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December 1, 2023

  • Canada gains 24,900 jobs, topping estimates
  • Fed Chair Jay Powell chats fireside at 11:00 am ET
  • US dollar opens modestly stronger vs close but mixed from yesterday’s open.

November FX at a glance

Source: IFXA/RP

USDCAD Snapshot: open 1.3525-29, overnight range 1.3517-1.3576, close 1.3590

Canada created 24,900 jobs in November, easily topping the forecast of 15,500 jobs. The public sector is  doing its part-they hired another 11,700 people.  Nevertheless, Canada is still bringing in more immigrants then there are jobs which suggests that tent cities and food banks will continue to be fast growing industries.

USDCAD  dipped on the news but remained inside its overnight range.  The currency has been caught up in the mass exodus out of US dollars although the USDCAD losses are a bit of a head-scratcher from a macro view. The US economy grew 5.2% in Q3, which contrasts sharply with the 1.1% decline in Canadian Q3 GDP. You can spin the numbers any which way, but there is no doubt that the American economy is far more robust than Canada’s.

The spread between Canada 10-year government bonds and US 10-year Treasuries is -74 bps in favor of the US dollar, which suggests limited USD/CAD downside.

OPEC and friends announced total production cuts of 2.2 million bpd. Russia and Saudi Arabia are extending their voluntary cuts of 1.3 million bpd, and six other members agreed to trim production by 0.9 million bpd. Four other members opted not to join. Apparently, OPEC’s claim that global demand is strong may be hyperbole. That’s what traders decided. WTI spiked to $79.55/b in the wake of the OPEC announcement, then dropped to $75.12. Prices consolidated in a $75.37-$76.45 range overnight.

USDCAD Technicals:

The intraday USDCAD are bearish below 1.3620 which guards the November downtrend line at 1.3750. Both trends meet support in the 1.3500 area.  A break above 1.3620 would meet resistance at 1.3680 but only a move above 1.3750 negates the downtrend.

Fibonacci retracement analysis of the July-November move suggests the 50% retracement level of 1.3500 is support ahead of the 61.8% 13408 area.

For today, USDCAD support at 1.3505 and 1.3480.  Resistance is at 1.3560-1.3610.  Today’s range 1.3490-1.3580.

Chart: USDCAD daily


G-10 FX recap

Fed Chair Jerome Powell is having a fireside chat at Spelman College in Atlanta to discuss the post-Covid economy with college president Helene Gayle. Traders and analysts are hoping that his comments about the future course of US interest rates align with Fed Governor Christopher Waller’s remarks earlier this week or San Francisco Fed President Mary Daly’s comments. Thursday Ms Daly said that it was too early to know if the Fed is done hiking rates and claimed that she wasn’t thinking about rate cuts.

Asian equity indexes closed in negative territory, but European bourses are higher, but off their best levels. The German Dax has gained 0.69%. S&P 500 futures are down 0.23%. The US 10-year yield is at 4.335%.

EURUSD is at the bottom of its 1.0863-1.0913 range with prices weighed down by chatter that the ECB will pivot in April. That may not be the case according to ECB President Chritine Lagarde.  She said “Fiscal policies that create excess demand in a supply-constrained economy might force monetary policy to tighten more than would otherwise be necessary.”

GBPUSD traded erratically in a 1.2615-1.2675 band Initial support from the Nationwide Housing Price Index rising 0.2% m/m in November faded quickly.

USDJPY is near the top of its  147.61-148.35 range.  The Japanese unemployment rate fell to 2.5% from 2.6% and November Manufacturing PMI inched up to 48.3 from 48.1 in October.

AUDUSD is in the middle of its 0.6151-0.6192 overnight range after support from higher-than-expected Chinese Caixin Manufacturing PMI disappeared.

Today’s US data includes US ISM Manufacturing PMI and construction spending.

FX high, low, open (as of 6:28 am ET)


China Snapshot

PBoC fix: today 7.1104, expected 7.1458, previous 7.1018.

Shanghai Shenzhen CSI 300 fell 0.38% to 3482.88.

Caixin Manufacturing PMI pops into expansion territory rising to 50.7 from 49.5 in October.

Stocks rallied around the world in November, except in China.  The CSI 300 index lost 2.1% compared to the S&P 500 index gaining 8.9%.  The MSCI All-Country World Index also surged about 9.0%. Xi Jinping’s penchant for locking up business leaders he is unhappy with, certainly played a role.

­Chart: USDCNY (onshore) vs USDCNH (offshore)