US holiday sidelines overseas markets
China Services PMI misses guess while Eurozone PMI tops forecasts
US continues its post-NFP drift lower
USDCAD open 1.2345-49, Overnight range, 1.2314-1.2353, Previous close 1.2324
FX at a Glance
FX Recap and outlook
Global markets are mostly sidelined due to today’s US holiday. Americans are playing with their fife and drums and marching down Main Street USA, celebrating 245 years of independence from Great Britain.
The major Asian equity indexes closed on a mixed note. Japan’s Nikkei 225 lost 0.64%, Hong Kong’s Hang Seng fell 0.59%, while Australia’s ASX 200 ticked up 0.09%. European bourses are trading sideways, while S&P 500 futures are flat. Gold and oil prices are posting gains. US 10-year Treasury yields are a tad softer at 1.43%.
Friday’s 850,000 gain in US nonfarm payrolls may have beat the forecast, but the details suggest the Fed is right to stick to their view for the timing of the next rate increase.
The US dollar gave back its pre-NFP gains.
Weaker than expected China Caixin Services PMI (actual 50.1, forecast 55.7, May 55.1) also tempered enthusiasm about a robust post-pandemic global economic boom.
WTI oil prices are steady above $75.00/barrel, awaiting United Arab Emirates (UAE) and Opec to resolve their differences over UAE production. The talks continue today.
EURUSD is trading at the top of its 1.1852-1.1879 range. Modestly higher than expected market Composite PMI (actual 59.5 vs forecast 59.2)and Services PMI (actual 58.3 vs forecast 58) data, underpinned prices. ECB board member Isabel Schnabel said a temporary inflation overshoot was necessary. However, Dutch Central Bank Governor Klaas Knot disagreed, saying the ECB may be underestimating inflation. The intraday EURUSD technicals are bullish above 1.1850, looking for a break above 1.1890 to extend gains to 1.1950.
GBPUSD rallied from Friday’s low of 1.3735 to 1.3858 in Europe as traders unwound pre-NFP positions and digested positive UK data and developments. June Services PMI at 62.4, beat the 61.7 May result. Prices were also supported by Boris Johnson’s plan to end most COVID-19 restrictions by July 19, as 86% of Brits have at least one COVID-19 shot. The short term technicals turned bullish, and are looking for a test of 1.3940.
USDJPY extend Friday’s post-NFP swoon. Prices plunged from 111.65 pre-NFP to 110.81 in early Toronto trading today. The slide in 10-year Treasury yields to 1.43%, and profit-taking weighed on prices.
AUDUSD rallied from Friday’s low of 0.7448 to 0.7536 today, supported by broad US dollar weakness and mostly positive economic data. May Retail Sales rose 0.4% m/m (forecast 0.1%), and Services PMI beat expectations (actual 56.8 vs forecast 56). Traders are looking ahead to tomorrow’s RBA monetary policy meeting. Analysts expect a dovish outcome, leaving AUDUSD vulnerable.
USDCAD snapped a two-week uptrend when prices broke below 1.2340 Friday. However, follow-through selling was shallow, and prices are trading at 1.2345 in Toronto. Price action is driven by broad US dollar sentiment, although steady to firm WTI prices act as a drag on gains. The Bank of Canada Business Outlook Survey (BOS) is due today.
FX activity is likely to remain subdued until after the release of the FOMC minutes on Wednesday afternoon.
USDCAD technical outlook
The USDCAD technicals are bearish following the break below 1.2340, looking for a break below 1.2250 to extend losses to 1.2000. A break above 1.2420 shifts the focus to 1.2480. For today, USDCAD support is at 1.2310 and 1.2280. Resistance is at 1.2360 and 1.2390 Today’s range 1.2310-1.2380
Chart USDCAD 4 hour
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank