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FX at a Glance:
USDCAD Snapshot Open 1.2612-16, Overnight Range 1.2571-1.2628, Previous close 1.2575
USDCAD broke through topside resistance at 1.2605 in Asia overnight. The currency pair was collateral damage in a suddenly risk-averse world, spooked by fresh COVID-19 concerns, and geopolitical tensions. The antipodean currencies were thrashed, and the US dollar rallied on safe-haven demand. USDCAD got an added lift from relatively soft oil prices (compared to two-week ago levels). There are not any actionable Canadian economic reports available until July CPI data (forecast 3.4% y/y), Wednesday.
Technical view: The USDCAD technicals are bullish. The break above 1.2605, which capped gains since July 23, targets 1.2665, then 1.2805. For today, USDCAD support is at 1.2570 and 1.2530. Resistance is at 1.2630 and 1.2670. Today’s range 1.2570-1.2670
Chart USDCAD 4-hour, 90 days
Source: Saxo Bank
G-10 FX recap and outlook
US Retail Sales fell more than expected in July, declining 1.1% rather than the 0.2% drop that was expected. The news is not as bad as the headline suggests as the June data was tweaked higher. The US dollar extended overnight gains, following the news.
Risk was in the air overnight. China conducted land and sea military exercises near Taiwan, to demonstrate their unhappiness with what Beijing describes as “external interference and provocation.” Chinese and Russian military are also playing war games.
The ongoing stock market crackdown in China, continues to spook markets. The Shanghai Shenzhen CSI 300 index plunged 2.10%, leading Asia equity indexes lower. European bourses are in the red except the UK FTSE 100 which is modestly higher. S&P 500 and DJIA futures point to a negative open on Wall Street. Gold prices are a tad firmer, oil prices are softer, and US 10-year Treasury yields slid to 1.23%.
EURUSD traded in a 1.1761-84 range, the dropped through the floor, reaching 1.1740 after Retail Sales report. and is at the bottom of that band in NY. Eurozone Q2 GDP was confirmed at 2.0%, which was expected. EURUSD technicals are bearish after failing to move above 1.1800, then breaking below minor support at 1.1760.
GBPUSD extended overnight losses following the Retail Sales data. GBPUSD dropped from 1.3834 to 1.3787, on risk aversion, then felt to 1.3770 following the morning data. The UK employment report was better than expected but ignored. GBPUSD is bearish below 1.3750.
USDJPY popped from a pre-retail sales low of 109.13 to 109.55 in a bit of a short-squeezed, helped by US 10-year Treasury yields ticking modestly higher. Japanese officials are planning an extension to the coronavirus emergency until September 12.
NZDUSD plunged from 0.7028 to 0.6909 after the New Zealand government slapped a lockdown on the entire country because one (1) person in a population of 4.9 million contracted the coronavirus delta-variant. Can you say “over-reaction?” Westpac and ASB Banks quickly canceled their forecast that the RBNZ would raise rates at Wednesday’s meeting. AUDUSD followed NZDUSD lower.
Fed Chair Powell speaks at 2:00 pm ET.
Chart of the Day- NZDUSD 30-minute, 10 days
FX open, high, low, previous close
Source: Saxo Bank
Today’s Bank of China Fix, 6.4765 Previous day 6.4717
Shanghai Shenzhen CSI 300 fell 2.10% to 4837.40
China regulators turn focus to internet sector.
Chart: USDCNY 1 month
Source: Yahoo Finance