Source: Wikimedia Commons

August 4, 2021

EURUSD steady despite soft to mixed Eurozone data

Canadian dollar underperforms, and Kiwi outperforms

US dollar  opens higher except against Antipodeans and GBP

USDCAD open 1.2531-34, Overnight Range 1.2518-1.2550, Previous close 1.2533

FX at a Glance:

Source: IFXA/RP

FX Recap and outlook

“Sometimes I wonder What I’m gonna do, “Cause their ain’t no cure for the summer time blues”

Traders were looking to today’s ADP report to raise the stakes for early-onset tapering.  It didn’t.   ADP reported that private sector employment increased by 330,000 jobs in July.   Analysts were forecasting  an increase of 695,000.

The ADP report is a notoriously poor indicator of nonfarm payrolls, yet every month, traders react to the data.  Today’s weaker than expected results knocked S&P 500 futures lower, and undermined the US dollar.

The monthly nonfarm payrolls report is increasingly important to traders, US job gain performance is the only impediment to the Fed announcing QE tapering plans.

Fed Vice Chair Richard Clarida speaks about  “US economic outlook and monetary policy” at 10:00 am today, which will be closely watched to see if his views align with Chair Powell or Governor Christopher Waller.   Monday , Mr Waller said that if the next two NFP reports were as strong as the June results, it would suggest Powell’s “substantial progress” hurdle has been met

Traders are keen to see if his views align with Powell or Waller.

Asia equity markets were far from inspiring.  Japan’s Nikkei 225 closed down 0.21%, weighed down by concerns that officials discussed a national State of Emergency due to the coronavirus.   Chinese equity indexes rose, helped by better than expected Caixin PMI Services data.

European bourses are trading higher, underpinned by data showing the economic outlook is improving. S&P 500 futures are flat (6:25 am ET). Oil prices are down while gold prices are a tad firmer.  US 10-year Treasury yields are 1.172%.

EURUSD is trading in the middle of its 1.1843-1.1879 overnight range.  Traders are reluctant to drive prices above 1.1900  due to contrasting US and Eurozone monetary policies.

The EU announced interest rates would stay lower for longer, while the Fed is closing in on a tapering announcement.   ECB officials continue to offer dovish opinions. Governing council member and Latvia Central Bank governor Martins Kazaks said it was “much too early” to discuss PEPP.

Euro-area Services PMI reports were mostly below forecasts but still strong.  Eurozone July Services PMI was 59.8 compared to the forecast of 60.6, and Retail Sales rose 1.5% m/m.

GBPUSD traded in a 1.3902-1.3946 range, supported by a slightly better than expected Services PMI report (actual 59.6 vs previous 57.8).  Traders are looking ahead to Thursday’s Bank of England monetary policy meeting.  Upward revisions to inflation forecasts may lead to speculation of an earlier than expected rate hike and underpin the currency.

USDJPY traded in a 108.93-109.23 range with prices depressed by soft US 10-year Treasury yields and the spread of the coronavirus domestically.

NZDUSD soared, rising from 0.7020 to 0.7081, in NY, following robust economic data that fully priced in a rate hike at the August 18 RBNZ  monetary policy meeting.  The RBNZ OCR rate is 0.25% and is expected to rise to 0.50% on August 18 and 1.0% by year-end. NZ unemployment fell to 4.0% in the June 2021 quarter.

AUDUSD rallied from 0.7381 to 0.7423, but its gains lagged that of Kiwi.

USDCAD underperformed its antipodean cousins, bouncing around in a 1.2518-50 range due to sliding crude prices and the risk that WTI could drop below $70.00/b and revisit $65.00./b.  Crude traders are concerned about another supply-demand imbalance from slowing global growth due to the spread of the delta-variant virus and rising Opec production.

US ADP employment and ISM Services data are due.

USDCAD technical outlook

The intraday USDCAD technicals are unchanged.  They are bullish above 1.2420, looking for a break above 1.2600 to target 1.2740.  For today, USDCAD support is at 1.2510and  1.2480. Resistance is at 1.2560 and 1.2610.   Today’s range 1.2510-1.2590

Chart USDCAD 4 hour

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank