October 28, 2024
- Oil prices plunge after Israel slaps, but does not spank, Iran
- Japan’s ruling coalition loses majority.
- US dollar firms on safe have demand.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3895, overnight range 1.3886-1.3907, close 1.3894
USDCAD rallied on the back of broad-based, safe-haven demand for US dollars and had a peak above the 1.3800 resistance level. The 6.6% plunge in WTI oil prices (peak-to-trough) did not have much impact except to provide another reason for limiting USDCAD losses.
The CAD/US 10-year yield spread widened to -102.5 in favour of the US which has also encouraged USDCAD buying. BoC Governor Tiff Macklem will have some explaining to do when he testifies before the House and Senate on Tuesday and Wednesday.
There are no Canadian or US economic releases of note today.
USDCAD technicals
The intraday technicals are bullish above 1.3860 and looking for a break above 1.3920 to extend gains to 1.3950. A move below 1.3860 will lead to a re-test of 1.3830.
Longer term, the USDCAD rally from the beginning of the month is intact while prices are above 1.3830 and looking for a move to 1.3950 and then 1.4100. However, gains may be limited as short CAD long US dollar speculative positioning is looking overbought, which is confirmed by RSI studies.
For today, USDCAD support is 1.3860 and 1.3830. Resistance is 1.3920 and 1.3950.
Today’s Range 1.3860-1.3930
Chart: USDCAD daily
Source: Investing.com
US Election Overshadows Data
There are only eight days until America votes. The Wall Street Journal, Bloomberg, and New York Times claim that Trump and Harris are running neck and neck in a race too close to call. A few betting sites have Trump as a “slam-dunk” winner. The usually important US employment data, which includes JOLTS, ADP, weekly jobless claims, and nonfarm payrolls, will play second fiddle to the latest election polls and rumors.
Israeli Restraint Sinks Oil Prices
Israel’s highly anticipated retaliation on Iraq did not leave Tehran a smoking ruin, nor did it lay waste to Iran’s oil production infrastructure. But it did demonstrate to Ayatollah Khamenei that the Israeli air force can strike any target at any time. Oil traders were relieved, and WTI gapped lower, falling from 71.90 to 67.14, before rising to 67.52 in NY.
EURUSD
EURUSD traded in a 1.0782-1.0821 range, with the low seen in Asia. Prices got a bit of a boost from the 6.6% drop in oil prices, but gains are capped by widening US and EU yield spreads. Germany’s Q3 GDP data is due Thursday, and it could mean a technical recession. The EURUSD downtrend channel that started on October 1 is intact between 1.0720 and 1.0860.
GBPUSD
GBPUSD bottomed out at 1.2940 in Asia, then rallied to 1.2986 by the NY open, with price action following broad US dollar moves. However, traders are cautious ahead of this week’s UK budget, which is expected to raise taxes, including those on capital gains, as well as some spending cuts. Essentially, Chancellor Reeves will annoy rich and poor alike.
USDJPY
USDJPY gapped higher at the open, rising from 152.30 at Friday’s NY close to 153.88 in Asia, following news that Japan’s ruling coalition parties failed to garner a majority. Prices retreated to 152.53 in early NY as the focus shifted to Thursday’s Bank of Japan monetary policy meeting. No change in rates is expected.
AUDUSD and NZDUSD
AUDUSD tracked broad US dollar moves and traded in a 0.6579-0.6618 range, and it is near the top of that range in NY. Traders are looking ahead to Wednesday’s inflation and retail sales data. NZDUSD traded in a 0.5757-0.5790 range, with volumes lower than usual as New Zealand markets were closed for Labour Day.
USDMXN
USDMXN rallied in a 19.9383-20.0864 range due to increased concerns about a Trump victory and its implications for higher tariffs on imports from Mexico. In addition, recent economic data, including inflation and retail sales, were below expectations.
BTCUSD (Bitcoin)
Bitcoin traded with a bit of a bid in a 67,019-68,873 range. The technicals are bullish while prices are above 66,500.FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1307 (prev. 7.1090)
Shanghai Shenzhen CSI 300 rose 0.20% to 3964.16
The PBoC continues to gravitate away from using the medium term lending facility as a key rate transitioning to a seven-day reverse repo facility as the main policy tool. It will lead to the PBoC having more bonds to sell to control long-end yields,
Chart: USDCNY and USDCNH
Source: Investing.com
