Picture: Time.com

November 10, 2021

  • US inflation surges 6.2% y/y in October, Jobless claims fall again
  • China October PPI and CPI rise higher than expected
  • US dollar opens higher, CAD outperforms

FX at a Glance:

Source: IFXA Ltd/RP

USDCAD Snapshot   Open 1.2420-24, Overnight Range 1.2413-1.2444, Previous close 1.2436

USDCAD climbed to 1.2482 yesterday, coinciding with the option expiry window, then slid lower and closed nearly unchanged from Monday. Prices were steady in Asia then dropped to 1.2413 when Europe opened. USDCAD is on the defensive supported by WTI oil prices climbing to $84.92/b. API reported a 2.485 million barrel draw down in US crude inventories as of November 8 and traders are hoping today’s EIA report is similar. WTI is trading at $83.72 in NY.

The EIA Short-term Energy Outlook predicts “that global oil stocks will begin building in 2022, driven by rising production from OPEC+ and the United States, along with slowing growth in global oil demand.”

USDCAD is inching lower following the US inflation report thanks to WTI oil prices rising from the pre-US data low of $83.33/barrel to $84.34, post-data.

Technical view:  The intraday USDCAD technicals are modestly bearish with the overnight breach of minor uptrend line support at 1.2430 which opens the door to a test of 1.2370. However, the move is just a correction until the June uptrend line at 1.2330 is broken, which would set the stage for 1.2030 test.

For today, USDCAD support is at 1.2410 and 1.2370.  Resistance is 1.2470 and 1.2510. Today’s range 1.2380-1.2450

Chart USDCAD daily

Source: Saxo Bank

G-10 FX recap and outlook

FX traders anticipating higher than expected US inflation and jobless claims data failed to see much benefit after both reports beat expectations. However, equity bears banked some profits as Wall Street futures dipped on the news.

Headline CPI rose 6.2% y/y which the Bureau of Labor Statistics noted was “the largest 12-month increase since the period ending November 1990.

Core CPI rose 4.6 percent over the last 12 months, the largest 12-month increase since the period ending August 1991.

Source: Bureau of Labor Statistics

Weekly jobless claims fell 4,000 to 267,000 which is the lowest level since March 14, 2020.

The US dollar started today’s NY session on firm footing ahead of today’s US data and has managed to maintain those gains after the CPI and weekly jobless claims reports.

Higher global inflation fears were exacerbated following the higher than expected Chinese PPI data which rose 13.5% y/y in October compared to 10.7% in September y/y.

EURUSD traded in a 1.1559-1.1594 range overnight, then dropped to 1.1547 in early NY trading, where I sits in NY as of 6:00 am PT. German CPI rose 0.5% m/m as expected. The German Council of Economic Advisors appeared to be concerned about the dovish ECB bias. They said, “the economy could be harmed if the ECB fails to react in a timely manner. As such, the Bank should put forward a normalisation strategy.”

The Council also downgraded German 2021 GDP and boosted 2022 GBP forecasts. EURUSD has chunky option strikes in the 1.1550-1.1570 area rolling off at 10:00 am ET.

GBPUSD followed EURUSD lower, dropping from 1.3564 to 1.3502 in NY due to general US dollar strength. GBPUSD gains may be limited until the EU and UK resolve differences around French fishing rights and the Irish Border.

USDJPY climbed from 112.79 to 113.24 in anticipation of a robust CPI print and extend the gains to 113.48 following the data.  The US  10-year Treasury yields closed at 1.441% yesterday and inched higher to 1.479% today.

AUDUSD was steady in a 0.7354-0.7380 range with traders looking ahead to Thursday’s employment report. Analysts are forecasting 50,000 jobs in October, compared to the loss of 138,00 in September.

Chart of the Day:  GBPUSD

Source: Investing.com

FX open, high, low, previous close

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3948 Previous 6.3903

Shanghai Shenzhen CSI 300 fell 0.53% to 4.821.19

October CPI rose 1.5% y/y vs 0.7% in September, 0.7% m/m vs 0% in September

October PPI 13.5% y/y vs 10.7% in September

President Xi Jinping and President Biden may meet virtually next week

Chart: USDCNY 1 month

Source: Yahoo Finance