Picture: Historycollection.com

November 15, 2021

  • Upside surprise for China Retail Sales and Industrial Production,
  • ECB’s Lagarde repeats dovish mantra “undue tightening is not desirable.”
  • US dollar eases in cautious overnight session

FX at a Glance:

Source: IFXA Ltd/RP

USDCAD Snapshot   Open 1.2521-25, Overnight Range 1.2523-1.2554 Previous close 1.2552

USDCAD drifted lower overnight. Traders ignores slumping WTI oil prices and focused on broad US dollar weakness. Weaker than expected Michigan Consumer confidence data on Friday knocked US 10-year Treasury yields from 1.588% to 1.555% today, which also served to alleviate US rate hike concerns, for now.

Canada Manufacturing Sales and Wholesale Sales data were as expected and non-factors for traders

Technical view:  The intraday USDCAD technicals are bearish below 1.2550, but the short term bullish outlook is intact while above 1.2420.  Prices are consolidating gains between the 200-day (1.2470 and 100 day (1.2542) moving averages with 1.2500 providing another layer of support.

For today, USDCAD support is at 1.2510 and 1.2470.  Resistance is 1.2550 and 1.2590. Today’s range 1.2490-1.2550

Chart USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

Traders do not have any better idea of the direction of the US dollar or the timing of Fed lift-off today than they did on Friday. But that did not stop them from selling US dollars across the board, knocking US 10-year Treasury yields lower, or buying stocks.

Japan’s Nikkei 225 index led Asia equities higher, gaining 0.56%. European bourses ticked higher except for the UK FTSE 100, which is unchanged. S&P 500 and DJIA futures point to a positive open on Wall Street. Inflation fears underpin gold, although prices are modestly lower. Oil prices fell on fears the US man open Strategic Petroleum Reserve taps.

Better than expected, Chinese data gave markets a positive risk tone. Retail Sales and Industrial Production were higher than expected in October. However, some analysts warn that the gains may be short-lived due to the ongoing property slump and developer issues.

The highlight for today’s session may be the Biden/Jinping meeting, although it is likely to end with a fluff statement promising cooperation, yada, yada, yada.

EURUSD traded with a modest bid, rising from 1.1431 to 1.1447 due to broad US dollar weakness vs the majors.

ECB President Christine Lagarde optimistically suggested Euro area growth is expected to exceed pre-pandemic levels by the end of the year, although it is moderating due to supply chain bottlenecks. She retreated that the ECB’s three conditions to be met before raising rates will not be satisfied next year.

Coronavirus outbreaks are also serving to limit EURUSD gains. Austria plans to lockdown all unvaccinated people. The Netherlands is closing restaurants bars and supermarkets at 9:00 pm.

EURUSD technicals are bearish below 1.1560, with a break below 1.1430 targeting 1.1370.

GBPUSD rallied to 1.3439 from 1.3409 due to the improved risk tone. The Rightmove House Price Index fell 0.6%m/m in November compared to a 1.8% rise previously. Traders are more focused on Tuesday’s employment report. A robust result will inflame speculation that the Bank of England will raise interest rates in December. The GBPUSD downtrend is intact while prices are below 1.3470.

USDJPY is trading near the bottom of its overnight 113.76-114.04 range. Traders ignored the 3% y/y drop in GDP as it was due to COVID-19 restrictions and may get a boost from the latest fiscal stimulus plan (around $350 billion)) will help alleviate further losses. Prices were weighed down by the drop in US 10 year Treasury yields.

AUDUSD and NZDUSD were underpinned by the better than expected Chinese data and broad US dollar weakness.

Chart of the Day:  Gold-Consolidating gains from fears of rising inflation

Source: Yahoo Finance.com

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

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3896 Previous 6.4065

Shanghai Shenzhen CSI 300 fell 0.12% to 4,882.38

Industrial Production rose 3.5% y/y in October (forecast 3.0%)

Retail Sales rose 4.9% y/y vs forecast 3.5% y/y.

Xi Jinping and Joe Biden meet today. Topics of discussion are Taiwan, and China’s adherence to trade agreement

Chart: USDCNY 1 month

Source: Yahoo Finance