Source: Wikimedia

September 2, 2022

  • US gains 315,000 jobs in Aug, Unemployment rises to 3.7% from 3.5%
  • European equities and Wall Street Futures higher after NFP
  • US dollar stays opens bid but retreats after data

FX at a glance: 

Source: IFXA Ltd/RP

USDCAD Snapshot: open 1.3144-48, overnight range 1.3115-1.3168, close 1.3154

USDCAD was directionless in a 1.3136-1.3168 range overnight with trading subdued ahead of today’s US data but prices are trading at 1.3115, post NFP

The Bank of Canada is expected to raise rates by 75 bps next week, but the traders are ignoring the forecast, preferring to focus on the outlook for US rates.  A slew of hawkish fed-speak following last week’s Powell speech at Jackson Hole has underpinned the US dollar against the G-10 currencies.

Oil prices have see-sawed all week and WTI traded in a $86.39-$89.32 range, with prices weighed down by fears of reduced demand from a global growth slowdown. Meanwhile Russia announced this morning that they would halt oil sales to countries supporting a price cap for Russian oil.

The Canadian data calendar is empty.

USDCAD Technical outlook

The USDCAD technicals are bullish while trading above 1.3030, looking for a break above 1.3220 to extend gains to 1.3400.  A decisive break below 1.3030 would negate the uptrend and extend losses to 1.2820.

For today, USDCAD support is at 1.3130 and 1.3070.  Resistance is at 1.3190 and 1.3225. Today’s range: 1.3120-1.3210.

Chart: USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

Philadelphia hosted the theatrical presentation of This is Us vs Them, starring Joe Biden as Abraham Lincoln and Donnie Trump as Jefferson Davis. Enough said.

The US NFP is being described as a “goldilocks” result.  The 315,000 new jobs and an increase in the participation rate to 62.4 % from 62.1% smooths the way for the Fed to continue to raise rates aggressively as the economy appears able to withstand higher rates.

The immediate market reaction was to buy US futures, sell US dollars and buy commodities.  However, initial reactions are usually reversed and beware of profit taking ahead of the long weekend.

Asia equity indexes closed defensively. The major Chinese indexes were weighed down by ongoing covid and developer issues while Japan’s Nikkei 225 and Australia’s ASX traded defensively ahead of the US data.

European bourses, DJIA and S&P 500 futures are higher following the NFP data.  WTI oil gained 2.29% from yesterday’s close, while gold squeezed out a 0.42% gain.

The 10-year Treasury yield consolidated yesterday’s gains in a 3.233%-3.27% band. 

EURUSD traded in a 0.9944-1.0017 range, peaking in Europe and drifting down to 0.9998 in early NY. The outlook for the single currency is unchanged and bearish. It is supported by expectations for a 75 bp rate hike next Thursday, but gains are limited due to recession risks, the energy crisis, and the Russia/Ukraine war.

GBPUSD traded in a 1.1534-1.1581 range, with traders awaiting direction from the US employment data. The British Chamber of Commerce (BCC) forecasts the UK will enter a recession before the end of the year. The news was ignored as many other forecasters said the same thing, but much earlier. The UK will have a new Prime Minister just after noon today, with Secretary of State for Foreign, Commonwealth and Development Affairs Liz Truss expected to win decisively.

USDJPY surged to 140.42 from 136.50 last Friday due to the jump in US Treasury yields. The analyst’ speculation of BoJ intervention has been dismissed as the rally is due to the BoJ’s decision to keep Japanese rates artificially low.

AUDUSD drifted in a 0.6781-0.6812 range while NZDUSD traded in a 0.6053-0.6095 band. Traders are awaiting the NFP data.

It is Friday before a long weekend in Canada and the US. Liquidity will be at a premium in the afternoon as traders get an early start to the holiday.

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

Source: Saxo Bank

China Snapshot

Today’s Bank of China Fix: 6.8917, previous 6.8821

Shanghai Shenzhen CSI 300 fell 0.50% to 4,023.61

China/Taiwan tensions and heavy-handed covid measures weigh on markets.

Chart: USDCNY  1 month

Source: Bloomberg