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December 9, 2021

  • BoC finds more excuses to do nothing
  • Fitch Ratings places China’s Evergrande in “restrictive default”
  • US dollar opens mixed ahead of Friday’s CPI data

FX at a Glance

Source: IFXA Ltd/RP

USDCAD Snapshot   Open 1.2675-79, Overnight Range 1.2652-1.2697, Previous close 1.2652

USDCAD rallied yesterday, rising from 1.2605 to 1.2665.  It was a textbooks short squeeze after the BoC disappointed some traders when it failed to signal higher interest rates sooner than previously expected. Traders expected the policymakers to react to the run of robust economic data which included inflation well above their targeted level, and broad based job gains, but instead officials used the Omicron-variant as an excuse to twiddle their thumbs.

Arguably, this week’s USDCAD weakness is an anomaly, and mostly due to expectations for a hawkish BoC statement. It didn’t happen and USDCAD direction is determined by broad US dollar sentiment.

Traders are hoping Deputy Governor Toni Gravelle will provide more clarity on the BoC’s outlook today at 2:00 pm ET.

The US dollar will remain in demand ahead of Friday’s US CPI data and next week’s FOMC meeting. The Fed is expected to announce it would end tapering earlier than expected, and therefore, raise rates sooner.

Oil prices have lost upside momentum and appear content to range in a $65.00-$75.00 range

Technical view:  The intraday USDCAD technicals flipped to bullish after rejecting losses below support in the 1.2600-20 area. A move above 1.2710 suggests a short-term low is in place at 1.2605 and shifts the focus to 1.2860.

For today, USDCAD support is at 1.2640 and 1.2610.  Resistance is at 1.2710 and 1.2740.  Today’s Range 1.2640-1.2710

Chart USDCAD 4 hour

Source: Saxo Bank

G-10 FX recap and outlook

There is an undercurrent of risk that threatens to bubble over into markets. T The US administration plans to tighten sanctions against Iran due to stalled nuclear talks and threats that some banks are not in compliance with existing sanctions.

Traders do not seem too perturbed by Fitch Ratings placing Evergrande in “restrictive default,” which simply means that the company has defaulted but has not entered into a bankruptcy filing.

Russia continues to mass troops along the Ukraine border, raising fears of an imminent invasion.

Chinese officials are blustering and blathering over the expanding Olympic Games boycott by politicians from  Australia, New Zealand, Canada, the UK, and the US.  A Chinese foreign ministry spokesman whined, “The United States, Britain, and Australia have used the Olympics platform for political manipulation.” Why would they care? Hands up, people, if you tune into the games to see politicians.


Asia equity indexes closed mixed; the Nikkei 225 and the ASX200 lost, while the Hang Seng and CSI 300 rallied. European indexes are softer as are DJIA and S&P 500 futures. Gold and oil prices are down from their closing levels. The US 10-year is consolidating yesterday’s gains and sits at 1.484%.

US weekly jobless claims fell 43,000 to 184,000 and is the lowest level since 1969.  Markets barely budged on the news.

EURUSD is trading at the bottom of its overnight 1.1312-1.1344 band. Prices are on the defensive ahead of Friday’s US inflation report, which may precursor a hawkish FOMC outcome next Wednesday. The German trade surplus was a tad narrower, but the news did not impact the currency. Reuters reports that ECB officials are discussing a temporary boost to the Asset Purchase Program. EURUSD technicals are bearish below 1.1380.

GBPUSD slid to 1.3180 from 1.3215 as the downtrend from the end of October peak guides prices lower. Traders are unhappy with the Johnson government imposing Plan B coronavirus restrictions, including work from home guidance and mandatory mask mandates for large venues. RICS Housing Price Balance was unchanged from October’s upwardly revised 71 level.

USDJPY has been trapped in a 112.60-114.00 range for two weeks as safe-haven demand for yen competes with higher Treasury yields for dominance.

AUDUSD is on the defensive, falling from 0.7185 to 0.7138 due to renewed US dollar demand ahead of Friday’s US inflation report. AUDUSD rallied after the RBA suggested the Omicron variant would not derail the recovery, but those gains stalled at the downtrend line from the end of October

Chart of the Day: AUDUSD

Source: Saxo Bank

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3498, Previous 6.3738

Shanghai Shenzhen CSI 300 rose 1.66% to 5,078.69

CPI rose 0.4% m/m in November (previous 0.7% m/m)

PPI rose 12.9% y/y, (previous 13.5%

Stocks rally after government said it planned measures to boost spending which may include furniture and autos.

WSJ reported the PBoC has less autonomy than before as Communist Party officials influence monetary policy

Chart: USDCNY 1 month

Source: Yahoo Finance