April 3, 2024
- US ADP employment beats forecast; February revised higher.
- Eurozone inflation slows to 2.4% in March.
- US dollar opens little changed.
FX at a Glance
Source: IFXA/RP
USDCAD Snapshot: open 1.3573-77, overnight range 1.3555-1.3589, close 1.3567
USDCAD drifted in a narrow range with prices tracking broad US dollar sentiment. The rise in the US 10-year treasury yield more than offset Mondays’ Business Outlook Survey which suggested Canadian rates may remain unchanged for a while longer.
USDCAD gains are hampered by firm oil prices. WTI traded in a $84.86-$85.85 range supported by the API report of a 2.28 million barrel draw-down of US crude inventories last week. Oil prices are also supported by ongoing tensions in the Middle East.
USDCAD barely acknowledged today’s ADP report which suggests markets believe the Fed is more focussed on inflation than jobs.
USD/CAD Technicals
The intraday USDCAD technicals are unchanged while prices remain in a 1.3540-1.3600 range. A break above 1.3600 targets 1.3630 and 1.3660. while a move below 1.3540 opens the door to 1.3480.
The longer term technicals show USDCAD in a gently rising uptrend channel from the beginning of the year which has the base at 1.3480 and the top at 1.3760
For today, USDCAD support is at 1.3540 and 1.3510. Resistance is at 1.3590 and 1.3620. Today’s range is 1.3530-1.3610.
Chart: USDCAD monthly.
Source:Investing.com
Shake it off.
That’s the advice this recent Forbes World Billionaires list entrant might offer to traders lamenting over lackluster markets, if, in an alternate universe, Taylor Swift had pursued trading instead of pop stardom.
Speaking of shaking it off, the Federal Reserve led a group of US regulators in thwarting an EU plan concocted by the Basel Committee on Banking Supervision. That plan would have forced regulators to require banks to disclose their strategies for meeting “green commitments.” The US officials believe the Basel committee was overstepping its mandate. Finally, common sense prevailed over “woke folly.”
Fed officials are also telling markets to “shake it off.” Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly said that they still expect 3 rate cuts in 2024, despite recent data that questions the need for even two rate cuts.
FX traders who were hoping today’s ADP Employment report would spark some action were sorely disappointed. ADP employment rose 184,000 in March easily beating the 148,000 forecast and the upwardly revised 155,000 reported in February. FX markets barely budged on the news.
ISM Services PMI is expected to rise to 52.7 from 52.6, a negligible change which won’t have any impact on trading.
EURUSD
EURUSD is trading a touch firmer in a narrow 1.0764-1.0781 range. Eurozone Core-inflation dipped to 2.9% y/y in March, down from 3.1% in February. The unemployment rate remained unchanged at 6.5%. The results increase the odds for a rate cut in April, but most pundits don’t expect any rate cuts until June.
GBPUSD
GBPUSD traded narrowly in a 1.2563-1.2588 range as the currency attempts to recoup its losses since Easter Monday. Prices continue to be weighed down by the jump in US interest rates, which contrasts with the shift to neutral by the Bank of England. GBPUSD technicals are bullish above the 1.2530-50 support zone.
USDJPY
USDJPY inched higher, rising from 151.44 to 151.80 in the face of broad US dollar strength after the US 10-year Treasury yield climbed to 4.393% yesterday from 4.19% on Monday. Japan Services PMI was a tad softer at 54.1 in March compared to 54.9 in February.
AUDUSD and NZDUSD
AUDUSD drifted lower in a 0.6503-0.6525 range while remaining above Tuesday’s low. The currency saw some support from the improved Chinese services data, which helped offset pressure from higher US rates. AIG Industry Index improved in March, pointing to a steady recovery in industry across the first quarter of 2024.
NZDUSD drifted quietly in a 0.5953-0.5978 range, climbing from its session low following the Chinese Services PMI report. However, prices have since drifted to the middle of the overnight range.
USDMXN
USDMXN traded in a 16.5510-16.5980 range, and it is sitting just above the mid-point of that range in NY. The bounce from the low following the JOLTS job openings data met headwinds from an upbeat Mexican business confidence report.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.0949 vs exp. 7.2282 (prev. 7.0957).
Shanghai Shenzhen CSI 300 fell 0.36% to 3567.80.
Caixin Services PMI 52.7 (forecast 52.7, February 52.5) The press release noted “Growth of supply and demand picked up pace. Improved market demand drove a continuous increase in supply. Business activity and total new orders both grew for the 15th straight month, while exports continued to grow amid a recovery of the global economy, pushing the corresponding measure to its highest level since June.”
CNY is showing signs of stress as it nears the lower end of the PBoC’s trading band. (CNY is permitted to move 2% either side of the daily fix). Part of the weakness is due to domestic policies and part of the weakness is due to broad-based US dollar demand.
Chart: USDCNY and USDCNH 4 hour
Source: Investing.com
