- US 10-year Treasury yield hits 3.27%
- S&P 500 futures gap lower at Asia open, falling 2.4%.
- US dollar soars, ahead of Tuesday FOMC meeting.
FX change at a glance
Source: IFXA Ltd/RP
USDCAD Snapshot: open 1.2858-62, overnight range 1.2776-1.2866, close 1.2787,
USDCAD dropped Friday immediately following Canada’s better than expected employment report (actual 39,800 vs forecast 30,000). The move was short lived as domestic data is irrelevant to global risk sentiment. That sentiment turned sharply negative following the hotter than forecast US inflation data. USDCAD rallied from 1.2728 to close at 1.2787. Prices climbed steadily overnight, reaching 1.2866 in NY with the gains encouraged by the drop in oil prices.
WTI fell from $122.60 on Friday to $118.04/b today due to a mix of US dollar strength and fears China’s latest Covid outbreak will dampen demand.
USDCAD direction is at the mercy of global risk sentiment and that sentiment is negative ahead of tomorrows FOMC meeting.
There are no domestic economic reports today.
USDCAD technical outlook
The intraday USDCAD technicals are bullish above 1.2670 but need to crack resistance in the 1.2860 area (61.8% Fibonacci retracement level of May-June range) to avoid a retracement to 1.2730. A topside break targets 1.2940
For today, USDCAD support is at 1.2805 and 1.2740. Resistance is at 1.2870 and 1.2920. Today’s Range 1.2805-1.2890
Chart: USDCAD 4 Hour
Source: Saxo Bank
G-10 FX recap and outlook
That roar you hear is not the sound of an outlaw motorcycle gang riding the highway, but the sums of agony as equity bulls tally their losses. It’s nasty out there.
S&P futures gapped lower at the Asia open in a poor liquidity environment due to an Australian holiday and sank steadily until just before NY opened. The Nikkei 225 closed with a 3.01% loss while Covid concerns exacerbated the Hong Kong Hang Seng slide, which finished down 3.39%.
European bourses are not faring well. The risk of soaring US interest rates combined with a clueless-looking ECB and Putin’s wish to rebuild the USSR have driven the German Dax down 2.15%, while political issues in France weigh on the CAC -40 index.
The UK FTSE 100 is down 1.85% ahead of the June 16 Bank of England monetary policy meeting. Gold and WTI oil prices lost 0.94% and 1.81%.
Global risk sentiment soured Friday when US inflation soared 8.6%, higher than expected, which sparked speculation the Fed would hike rates by 0.75% on Tuesday. There are no shortages of stories about Fed Chair Jerome Powell blowing the call on inflation and likely being forced to hike rates higher and faster than previously expected.
Geopolitical news did not help sentiment. Putin, Xi Jinping, and Kim Jung-un are running neck and neck in the “Nutbar Sweepstakes.” Putin’s recent speech discussing reclaiming “what is ours” in a veiled reference to rebuilding the USSR has a small lead. Xi Jing Ping is a close second. China’s Defence Minister Wei Fenghe said, “Taiwan is first and foremost China’s Taiwan,” and they view its annexation as a historic mission. Kim Jung -un is a close third as North Korea continues nuclear test preparations.
Mr Fenghe is not a student of history otherwise he would know that China’s Qing Empire ceded Taiwan to Japan in 1895. China’s claim is as valid as Incan ancestors claiming South America.
EURUSD extended Friday’s post-US CPI losses and dropped from 1.0520 to 1.0457 before inching higher in NY trading. The single currency is being spanked due to the ECB’s “laissez-faire” monetary policy approach in contrast to what is expected to be a very aggressive FOMC reaction on Tuesday. Prices continue to be weighed down by Putin’s war in Ukraine and concern French President Macron will lose his parliamentary majority. A break below 1.0340 suggests a drop to parity.
GBPUSD fell from its Asia peak of 1.2320 to 1.2201 following another round of weak UK data, exacerbating Friday’s plunge following the US inflation print. GDP fell 0.3% in April compared to the 0.1% drop in March, which renewed recession talk. ING economists suggest the data was not as bad as it looked due to the end of pandemic-related health spending. The Bank of England is expected to raise rates 0.25% on Thursday.
USDJPY soared on the back of rising Treasury yields, rising from 134.15 to 135.19, before retreating to 134.48 in NY. The gains got an added lift from the Bank of Japan’s determination to stick with ultra-easy monetary policy.
AUDUSD and NZDUSD slumped on the back of broad US dollar strength and weaker commodity prices.
The US data calendar is empty.
Chart of the Day-US 10-year yield since June 8
FX open, high, low, previous close as of 6:00 am ET
Today’s Bank of China Fix 6.7182, Previous 6.6994
Shanghai Shenzhen CSI 300 fell 1.17% to 4,189.35, Previous close 4,238.99
COVID cases jump, lockdowns re-occur. Beijing government says latest outbreak is “ferocious and explosive”. Shanghai ban’s in restaurant dining, again.
Chart: USDCNY 1 month
Source: Yahoo Finance