Picture: Wikimedia commons

November 12, 2021

  • Covid resurgence and Geopolitical tension in Europe
  • Michigan consumer Confidence expected at 72.4 (71.7 previously)
  • US dollar consolidating gains

FX at a Glance:

Source: IFXA Ltd/RP

USDCAD Snapshot   Open 1.2595-99, Overnight Range 1.2571-1.2603 Previous close 1.2580

USDCAD maintained a small bid overnight mostly due to saofter oil prices.  WTI slid to $79.89/barrel overnight from $82.25/b yesterday in part because Opec lowered its 2021 demand forecast.  Traders are also concerned that the Biden administration will release Strategic Petroleum reserves.

USDCAD is underpinned by fears that stubbornly high US inflation will force the Fed to raise rates earlier than expected.  The situation is the same in Canada and the BoC could also raise rates ahead of schedule.  More clarity on the Canadian inflation picture will be available next Wednesday, when October CPI data is available.  Analysts forecast a 4.5% y/y gain.

Technical view:  The intraday USDCAD technicals are bullish above 1.2420 looking for a break above 1.2650 to extend gains to the post-pandemic downtrend line level of 1.2690.   A drop below 1.2530 suggests a re-test of 1.2470 support.  The daily chart suggests a bullish “cup and handle” pattern is forming with if accurate projects further gains.

For today, USDCAD support is at 1.2530 and 1.2470.  Resistance is 1.2610 and 1.2630. Today’s range 1.2570-1.2630

Chart USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

Market action was subdued overnight. Traders continue to digest the impact of the blow-out US inflation numbers with the US dollar in demand, 10-year Treasury yields consolidating in the 1.57% area, and global equities mixed to slightly higher.

There wasn’t a lot of top-tier economic data available in Europe, leaving news headlines to provide direction. Those headlines were a tad unnerving.

US and European officials are concerned about Russian military actions along the Ukraine border. Belarus leadership, irked at EU sanctions following its last election, is reportedly facilitating mass refugee migration across its borders into Poland. President Lukashenko threatened to disrupt Russian gas supplies which cross its borders, although Russia said that would not happen.

The World Health Organisation (WHO) said Europe and Central Asia are the only regions where COVID-19 cases and deaths are rising. Traders are concerned that another outbreak would derail the recovery.

Asia equity markets closed in positive territory led by a 1.13% rise in Japan’s Nikkei 225 index. European bourses are trading mixed. The UK FTSE100 is modestly lower, while the French CAC index leads the gainers. S&P 500 and DJIA futures are indicating a positive open on Wall Street. WTI and gold are down.

EURUSD is trading at the top of its 1.1437-1.1455 range. There are around $1.8 billion EURUSD option strikes in the 1.1550-1.1575 area expiring today.  Eurozone Industrial Production fell 0.2% m/m in September, which was better than the -0.5% drop expected. The drop was blamed on supply chain issues. ECB policymakers continue to chirp that inflation will return to target by 2023. The EURUSD technicals are bearish below 1.1500.

GBPUSD traded modestly firmer, rising from 1.3355 to 1.3410, primarily due to profit-taking ahead of the weekend. The resurgence of Brexit issues and the threat by the EU they are prepared to scrap the Brexit trade agreement if Britain triggered Article 16, combined with broad US dollar strength, is weighing on prices. GBPUSD is in a downtrend below 1.3500, a level guarded by resistance at 1.3430.

USDJPY is steady in a 113.96-114.29 band with prices underpinned by US 10-year Treasury yields at 1.57%. There are reports that the Japanese government’s latest stimulus plan will exceed $350 billion.

AUDUSD and NZDUSD are a tad firmer, mainly due to profit-taking.

Today’s US data includes Michigan consumer Confidence and JOLTS job openings.

Chart of the Day:  Rivian Automotive: Market cap $120.46 billion, 2021 vehicle deliveries -156                                                            General Motors Company: Market cap $89.75 billion, Q3 2021 units sold 446,997

Source: Yahoo Finance.com

FX open, high, low, previous close

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.4065 Previous 6.4145

Shanghai Shenzhen CSI 300 fell 0.21% to 4,888.38

Chart: USDCNY 1 month

Source: Yahoo Finance