Picture: YouTube

October 13, 2021

US inflation ticks higher in September

China trade data: Exports surge, imports plunge

US dollar bounces post-CPI, may be short-lived

FX at a Glance:

Source: IFXA/RP

USDCAD Snapshot   Open 1.2447-51, Overnight Range 1.2438-1.2477, Previous close 1.2467

USDCAD is consolidating recent lows, albeit with a negative bias, with prices reaching levels last seen at the beginning of August. WTI oil prices are at $80.06/barrel in NY, down from Monday’s $82.02/b peak but still 6.7% higher than they were a week ago and weighing on the currency.  Prices continue to be undermined by the belief that the BoC is on the road to normalizing monetary policy.  USDCAD demand may emerge if the FOMC minutes have traders refocusing on a hawkish narrative. 

Technical view:  The intraday USDCAD technicals are bearish below 1.2480 looking for a break below 1.2420 to extend losses to 1.2360, then 1.2305.  A move above 1.2490 targets 1.2550 but only a move above 1.2610 negates the downside pressure.

For today, USDCAD support is at 1.2430 and 1.2380.  Resistance is 1.2490 and 1.2530. Today’s range 1.2390-1.2490.

Chart USDCAD 4 hours

Source: Saxo Bank

G-10 FX recap and outlook

US September CPI was a tick higher than expected, rising 5.4% y/y compared to 5.3% expected.  The gain is due to supply-chain and labour shortages, post-pandemic.  Core CPI rose 4.0% as expected and unchanged from August.

US dollar demand immediately following the data ended quickly and prices aree back to their pre-data levels.

US 10-year Treasury yields inched higher following the inflation results, rising to 1.593% then reversed and dipped to 1.542% as of 6:40 am PT

The FOMC minutes are due at 11:00 am PT and will be scrutinized for further clues as to the Fed’s tapering and rate hike plans.

Many policymakers have discussed the outlook since the September 22 meeting, so the minutes should not have any surprises.

Asia equity markets closed in the red, except for China’s Shenzhen CSI 300 index, which climbed 1.15%, suggesting the not so subtle hand of “official intervention” at play.

European bourses are choppy.  The UK FTSE 100 is modestly lower but off its worst levels.  Germany’s DAX index is up 0.70%, and the French CAC index is 0.27% higher.  Wall Street futures point to a flat to positive open. Gold prices have eked out small gains.

EURUSD is trading at the top of its overnight 1.1530-1.1566 range.  There were no surprises from German inflation data, and traders ignored Eurozone industrial production data distorted by supply chain issues.

GBPUSD recouped Asia losses and rallied to 1.3643 from 1.3577.  UK August Manufacturing and Industrial Production rose more than expected.  August GDP Rose 0.4%, compared to July’s 0.1% m/m dip, but the result was a tick below the 0.5% m/m forecast.  The intraday technicals are looking for a break above 1.3650 to extend gains to 1.3700.

USDJPY is ignoring the dip in US Treasury yields and sits near the top of its overnight 111.36-111.61 range.

AUDUSD and NZDUSD traded defensively ahead of today’s US data.  AUDUSD mostly ignored weaker than expected October Consumer Confidence data.

Chart of the Day- Gold (XAUUSD)

Chart: Saxo Bank

FX open, high, low, previous close

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.4612, Previous 6.4447

Shanghai Shenzhen CSI 300 rose 1.15%% to 4,940.11

September Trade Balance USD 66.76 billion, Exports 28.1% y/y, (Aug 25.6% y/y,  Imports 17.6% y/y (August 33.1% y/y)

Chart: USDCNY 1 month

Source: Yahoo Finance