- South African COVID-19 variant panics global markets
- Equity markets tank, US 10-year yields drop to 1.53%
- US dollar rallies against commodity bloc, CAD worst performing
FX at a Glance:
Source: IFXA Ltd/RP
USDCAD Snapshot Open 1.2758-62, Overnight Range 1.2650-1.2772, Previous close 1.2648
USDCAD spiked as crude prices tumbled in a panicked reaction to news the Nu variant will disrupt travel. The 6.2% plunge in WTI prices fueled USDCAD gains in ultra-thin overseas markets. Arguably ,the rally is exaggerated due to poor liquidity from the US Thanksgiving holiday and the approach to year end. The move is a US dollar/COVID-19 story and has nothing to do with domestic Canadian issues.
Technical view: The intraday USDCAD technicals are bullish while prices are above 1.2650 but failure to decisively break above resistance in the 1.2770-90 suggests a retest of the uptrend line. A move above 1.2790 opens the door to 1.3000.
For today, USDCAD support is at 1.2720 and 1.2680. Resistance is 1.2770 and 1.2790. Today’s range 1.2690-1.2790
Chart USDCAD daily
Source: Saxo Bank
G-10 FX recap and outlook
Black Friday took a new meaning for global markets overnight. Traders weren’t buying electronics or clothing but instead selling currencies, oil, and stocks do to reports of a new COVID-19 variant. WHO Nu?
The new variant, first discovered in South Africa, is officially denoted as B.1.1.529.
It is highly transmittable, and governments are already issuing new warnings and travel restrictions.
The number of new cases is rather small, and officials from WHO are meeting today to determine if the new variant should be labeled as a “variant of interest or a variant of concern.”
The Twitter-verse is way ahead of them; it is in full hysteria-mode.
Gold (XAU) rallied to $1810.50 from $1790.37, which is a rather unimpressive move in the face of another coronavirus apocalypse. Gold traded close to $1850.00 on Monday.
The US 10-year Treasury yield plunged to 1.512% in Europe from 1.686% yesterday as traders pushed back the timing for the first Fed rate hike.
Oil took it on the chin. Concerns about a new wave of travel restrictions, in the face of fresh supply from Strategic Petroleum Reserves, knocked WTI down 6.2%. Prices fell from $78.14/b to $73.25/b. They have since climbed to $74.09 in NY trading.
The major equity indexes closed deep in the red. Hong Kong’s Hang Seng lost 2.67% followed closely by a 2.53% drop in the Nikkei 225. European bourses are even worse off. The FTSE 100, DAX, and CAC are down around 3.0%. DJIA and S&P 500 futures are down 2.17% and 1.70%, respectively.
Before you start hoarding toilet paper, food and head out to a fortified bunker in the wilds of the Great White North, consider this: the latest market mayhem occurred in thin, holiday, and year-end markets which suggests the moves are exaggerated and very likely to be reversed.
EURUSD rallied due to the news of the Nu variant and its impact on US Treasury yields. EURUSD climbed to 1.1285 from 1.1208 as traders downgraded expectations for a Fed rate hike in May and pushed them out to September. Nevertheless, the rally only takes the single currency back to Monday’s level, leaving the downtrend following the move below 1.1500 intact while prices are below 1.1440.
GBPUSD is trading at the top of its overnight 1.3280-1.3338 range, supported by US dollar selling pressures vs Europe on delayed Fed rate hike expectations. However, the downtrend is intact while prices are below 1.3390.
USDJPY plunged from 115.36 to 113.66 due to safe-haven demand for yen and the steep slide in US Treasury yields. Even so, the move is just a correction as the 2021 uptrend is intact above 111.00.
AUDUSD and NZDUSD slid due to risk aversion from fears of weaker commodity demand. AUDUSD saw added pressure from a bearish forecast by Westpac bank downgrading their AUDUSD forecast for June 2022 to 0.7000 from 0.7700 due to higher US rates and unchanged Australian rates.
There are no US economic reports today.
Chart of the Day: Gold (XAUUSD) 30 minute
Source: Saxo Bank
FX open, high, low, previous close as of 6:00 am ET
Chart: Saxo Bank
Today’s Bank of China Fix 6.3936, Previous 6.3980
Shanghai Shenzhen CSI 300 fell 0.74% to 4,860.13
Chart: USDCNY 1 month
Source: Yahoo Finance