speculation. Deputy Governor Sharon Kozicki speaks on Tuesday, and she may provide more clarity, although the next BoC meeting isn’t until October 25.
Chicago currency speculators are thinking USDCAD is close to a bottom as they increased short CAD (long dollars) by 16,900 contracts for the week ending September 12.
The intraday USDCAD technicals are bearish and looking to extend losses to 1.3380 on a break below 1.3490. However, a retracement above 1.3520 will delay such a move and target gains to 1.3580.
The uptrend line from May 2021 is intact while prices are above 1.3040 on a weekly chart.
For today, USDCAD support is at 1.3490 and 1.3460. Resistance is at 1.3560 and 1.3590. Today’s range 1.3480-1.3540
Chart: USDCAD daily
G-10 FX recap
The central banks are gathering. Not all together and not all at once, but even so, six of these mandarins of monetary policy will dispense their wisdom this week. But just as Middle Earth had the One Ring to rule them all, it will be Wednesday’s FOMC meeting that dictates market direction.
And speaking of ruling them all, China’s Foreign Minister Wang Yi met White House National Security Advisor Jake Sullivan in Malta, where China’s plans for world domination were on the agenda. US officials believe they have a “God-given” right to meddle in the affairs of countries around the globe and resent China’s attempt to carve out a niche.
FX markets traded cautiously overnight, with the major currencies stuck in relatively narrow ranges. Asian equity indexes closed negatively, with Australia’s ASX 200 losing 0.67%, and Japan markets closed for a holiday. European bourses opened negatively and extended losses, led by a 1.04% decline in the French CAC. The UK FTSE 100 lost 0.25%. S&P 500 futures are close to unchanged. The 10-year US Treasury yield is 4.347%, compared to 4.332% at Friday’s close.
EURUSD was steady in a 1.0656-1.0678 range. The single currency remains depressed after last week’s dovish ECB rate hike, and it is not likely to change as long as traders believe US rates will remain unchanged at an elevated rate for a long time. A comment from ECB Vice President Luis de Guindos suggesting markets have seen “the worst of inflation” is another EURUSD negative.
GBPUSD traded in a 1.2370-1.2405 range. Expectations for the Bank of England to hike rates by 25 bps on Thursday are fully priced in, and prices are trading defensively on anticipation of a dovish tone in the statement. That could change on Wednesday if UK CPI is higher than expected (forecast 0.7% vs July -0.4% m/m).
USDJPY barely budged in a 147.56-147.88 range as Japan was closed for the Respect for the Aged Day holiday. Traders are expecting another “non-event” Bank of Japan meeting on Friday.
AUDUSD was directionless in a 0.6427-0.6449 range, although prices saw a bit of support from better than expected Chinese data.
NZDUSD drifted in a 0.5897-0.5921 band, with New Zealand August PMI (actual 46.1 vs July 46.6) not a factor.
The US NAHB Housing Market Index is expected to remain unchanged at 50 today.
FX high, low, open
Bank of China Fix: today 7.1736, expected 7.2707, previous 7.1786
Shanghai Shenzhen CSI 300 rose 0.51%% to 3727.71.
Chinese authorities detained 20% of Evergrande’s wealth management employees as Xi Jinping looks for scapegoats to deflect attention from his incompetence.
Chart: USDCNY 1 month