Equity Index, Index futures, and Index options expire today
Big week ahead: Canada election, FOMC, BoE, Asia holidays
US dollar remains bid, opens higher compared to yesterday
FX at a Glance:
USDCAD Snapshot Open 1.2651-55, Overnight Range 1.2639-1.2689, Previous close 1.2684
The Loonie behaved like the proverbial headless chicken this week. USDCAD bounced off the top and bottom of its 1.2600-1.2700 range at the whim of broad US dollar sentiment. Global markets are torn between fears that rising COVID-19 variant outbreaks will derail global growth, and concern that the Fed may be forced to tighten rates earlier than expected. USDCAD gains were hampered by crude oil prices attempting to break above $73.00/barrel resistance.
Canada goes to the polls Monday in a too close to call election. It shouldn’t be a factor for markets although a Liberal majority would wreak havoc on already shaky finances.
USDCAD could see some volatility around the 10:00 am option expiry window due to sizeable strikes in the 1.2635-50 area rolling off.
Longer term, USDCAD direction will continue to be driven by the Fed and the outlook for US interest rates.
Technical view: The intraday USDCAD technicals are directionless inside this week’s 1.2600-1.2700 range. Longer term, the uptrend channel that started in the middle of June with the break above 1.2200 resistance targets gains to 1.3000, while prices are above 1.2570. Fibonacci retracement analysis of the September 2020-September 2021 range suggests a break above 1.2707 (50% Fibo level) will extend gains to 1.2873 (81.8% Fibo level). A decisive move below 1.2570 negates the upside trend.
For today, support is at 1.2610 and 1.2580. Resistance is 1.2690 and 1.2710. Today’s range 1.2610-1.2710
Chart USDCAD 4 hour
Source: Saxo Bank
G-10 FX recap and outlook
Asia markets closed with China and Taiwan players in super-long weekend mode while Hong Kong, Japan, and Australia get Wednesday, Thursday, and Friday off, respectively. The major Asia equity indexes closed higher except for Australia’s ASX 200 index, which fell 0.76%. European bourses have recovered earlier losses and are modestly higher. S&P 500 and DJIA futures are trading around flat. Oil slipped from its peak, and gold gave back earlier gains US 10-year Treasury yields are steady at 1.348%.
EURUSD broke through support at 1.1800 in Europe yesterday and bottomed out at 1.1750 in NY. Prices ground higher throughout the NY session and continued that trend overnight, albeit in a narrow 1.1760-1.1787 band. The Eurozone Current Account surplus widened to €30.29 billion from €28 billion in June. Inflation was confirmed at 3.0%. ECB Governing Council Member Martins Kazaks predicted inflation would be higher than the ECB outlook if there were not further coronavirus shocks. Chief Economist Philip Lane told German investors that the ECB expects inflation to hit its 2.0% target in 2025, a previously unrevealed forecast.
GBPUSD traded in a 1.3777-1.3811 range. Gains were capped by weaker than expected Retail Sales fell 0.9% in August.
USDJPY has almost recouped its losses from Wednesday when prices dropped to 109.12 from 110.15. Prices were trading just below 110.00 in NY with the gains underpinned by the rebound in US 10-year Treasury yields.
AUDUSD traded choppily in a 0.7283-0.7320 range and is in the middle of the band in NY. Gains may be limited because of fears that Australia’s participation in the UKUS security pact may annoy China Beijing has a history of using tariffs and other sanctions to show displeasure with Australia.
The Michigan Consumer Sentiment Index (forecast 72.2) is ahead.
Chart of the Day- US Dollar Index (USDX)
FX open, high, low, previous close
Source: Saxo Bank
Today’s Bank of China Fix, 6.4527, Previous 6.4330
Shanghai Shenzhen CSI 300 index rose 1.0% to 4855.94
China starts Mid-Autumn Festival, markets closed Monday and Tuesday
China applies to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, (CPTPP)
Chart: USDCNY 1 month
Source: Yahoo Finance