Photo:Bing Image Creator

August 23, 2023

  • Risk sentiment rebounds after yields fall and stocks rise.
  • US Durable Goods Orders fall more than expected.
  • USD dollar gives back some gains while it consolidated overnight.

FX at a Glance

Source: IFXA/Raymond Peters

USDCAD Snapshot:  open: 1.3542-46, overnight range: 1.3511-1.3550, close 1.3525

USDCAD is mimicking a ping pong ball, bouncing back and forth repeatedly and showing no conviction for either direction.  That won’t change until after Fed Chair Powell’s speech tomorrow, and even then, the risk remains that Powell’s remarks are balanced and cause little or no fanfare.

USDCAD reached its highest level since May 31 yesterday but ran out of steam and dropped inside this week’s range.  Canada Retail Sales data did not help sentiment The June results were better than expected but the details were mostly weaker.

WTI oil traded in a $78.24-$79.26 range overnight.  Prices were supported by yesterday’s EIA data showing US crude inventories fell 6.13 million barrels last week.  Gains were limited after reports the US may ease restrictions on oil imports from Venezuela.

There are no Canadian economic reports today.

USDCAD Technicals

The intraday USDCAD technicals are neutral inside a 1.3505-1.3880 range.  A break above resistance in the 1.3580-1.3600 area targets 1.3660 while a move below 1.3500 suggests further losses to 1.3440.

The uptrend line from August 1 comes into play in the 1.3500-05 area.

For today, USDCAD support is at 1.3505 and 1.3460. Resistance is at 1.3550 and 1.3580. Today’s range 1.3505-1.3560

Chart: USDCAD  weekly

Source: Saxo Bank

G-10 FX recap

“Round and round.” “What comes around goes around.” Those words describe a lot of things, including the state of today’s financial markets, equity markets in particular. One day, traders are risk-averse, and the next, it is “buy everything.”

Also going round and round are parts of Wagner Group head Yevgeny Prigozhin, who found his private jet exploding in mid-flight due to a malfunctioning relationship with Mad Vlad Putin.

Japan appears to have embraced the concept of genetically modified seafood. The government said “Fukushima” to opposition and released wastewater from a ruined nuclear reactor, into the Pacific Ocean.

Risk sentiment took a turn for the better yesterday after US Treasury yields slid down to 4.18% from 4.32%, garnering some support from a rise in US housing starts. The US dollar retraced earlier gains, partly because of weaker-than-expected S&P Global PMI data. That move is a tad sketchy as the US S&P PMI data usually takes a back seat to the ISM PMI report, which is released on September 1.

Wall Street closed with gains, with the S&P 500 closing 1.10% higher. Nvidia announced better-than-expected earnings after the close, which helped Asian equity markets end the session with gains across the board.

European bourses opened in positive territory, and all are recording modest gains so far. S&P 500 futures are flat to positive.

The US dollar found a bit of a bid after weekly jobless claims rose 230,000, 10,000 below last week’s result and adds fuel to the strong labour force debate.  Durable Goods Orders fell 5.2% in July (forecast-4.0%). Excluding transportation, new orders increased 0.5 percent.

Traders are getting lathered up in anticipation of “profound, market-moving insight” from Fed Chair Jerome Powell on Friday. Chances are they will be sorely disappointed. The latest batch of economic data provides convincing arguments for both a rate hike or leaving them unchanged, while the raft of top-tier data from next week until September 20 suggests Powell will not be motivated to tip his hand in either direction.

EURUSD was adrift in a 1.0847-1.0876 range in the absence of any Eurozone economic data then fell to 1.0822 after this mornings data. The intraday technicals are bearish below 1.0920, and traders are content to await the outcome of the speeches from Jackson Hole.

GBPUSD traded sideways in Asia, then fell from 1.2728 to 1.2640 in NY trading.  Gain are limited by concerns about the weak UK economy.

USDJPY traded in a tight 145.47-145.89 band and bounced to the top after US 10-year yields rose to 4.235% from an 4.184% overnight.

AUDUSD traded in a 0.6427-0.6487 range due to broad US dollar strength and fears of slowing China growth capping upside moves.

Top of Form

FX high, low, close

Source: Saxo Bank

China Snapshot

Bank of China Fix: today 7.1886, expected 7.2791, previous 7.1988.

Shanghai Shenzhen CSI 300 rose 0.73% to 3723.43.

Chart: USDCNY 1 month

Source: Bloomberg