The Canadian dollar had a volatile 24-hour period in a move fueled by month-end portfolio rebalancing flows and plunging U.S. stock markets. USD/CAD plummeted from the Asia peak of $1.2760 yesterday to $1.2629 just before lunch, rallied to $1.2737 overnight and gave back almost all the gains in early New York trading today.
Global risk sentiment took a turn for the better at the start of trading in New York. S&P 500 fell from 4,307.54 at yesterday's close to 4,273.72 overnight then rallied hard in New York reaching 4,328. Those gains improved risk sentiment and USD/CAD dropped from its opening level of $1.2700 to $1.2655.
Canada July Gross Domestic Product (forecast -0.2%m/m) may put a cap on Canadian dollar gains if it is weaker than expected. A soft report may force the Bank of Canada to downgrade near-term growth prospects. On the other hand, better than expected data coupled with firm oil prices may accelerate Canadian dollar gains.
West Texas Intermediate (WTI) oil prices are steady with intraday uptrend support at $73.60/barrel guarding the August uptrend line which is at $71.40/b. The prospect of rising global demand is expected to more than offset the latest 400,000 barrel /day increase from the Organization of the Petroleum Exporting Countries. Chinese authorities managed to give prices additional support when they instructed state-owned energy prices to "secure supplies for winter at any cost."
EUR/USD traded in a $1.1564-$1.1590 range overnight and continued to consolidate losses since breaking $1.1660 support on Wednesday. The single currency is suffering from widening yield differentials between the Eurozone and the U.S. and from slightly weaker than expected Manufacturing Purchasing Managers Index data (actual 58.6 vs forecast 58.7).
Eurozone inflation jumped to 3.4% y/y in September compared to 3.0% y/y in August. That gain was blamed on soaring energy costs. EURUSD technicals are bearish below 1.1600 with a break below $1.1540 targeting $1.1450.
GBPUSD soared from the overnight low of $1.3435 to $1.3524 in early New York trading. Profit-taking and a rebound in stock markets boosted prices. U.K. September Manufacturing PMI was a 57.1 with the result due to supply chain issues. GBP/USD technicals are bullish and looking for a break above $1.3550 to extend gains to $1.3600.
USD/JPY retreated from 111.48 to 111.04 on lower 10-year Treasury yields and renewed US dollar weakness. The BOJ Tankan Survey was largely better than expected. The Large Manufacturers Index rose to its highest since 2018.
AUD/USD and NZD/USD are at the top of their overnight ranges as equities rally and risk sentiment improves.
Today’s U.S. data includes Personal Income and Expenditures (PCE), ISM Manufacturing PMI, Construction spending, and Michigan consumer confidence.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
