Source: the Learning station/youtube

November 2, 2022

  • NZDUSD rises on firm employment data
  • Markets will be dull until FOMC meeting
  • US dollar opens on a mixed note.

FX at a glance: 

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3596-99, overnight range 1.3589-1.3633, close 1.3631

USDCAD drifted lower in Asia then chopped about in Europe due to a mix of position adjusting and slightly firmer oil prices.

Bank of Canada Governor Tiff Macklem explained the recent interest rate hike to the Senate Committee on Banking, Trade, and the Economy last evening. His opening statement appeared designed to appeal to those wanting a halt to rate hikes, those concerned high inflation remained a serious problem, with a nod to acknowledging that the BoC’s actions hurt some people.

The Governor’s comments can be summed up like a Michael Jackson song: “hiking rates too high is bad, not hiking rates enough is bad. I’m Bad!”

WTI oil prices rallied from $88.18/b near the end of Tuesday to $89.72/b after the weekly API crude report showed a 6.53-million-barrel drop in inventories last week. Prices were also lifted by hopes and rumours that China would lift some Covid restrictions which would help to boost demand. The gains evaporated in Europe with prices dropping to $88.11 in NY ahead of the Fed.

USDCAD will trade quietly while tracking broad US dollar moves until the 2:00 pm FOMC statement.  The Canadian economic calendar is empty.

USDCAD Technical outlook

The intraday USDCAD technicals are bearish below 1.3640 (hourly chart), looking for a break of support in the 1.3560 area to extend losses to the 1.3490-1.3500 support area.  A break above 1.3640 targets 1.3770.

The downtrend from October 14 is intact while prices are below 1.3670 looking for a break below 1.3490 to extend losses to 1.3350.

For today, USDCAD support is at 1.3560 and 1.3510.  Resistance is at 1.3630 and 1.3670.  Today’s range 1.3560-1.3660

Chart: USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

Ho-hum.  The session ahead of an FOMC meeting doesn’t usually bring much FX action and last night was no exception.

The FOMC Hokey-Pokey

“You put a big rate hike in, you take a big rate hike out, then you put a big rate hike in, and you shake it all about.  You do the hokey pokey, and you pivot all about.”

The PBoC is allowing the yuan to slide and combined with rumours that Covid restrictions in many areas would be easing gave risk sentiment a positive boost in Asia. Even a 17-missile barrage from North Korea which landed near South Korean waters didn’t cause much of a commotion unless you happened to be in the vicinity of where they landed.

 Chinese equity index gains (Hang Seng 2.41%) and CSI 300 1.20%) dwarfed other Asian equity markets.  Australia’s ASX 200 rose 0.14% while Japan’s Nikkei 225 was unchanged.

European bourses gave up earlier gains and are flat to modestly higher as are S&P 500 and DJIA futures.  The US 10-year Treasury yield is steady at 4.05%.  Gold prices are moderately higher at $1655.90.

EURUSD traded in a narrow 0.9871-0.9911 range.  German trade and employment reports had little impact on the currency as traders await the FOMC decision. The single currency is getting a little support from yesterday’s comments by ECB policymakers who suggested interest rates need to rise a lot higher to tame inflation.

GBPUSD drifted in a 1.1476-1.1525 range with traders fearing a dovish Bank of England meeting Thursday and a hawkish Fed outcome today.

USDJPY found a bottom at 146.84 in early NY trading after peaking at 148.36 overnight.  The minutes from the BoJ September meeting did not offer anything new while the threat of BoJ intervention limits gains.

AUDUSD traded quietly in a 0.6386-0.6429 range supported by improved risk sentiment.

NZDUSD rose from 0.5836 to 0.5889 in NY, with prices boosted by robust employment data and wage inflation gains. RBNZ Governor Adrian Orr warned “The rising global interest rates necessary to curb inflation will test New Zealand’s financial resilience.”

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

Source: Saxo Bank

China Snapshot

Today’s Bank of China Fix: 7.2197, previous 7.2081

Shanghai Shenzhen CSI 300 rose 1.20% to 3677.81

PboC Governor Yi Gang says China will keep exchange rate stable at a reasonable and balanced level.

China reportedly getting ready to ease Covid restrictions

Chart: USDCNY 1 month

Source: Saxo Bank