Photo: Bing AI
October 4, 2023
- ADP employment disappoints-rises just 89,000 vs forecast of 153,000.
- US 10-year Treasury yields drop from 4.884% to 4.764%.
- US dollar gives back some gains,
FX at a Glance
USDCAD Snapshot: open: 1.3696-00, overnight range: 1.3693-1.3725, close 1.3709
USDCAD is consolidating its losses, and it seems to be waiting for the other shoe to drop. That could be from today’s US political drama or else Friday’s Canadian and US employment data.
The ousting of US Senate House leader Kevin McCarthy drove US Treasury yields higher and USDCAD rallied in sympathy.
WTI oil prices didn’t get much support after the API weekly crude oil stock report showed inventories declined by 4.21 million barrels in the week ending September 29. That’s because traders feared rising interest rates would reduce global demand. OPEC is meeting today, and Russia and Saudia Arabia have already announced that they will extend production cuts until the end of the year.
The Canadian economic calendar is empty.
The intraday USDCAD technicals are bullish while trading above 1.3680 and looking for a break above 1.3750 to extend gains to 1.3860, then 1.4030. A move below 1.3640 suggests further losses to 1.3580.
USDCAD may consolidate in a 1.3640-1.3730 range until prices ease from extreme overbought levels on a daily chart.
For today, USDCAD support is at 1.3680 and 1.3640. Resistance is at 1.3730 and 1.3770. Todays Range 1.3670-1.3750
Chart: USDCAD daily
G-10 FX recap
It would be funny if it weren’t so alarming. A group of US Republican senators went to war against another group of Republican senators, and the victors managed to turf the Speaker of the US House of Representatives, a historical first. The fallout included a spike in the US 10-year Treasury yield to 4.884%, and Russian President Vladimir Putin dancing a Kalinka because the Speaker’s ouster jeopardizes further weapon shipments to Ukraine.
Yesterday’s increase in US job openings (actual 9.61 million vs. July’s 8.92 million) underscored the resilience of the American economy. That conclusion did stand the test of time after todays disappointing private sector jobs data. ADP reported that employment rose just 89,000 in September compared to the forecast for a 153,000 gain. Augusts results were revised higher to 180,000 from 177,000.
Asian equity indexes followed Wall Street’s lead and closed with losses. Japan’s Nikkei 225 index fell 2.28%, while Australia’s ASX 200 dropped 0.77%. European bourses are mixed with the German Dax and French CAC 40 rising while the UK FTSE fell marginally. S&P 500 futures are 0.13% higher. Gold prices continue to slump under the weight of higher US interest rates but firmed after the ADP data.
It should be a lively trading session with the ISM Services PMI data, Fed-speak from Chicago Fed President Austan Goolsbee and Fed Governor Michelle Bowman alongside US political drama providing the fuel.
EURUSD is at the top of its 1.0452-1.0524 range, despite a mess of mixed economic data. German and Eurozone composite and services PMI rose a tad more than expected, but the results followed sharply lower readings in August. The statement noted that underlying demand remained weak. Eurozone PPI was down 11.5% compared with August, while retail trade dropped 1.2%. ECB President Christine Lagarde said, ‘we consider that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration.’
GBPUSD rallied from 1.2037 to 1.2161 in NY due to profit-taking and a Services PMI reading that was better than the ‘flash’ estimate. The index posted 49.3 in September, which was above the 47.2 flash estimate but below August’s 49.5 result. Bank of England Governor Bailey sounded like Eeyore when he warned that the UK economy could face ‘further large shocks that we don’t know about.’
USDJPY was sleepily drifting in a 149.67-147.90 range in Asia when it suddenly plummeted to 148.74. BoJ intervention perhaps? Finance Minister Shunichi Suzuki responded with ‘no comment’ when asked. Nevertheless, one look at an intraday chart is all the confirmation needed. USDJPY is 148.91 in NY trading. Japan’s September Services PMI rose to 51.8 from 50.5 in August.
AUDUSD outperformed its kiwi cousin while trading in a 0.6287-0.6338 range, partly because of a robust Judo Bank PMI report. Services Business Activity PMI rose to 51.8 in September from 47.8 in August. A Judo Bank economist said the findings suggest inflation will remain ‘high and uncomfortable’ for the rest of 2023, which implies a more hawkish RBA outlook.
NZDUSD traded in a 0.5871-0.5922 range, with the peak reached just before the monetary policy announcement. The RBNZ left interest rates unchanged at 5.50% and said that rates may need to be at a restrictive level for a more sustained period of time.
FX high, low, open
Chinese markets are closed for Golden Week holidays.
Bank of China Fix: closed. previous 7.1798.
Shanghai Shenzhen CSI 300 closed for Golden Week.
Chart: USDCNH (offshore)