Photo: Pixabay

March 15, 2023

  • Risk aversion rears its head on European bank woes.
  • US Retail Sales offers mixed results, PPI drops.
  • US dollar opens mixed compared to yesterday but gains in the overnight session.

FX at a glance

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3713-17, overnight range 1.3662-1.3779, close 1.3686

USDCAD is rallying on the back of broad-based, safe-haven demand for US dollars as due to fears that Credit Suisse Bank woes are not isolated, and that other European banking institutions may face similar issues.  Shares in Credit Suisse fell over 28% today. Credit Suisse is the 2nd largest bank in Switzerland and it wouldn’t surprise anyone if the Swiss National Bank steps in with a support package.

USDCAD is also depressed by sliding oil prices.  WTI oil fell from $72.52 overnight to $69.80/b today and is down 9.0% since Monday.   The increase in US crude inventories last week (API 1.15 million barrels) and renewed global growth concerns stemming from rising risk aversion are weighing on prices.  A trio of EU countries (Estonia, Lithuania, and Poland) are calling for the Russian oil price cap to be cut to $51.45/b.

Canada housing starts data is on tap today.

USDCAD Technical Outlook

The intraday USDCAD flipped to bullish this morning.  The failure to extend losses below the February uptrend line at 1.3660 combined with the break above 1.3740 today puts a target on 1.3850.  A break below 1.3660 suggests the 1.3500-1.3850 consolidation.

For today, USDCAD support is at 1.3705 and 1.3660.  Resistance is at 1.3790 and 1.3850

Today’s range 1.3710-1.3810

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

Equity traders are experiencing a Julius Caesar moment. Just when the thought the worst was over and it was safe to buy stocks, they get stabbed in the back by a bout of risk aversion.

The negative sentiment is due to concerns about the health of Credit Suisse Bank and possible contagion effects.  The stock price lost another 28% today.

S&P 500 futures reacted and dropped 2.3% (peak to trough) in early NY trading while the US 10 year Treasury yield plunged from 3.695% to 3.483%.

Geopolitical tensions are also. climbing.

 A Russian fighter pilot reportedly took out a US Reaper drone over the Black Sea didn’t cause much of a stir yesterday and today there is a headline claiming China ordered its military to deepen war preparedness planning.

US Retail Sales fell 0.4% (forecast -0.3% m/m) but the Retail Sales control group jumped to 0.5% (forecast -1.2%).  PPI ex-food and energy rose 4.4% (forecast 5.2%) which provides some support for those that believe the Fed’s terminal rate is in the 5.0% area.

EURUSD topped out at 1.0759 before free-falling to 1.0563 to 1.0632 as contagion fears from the  Credit Suisse woes threaten to restrict the ECB’s ability to hike rates 50 bps tomorrow. January Industrial production data (0.9% y/y vs forecast 0.2% y/y) was not a factor.

GBPUSD peaked at 1.2181 then dropped to 1.2044 due to risk aversion due to the latest wave of negative risk sentiment. GBPUSD traders are also keeping a close eye on Chancellor Jeremy Hunt’s budget as the Kwasi Kwarteng debacle is still fresh.

USDJPY is plunging on safe-haven demand for yen with prices dropping from 135.10 to 132.58 in NY trading.

AUDUSD is caught up in the risk aversion US dollar demand environment and prices fell to 0.6634 from 0.6710.

FX open, high, low, previous close as of 6:00 am ET

Source: Saxo Bank

China Snapshot

Bank of China Fix:  6.8680, Previous: 6.8949.

Shanghai Shenzhen CSI 300 rose 0.06% to 3986.90.

February Retail Sales 3.5% y/y (forecast 3.5%, January -1.8%). Excluding Auto’s, Retail Sales rose 5.0%. Industrial Production 2.4% (forecast 2.7%, Jan. 1.3% y/y.)

Xinhua reports Chinese officials tell military to deepen war preparedness planning.

Chart: USDCNY 1 month

Source: Bloomberg