Picture Flickr

November 24, 2021

  • US data confirms robust economy
  • Weak German IFO and new government weigh on EURUSD
  • US dollar firms as it consolidates yesterday’s losses

FX at a Glance:

Source: IFXA Ltd/RP

USDCAD Snapshot   Open 1.2691-95, Overnight Range 1.2667-1.2708, Previous close 1.2671

USDCAD peaked at 1.2742 yesterday as trader’s looked past Fed Chair Powell’s re-nomination and booked profits ahead of the US Thanksgiving holiday. Prices dropped 1.2660, closed at 1.2670 and consolidated in a 1.2667-1.2692 range overnight.

News that the US, China, Japan, India, South Korea, and the UK are releasing, or planning to release, oil from Strategic Petroleum Reserves did not have the impact on crude prices as anticipated. WTI extended opening gains and climbed from $75.30/barrel to close at $78.51/b, then traded sideways in a $78.05/b-$79.18/b range. Analysts at Goldman Sachs said the coordinated action is “A drop in the ocean” and only worth around $2.00/b.”  The November WTI downtrend is intact while prices are below $79.30/b.

USDCAD mostly ignored the oil price tumult and took direction from broad US dollar moves. Traders ignored Deputy Governor Paul Beaudry’s remarks. Mr Beaudry stated the obvious when he noted that: “The debt that households accumulated at unusually low interest rates will stay with them well into the future. In the meantime, interest rates can be expected to rise as the effects of the pandemic dissipate and excess capacity in the economy is fully absorbed.” 

USDCAD has a modest bid in early NY trading with prices tracking falling EURUSD prices and firmed after better than expected US GDP and jobless claims data.

Happy Thanksgiving to America. FX liquidity will deteriorate in the afternoon, as the US shuts down for the holiday.

Technical view:  The intraday USDCAD technicals are bullish while prices are trading above 1.2660, looking for a retest of resistance in the 1.2750-60 area, which if broken will extend gains to 1.3000. However, the downtrend from May 2020 is intact while prices are below the 1.2760-90 zone. A break below 1.2660 targets 1.2550

For today, USDCAD support is at 1.2660 and 1.2590.  Resistance is 1.2710 and 1.2750. Today’s range 1.2620-1.2720

Chart USDCAD hourly

Source: Saxo Bank

G-10 FX recap and outlook

The US dollar is clawing back yesterday’s losses on the strength of domestic data.  Weekly jobless claims were 199,000 the lowest level in 52 years. Headline durable goods orders fell 0.5% in October, but the ex-defence component rose 0.8% while ex-transportation was as expected at 0.5%.

The Bureau of Economic analysis (BEA) wrote: “Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the third quarter of 2021 according to the “second” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 6.7 percent. The deceleration in real GDP in the third quarter was led by a slowdown in consumer spending. A resurgence of COVID-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country.”

Source: US BEA

FX liquidity dis deteriorating against a backdrop of geopolitical static, which traders are blissfully ignoring.

China is upset that the US and others do not bow before their claims on Taiwan, and Beijing is making veiled threats to all if Taiwan is accepted as a member of the Trans-Pacific Partnership.

Russia is taunting NATO and the EU with reportedly 100,000 troops on the Ukraine border.

Iran and its nuclear aspirations continue to threaten peace in the Middle East, and without a nuclear agreement with the west, its aspirations may get bombed.

The Reserve Bank of New Zealand (RBNZ) hiked interest rates by 0.25% to 0.75% overnight in a move designed to reduce stimulus and combat rising inflation which is expected to rise to 5.0%. That is Economics 101.  In Turkey, Erdogonmics 101 says to cut interest rates to fight inflation.

The FOMC minutes are released this afternoon, but they should not cause much of a stir.  The FOMC just announced tapering at the November 3 meeting, and it is too soon to expect them to have discussed a faster pace of tapering.

EURUSD is trading at the bottom end of its 1.1204-1.1255 range, suffering from a soft German Ifo survey. The report said, “Sentiment in the German economy has taken a downward turn. The Ifo Business Climate Index fell from 97.7 points in October to 96.5 points in November. Companies were less satisfied with their current business situation, and expectations became more pessimistic.”

EURUSD is also suffering from concerns about the new German government led by Chancellor Olaf Scholz’s plans to fight the latest coronavirus outbreak. He is a Social Democrat heading a three-party coalition. In addition, prices are suffering from concerns the EU will impose a new slate of coronavirus measures. The EURUSD technicals are bearish, with the break below 1.1280 targeting 1.1030.

GBPUSD traded erratically in a 1.3354-1.3389 range. The price action is torn between broad US dollar demand, and UK rate hike concerns. CBI factory orders surged to 26 from 9 triggered some chop.  However, the Chief Economist at Pantheon Macroeconomics wrote, “Admittedly, the total orders balance overstates just how much demand increased in November, because it is not seasonally adjusted and nearly always falls in October, before bouncing back in November.”  GBPUSD remains in a downtrend below 1.3430.

USDJPY continues to struggle to keep gains above 115.00.  the currency pair broke above 115.00 on November 22 and since then has bounced in a 114.47-115.23 band. The rise in 10-year US Treasury yields to 1.645% from 1.553% on Monday is underpinning prices.

NZDUSD dropped from 0.6955 to 0.6898 on disappointment that the RBNZ only hiked rates 0.25% rather than 0.50% as many expected. Nevertheless, the statement is on the hawkish side, noting upside risks to inflation 

AUDUSD traded narrowly in a 0.7200-0.7226 range.

There are plenty of US data releases today, including Q3 GDP, durable goods orders, weekly jobless claims, PCE, and Michigan Consumer Sentiment.

Chart of the Day: NZDUSD

Source: Investing.com

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

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3903 Previous 6.3929

Shanghai Shenzhen CSI 300 rose 0.07% to 4,916.66

Biden administration invites Taiwan to Summit for Democracy

China opposes Taiwan’s bid to join Trans-Pacific Partnership

Chart: USDCNY 1 month

Source: Yahoo Finance