The Week Ahead – Central Bank Chatter, Evergrande, and a Busy Economic Calendar in Focus

On the Macro

It’s a busier week ahead on the economic calendar, with 59 stats in focus in the week ending 1st October. In the week prior, 39 stats had also been in focus.

For the Dollar:

Core durable goods orders for August kicks things off on Monday.

The focus will then shift to consumer confidence figures on Tuesday. We have seen market sensitivity to consumer confidence heightened in recent months.

On Thursday, the focus will then shift to final GDP numbers for the 2nd quarter and weekly jobless claims. Barring a marked revision to the GDP numbers, expect the jobless claims to be key.

At the end of the week, inflation, personal spending, and ISM Manufacturing PMI figures will also influence.

On the monetary policy front, we will expect increased sensitivity to FOMC member chatter in the week. FED Chair Powell and a number of FOMC members are scheduled to speak in the week.

In the week ending 24th September, the Dollar Spot Index rose by 0.14% to 93.327.

For the EUR:

It’s a relatively busy week on the economic data front.

German consumer sentiment and unemployment figures will be in focus on Tuesday and Thursday.

Consumer spending from both France and Germany will also draw interest on Tuesday and Friday.

Manufacturing PMI figures for Italy and Spain, and finalized PMIs for France, Germany, and the Eurozone wrap things up on Friday.

With inflation still a key area of interest, prelim member state and Eurozone inflation figures will also influence in the week.

On the monetary policy front, ECB President Lagarde is also scheduled to speak in the week. Expect any chatter on the economic outlook or monetary policy to move the dial.

For the week, the EUR fell by 0.04% to $1.1720.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Key stats include 2nd quarter GDP and finalized manufacturing PMIs due out on Thursday and Friday.

Expect any revision to prelim figures to influence.

On the monetary policy front, BoE Governor Bailey is due to speak on Wednesday. Following the BoE’s hawkish guidance last week, there will be plenty of interest in the Governor’s speech.

The Pound ended the week down by 0.45% to $1.3679.

For the Loonie:

It’s yet another quiet week ahead on the economic calendar.

RMPI figures will be in focus on Thursday ahead of GDP numbers on Friday.

Expect the GDP numbers to have a greater impact in the week. Much will depend on market risk sentiment, however.

The Loonie ended the week up 0.88% to C$1.2652 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week.

Retail sales figures due out on Tuesday will be the key stat of the week. On Thursday, private sector credit figures will also influence, however.

Away from the economic calendar, updates on government plans vis-à-vis lockdown measures will also be key, however.

The Aussie Dollar ended the week down by 0.23% to $0.7262.

For the Kiwi Dollar:

It’s another quiet week ahead.

Economic data is limited to business confidence figures due out on Thursday.

With the markets looking at the impact of the latest lockdown measures, expect interest in the numbers.

Key, however, will be updates from the New Zealand government on any plans to reopen.

The Kiwi Dollar ended the week down by 0.36% to $0.7015.

For the Japanese Yen:

Industrial production and retail sales figures will draw interest on Thursday.

Of greater significance, however, will be 3rd quarter Tankan survey numbers due out on Friday.

The Japanese Yen fell by 0.73% to ¥110.97 against the U.S Dollar.

Out of China

Private sector activity is back in focus.

NBS manufacturing and non-manufacturing PMIs along with the all-important Caixin Manufacturing PMI will test market risk sentiment on Thursday.

Another set of weak numbers will likely weigh heavily on riskier assets.

The Chinese Yuan ended the week flat at CNY6.4662 against the U.S Dollar.

Geo-Politics

Iran, China, and Russia remain the main areas of interest for the markets. News updates from the China, in particular, will need monitoring following last week’s holiday.

The Weekly Wrap – Economic Data, Monetary Policy, and Evergrande Delivered a Choppy Week

The Stats

It was a quieter week on the economic calendar, in the week ending 24th September.

A total of 39 stats were monitored, which was down from 61 stats in the week prior.

Of the 39 stats, 15 came in ahead forecasts, with 23 economic indicators coming up short of forecasts. There was just 1 stat that was in line with forecasts in the week.

Looking at the numbers, 10 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 29 reflected a deterioration from previous.

For the Greenback, monetary policy divergence delivered support in the week. In the week ending 24th September, the Dollar Spot Index rose by 0.09% to 93.281. In the previous week, the Dollar had risen by 0.66% to 93.195.

Out of the U.S

A quiet start to the week left the markets on hold ahead of Wednesday’s FOMC policy decision and projections.

Stats were limited to housing sector numbers that had a muted impact on the Dollar and beyond.

On Wednesday, the FED left policy unchanged as anticipated. The markets had expected a firm timeline on tapering, which didn’t materialize, however. While there were no fixed timelines, the projections revealed a divided camp on the interest rate front, with some pointing to rate hikes from 2022.

It was good enough to deliver Dollar support as central banks elsewhere shifted back due to the Delta variant.

On Thursday, economic data pegged back the Greenback, with the stats skewed to the negative.

In the week ending 17th September, initial jobless claims climbed from 335k to 351k.

Prelim private sector PMIs pointed to softer growth, albeit marginally.

In September, the Manufacturing PMI fell from 61.1 to 60.5, with the Services PMI declining from 55.1 to 54.4.

FED Chair Powell wrapped things up at the end of the week, with the FED Chair looking to soften market expectation of rate hikes near-term.

Out of the UK

It was a busy week.

On the economic data front, CBI Industrial Trend Orders rose from 18 to 22 in September.

The numbers had a muted impact on the Pound, however, with the BoE policy decision in focus.

Private sector PMIs came in softer in September, according to prelim figures, which pegged the Pound back.

The Manufacturing PMI fell from 60.3 to 56.3, with the Services PMI declining from 55.0 to 54.6.

In spite of weak numbers, the BoE was in action later in the day, delivering strong Pound support.

While leaving policy unchanged, the MPC noted that there was a stronger case for a rise in interest rates.

In the week, the Pound fell by 0.45% to end the week at $1.3679. In the week prior, the Pound had fallen by 0.71% to $1.3741.

The FTSE100 ended the week up by 1.26%, reversing a 0.93% loss from the previous week.

Out of the Eurozone

Private sector PMIs and German business sentiment were in focus, with the stats skewed to the negative.

In September, the French Manufacturing PMI fell from 57.5 to 55.2, with the Services PMI down from 56.3 to 56.0.

Germany’s Manufacturing PMI declined from 62.6 to 58.5, with the Services PMI falling from 60.8 to 56.0.

As a result, the Eurozone’s Manufacturing PMI fell from 61.4 to 58.7, and the Services PMI down from 59.0 to 56.3.

Germany’s IFO Business Climate Index fell from 99.6 to 98.8, with the Current Assessment sub-index down from 101.4 to 100.4. The Business Expectations sub-index declined from 97.5 to 97.3.

For the week, the EUR slipped by 0.04% to $1.1720. In the week prior, the EUR had fallen by 0.75% to $1.1725.

The CAC40 rallied by 1.04%, with the DAX30 and the EuroStoxx600 ending the week with up by 0.27% and 0.31% respectively.

For the Loonie

Retail sales were in focus in the 2nd half of the week.

In July, core retail sales fell by 1.0%, with retail sales down 0.6%. Core retail sales had risen by 4.7% in June, with retail sales having increased by 4.2%.

While the stats were Loonie negative, rising oil prices delivered support.

In the week ending 24th September, the Loonie rose by 0.88% to C$1.2752. In the week prior, the Loonie had fallen by 0.57% to C$1.2764.

Elsewhere

It was yet another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar fell by 0.45% to $0.7262, with the Kiwi Dollar ending the week down by 0.36% to $0.7015.

For the Aussie Dollar

There were no material stats to provide direction, leaving the RBA meeting minutes in focus.

Renewed lockdown measures supported the RBA’s view that there would be no rate hike until 2024.

The minutes did note, however, that the Delta variant impact was likely to be temporary, however.

For the Kiwi Dollar

Consumer sentiment and trade data were in focus, with the stats Kiwi Dollar negative.

In the 3rd quarter, the Westpac Consumer Sentiment Index fell from 107.1 to 102.7. While down, the decline was modest when compared with the impact of the first lockdown on sentiment.

A surge in imports led to a record trade deficit in August.

Month-on-month, the trade deficit widened from NZ$397m to NZ$2,144m. Compared with August 2020, the deficit widened from NZ$1,100m to $2,940m.

For the Japanese Yen

In August, core consumer prices were unchanged, year-on-year, after having fallen by 0.2% in July.

Service sector activity saw a softer contraction in September, which was also good news. The Services PMI rose from 43.5 to 47.4. Manufacturing sector activity did see slower growth, however, with the PMI falling from 52.7 to 51.2.

On the monetary policy front, the BoJ went largely unnoticed, with the September hold on monetary policy.

The Japanese Yen fell by 0.73% to ¥110.73 against the U.S Dollar. In the week prior, the Yen had risen by 0.01% to ¥109.93.

Out of China

There were no major stats in a shortened week.

On the policy front, the PBoC left loan prime rates unchanged, which was in line with expectations.

In the week ending 24th September, the Chinese Yuan was unchanged at CNY6.4662. In the week prior, the Yuan had ended the week down by 0.34% to CNY6.4661.

The CSI300 and the Hang Seng ended the week down by 0.13% and by 2.92% respectively.

USD/CAD Exchange Rate Prediction – The Dollar Fails to Rally Despite Rising Treasury Yields

The dollar attempted to move higher against the Loonie on Friday but was met with resistance. Despite higher U.S. Treasury yields, the greenback was unable to gain traction. The yield differential is moving in favor of the U.S. currency, but it has difficulty making headway. During the week, the U.S. data was mixed. Despite softer than expected PMI and Jobless claim data released on Thursday, the Fed’s message that they will begin to taper bond purchases by the end of the year. The market is now pricing in a 25-basis point hike by September of 2022 and a 50% chance of a second hike by December 2022. Higher yields will help buoy the dollar, which should eventually weigh on the yellow metal.

Technical Analysis

The dollar eased against the Loonie and was unable to gain traction following the Fed Decision. The exchange rate was unable to recapture resistant near the 10-day moving average at 1.2711 and is poised to test targets support near the 50-day moving average at 1.2615. The exchange moved from the overbought territory as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned negative the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a rising trajectory which points to a higher exchange rate.

Dollar Climbs as Evergrande Uncertainty Percolates

China Evergrande Group owes $305 billion and has run short on cash, missing a Thursday deadline for paying $83.5 million and leaving investors questioning whether it will make the payment before a 30-day grace period expires. A collapse of the company could create systemic risks to China’s financial system.

The safe-haven dollar had its biggest one-day percentage drop in about a month on Thursday after Beijing injected new cash into the financial system and Evergrande announced it would make interest payments on an onshore bond, boosting risk sentiment.

The offshore Chinese yuan weakened versus the greenback at 6.4641 per dollar.

The decline came a day after the greenback was lifted by Wednesday’s announcement from the U.S. Federal Reserve that it will likely begin to trim its monthly bond purchases as soon as November and flagged interest rate increases may follow suit sooner than expected as the central bank moves away from its pandemic crisis policies.

“We are in one of the situations, and this doesn’t always happen, where the dollar is the beneficiary of multiple ideas,” said Joseph Trevisani, senior analyst at FXStreet.com.

“The U.S. economy does look better than most of its competitors, there is lingering fear out there over Evergrande and what else is out there in the rather untransparent Chinese economy and political system, plus the Fed appears finally ready.”

The dollar index rose 0.237%, with the euro down 0.2% to $1.1713.

Kansas City Fed President Esther George said the U.S. labor market has already met the central bank’s test to pare its monthly bond purchases, and the discussion should now turn to how its massive bondholding could complicate the decision on when to hike rates.

Cleveland Fed President Loretta Mester echoed the sentiment for a tapering this year, and said the central bank could start raising rates by the end of next year should the job market continue to improve as expected.

In prepared remarks in a listening session with a wide swath of economic players, Fed Chair Jerome Powell did not elaborate on his own economic or monetary policy outlook, which he had outlined at the close of the two-day Fed meeting on Wednesday.

Sterling weakened a day after hawkish comments from the Bank of England on Thursday pushed the pound to its biggest one-day percentage gain since Aug. 23.

The Japanese yen weakened 0.43% versus the greenback at 110.77 per dollar, while Sterling was last trading at $1.3666, down 0.36% on the day.

Cryptocurrencies slumped after China’s most powerful regulators increased the country’s crackdown on the digital assets, with a blanket ban on all crypto transactions and crypto mining.

Bitcoin, the world’s largest cryptocurrency, last fell 5.89% to $42,256.47.

Smaller coins, which generally move in tandem with bitcoin, also dropped. Ether last fell 8.08% to $2,899.10 while XRP last fell 7.2889413% to $0.93.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chuck Mikolajczak; Editing by Dan Grebler and Sonya Hepinstall)

USD/CAD Daily Forecast – Strong Oil Provides Some Support To Canadian Dollar

Canadian Dollar Tries To Rebound Against U.S. Dollar

USD/CAD is currently trying to settle back below the support at 1.2690 while the U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index has recently made an attempt to settle above the resistance level at 93.40 but failed to develop sufficient upside momentum. In case the U.S. Dollar Index manages to settle above this level, it will head towards the resistance near the yearly highs at 93.75 which will be bullish for USD/CAD.

Today, U.S. reported that New Home Sales increased by 1.5% month-over-month in August compared to analyst consensus which called for growth of just 0.5%.

Foreign exchange market traders also kept an eye on the developments in U.S. government bond markets as Treasury yields moved to multi-week highs. Currently, the yield of 10-year Treasuries is trying to settle above 1.45%. In case this attempt is successful, it will continue to move towards the psychologically important 1.50% level which will be bullish for the U.S. dollar.

While the U.S. dollar is supported by higher Treasury yields, its gains against Canadian dollar are limited as WTI oil moved to new highs and made an attempt to settle above the $74 level.

Technical Analysis

usd cad september 24 2021

USD to CAD has recently made an attempt to settle above the resistance at 1.2730 but lost momentum and declined below the 20 EMA at 1.2690. The nearest support level for USD to CAD is located at 1.2650.

In case USD to CAD declines below the support at 1.2650, it will head towards the next support level which is located at the 50 EMA near 1.2625. A successful test of this level will push USD to CAD towards the support at 1.2590.

On the upside, USD to CAD needs to get back above the 20 EMA to have a chance to develop upside momentum in the near term. The next resistance level is located at 1.2710. If USD to CAD manages to settle above this level, it will move towards the resistance at today’s highs at 1.2730.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD: Loonie Snaps Three-Day Winning Streak as Evergrande Uncertainty Supports Greenback

The Canadian dollar snapped its three-day winning streak against its U.S. counterpart on Friday as concerns about the future of beleaguered property developer Evergrande Group have rattled markets around the globe, helping the greenback rebound from its steep descent.

After its biggest drop in nearly a month overnight, the dollar enjoyed a brief pause as questions lingered about developments involving property developer China Evergrande Group.

Due to its huge debt, China Evergrande Group has run short on cash, missing a deadline for making payments of $83.5 million on Thursday, making investors anxious whether it will make the payment within the 30-day grace period.

China’s financial system would face systemic risks if the company collapses. That provided greenback’s safe-haven appeal with a further boost. However, at the time of writing the dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.10% lower at 93.370.

“Next week, Canada sees the release of July’s GDP numbers. Growth has been the missing piece in an otherwise very robust data-flow for CAD, as a surprise 2Q contraction in activity was the main reason for the Bank of Canada to pause tapering,” noted Francesco Pesole, FX Strategist at ING.

“Still, even if we see a below-consensus GDP read, the very encouraging signals coming from the jobs market and higher inflation should remain enough to convince the BoC to start tapering again in October. We think CAD may stay among the best performers within the pro-cyclical space next week, although its fate remains very much tied to developments in the Evergrande saga.”

The USD/CAD pair rose to 1.273 today, up from Thursday’s close of 1.2655. The Canadian dollar lost over 1.2% last month and further depreciated over 0.6% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge higher on supply concerns. U.S. West Texas Intermediate (WTI) crude futures were trading 0.59% higher at $73.71 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

Last but not the least, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of at least one rate hike next year. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

“The CAD was one of the few major currencies that gained ground against the USD over the course of the week with the backdrop of financial troubles at Evergrande, China’s second-largest property developer, and Powell’s hawkish turn at his post-announcement presser offset by a fifth consecutive rise in crude oil prices and generally higher Gov of Canada yields versus its G10 counterparts,” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“Canada’s federal election on Monday came and went with limited impact on the CAD as the status quo of a Liberal minority government propped up by the NDP was maintained. The stimulative policy is set to continue for the foreseeable future while certain Liberal plans like pushing for $10/day childcare could unlock an important economic impulse—although there remains much to be done on this front legislatively.”

Economic Data and Central Bank Chatter Put the EUR and the Dollar in Focus

Earlier in the Day:

It was relatively busy start to the day on the economic calendar this morning. The Kiwi Dollar and the Japanese Yen were in action this morning.

For the Kiwi Dollar

Trade figures were in focus in the early hours.

In August, New Zealand’s trade deficit widened from NZ$397m to NZ$2,144m. Year-on-year, the deficit widened from NZ$1,100m to NZ$2,940m.

According to NZ Stats,

  • Imports rose by NZ$1.08bn, compared with August 2020, leading to a record monthly trade deficit.
  • Exports were little changed, falling by NZ$42m.
  • Vehicles, parts, & accessories imports were up NZ$415m, with mechanical machinery & equipment up NZ$223m.
  • Petroleum & petrol product imports increased by NZ$207m.

The Kiwi Dollar moved from $0.70713 to $0.70704 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.11% to $0.7077.

For the Japanese Yen

In August, core consumer prices remained unchanged in August, year-on-year, which was in line with forecasts. Core consumer prices had fallen by 0.2%, year-on-year, in July.

Of greater significance were prelim private sector PMIs.

In September, the Services PMI rose from 43.5 to 47.4, while the Manufacturing PMI declined from 52.7 to 51.2.

The Japanese Yen moved from ¥110.402 to ¥110.408 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.05% to ¥109.380 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was up by 0.23% to $0.7312.

The Day Ahead

For the EUR

It’s a quieter day ahead on the economic calendar. Business sentiment figures for Germany will be in focus in the early part of the European session.

Following the disappointing PMI numbers from Thursday, a larger than expected decline would test support for the EUR.

At the time of writing, the EUR was up by 0.07% to $1.1747.

For the Pound

It’s a particularly quiet day ahead on the economic calendar.

There are no material stats due out of the UK to provide the Pound with direction.

Following the BoE’s more hawkish stance on Thursday, risk sentiment would need to deteriorate to weaken the Pound.

At the time of writing, the Pound was up by 0.12% to $1.3736.

Across the Pond

It’s a relatively quiet day ahead. Key stats include new home sales figures, which should have a muted impact on the Dollar.

FED Chair Powell and other FOMC member are scheduled to speak later in the day, however, and could move the dial.

At the time of writing, the U.S Dollar Spot Index was down by 0.02% to $93.063.

For the Loonie

It’s a particularly quiet day ahead for the Loonie. There are no material stats due out of Canada later today.

The lack of stats will leave the Loonie in the hands of market risk sentiment and crude oil prices.

At the time of writing, the Loonie was up by 0.08% to C$1.2645 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Exchange Rate Prediction – The Dollar Drops on Soft Claims Data

 

The dollar eased as U.S. Treasury yields declined in the wake of the softer than expected Jobless Claims. The Fed also kept monetary policy unchanged and said if the recovery in the United States continued to remain on track, they would consider removing some accommodation. Additionally, the PMI composite reported by IHS Market showed weaker than expected manufacturing and services.

Technical Analysis

The dollar eased against the Loonie for a second consecutive trading session following the Fed Decision. The exchange rate sliced through support which is now resistant near the 10-day moving average at 1.2713 and is poised to test targets support near the 50-day moving average at 1.2613. The exchange moved from the overbought territory as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned negative the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a rising trajectory which points to a higher exchange rate.

Jobless Claims Rise More than Expected

Initial claims for the week ended September 18 totaled 351,000, an increase from the previous week’s upwardly revised 335,000 and above expectations of 320,000. The total was the highest since the week of August 21. Continuing claims data, which runs a week behind, also increased, rising 181,000 to total more than 2.84 million.

Dollar Slumps as Risk Appetite Rebounds

Investors’ risk appetite improved after Beijing injected fresh cash into its financial system ahead of an $83.5 million bond coupon by embattled property giant Evergrande, at risk of becoming one of the world’s largest-ever corporate defaults.

Worries about Evergrande’s payment obligations and what systemic risks to China’s financial system the property giant’s difficulties pose have weighed on global financial risk sentiment in recent sessions.

“Commodity currencies are broadly higher while havens are weaker, leaving the USD trading generally lower after a firm close following the FOMC (Federal Open Market Committee),” Shaun Osborne, chief currency strategist at Scotiabank, said in a note.

The U.S. Dollar Currency Index, which measures the greenback against a basket of six rivals, was 0.5% lower at 93.037. The index, which had risen 0.25% on Wednesday, was on pace for its biggest daily percentage drop in a month but remains close to the near 10-month high touched in late August.

The offshore Chinese yuan strengthened versus the greenback at 6.4599 per dollar.

The dollar found little support from data that showed the number of Americans filing new claims for jobless benefits unexpectedly rose last week amid a surge in California.

Thursday’s improved mood boosted risk-sensitive commodity currencies, with the Australian dollar rising 0.9% and the New Zealand dollar up 1.0%.

The improved risk-appetite was reflected in Wall Street’s major equity indexes, with the S&P 500 on track for a gain of more than 1% and its largest two-day percentage gain since late July.

On Wednesday, the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon as November and signaled interest rate increases may follow more quickly than expected.

While positive for the dollar, the boost from the Fed’s announcement was undercut by hawkish messages from several central banks in Europe, and as Norway became the first developed nation to raise rates.

Norway’s crown jumped to a 3-1/2 month high versus the euro on Thursday after the central bank raised its benchmark interest rate and said more hikes will follow in the coming months.

Sterling extended its rise on Thursday after the Bank of England said two of its policymakers had voted for an early end to pandemic-era government bond buying and markets brought forward their expectations for an interest rate rise to March.

In emerging markets, the Turkish lira plummeted to a record low after a surprise interest rate cut of 100 basis points to 18% that came despite inflation hitting 19.25% last month

Meanwhile, bitcoin extended its recovery from a sharp fall earlier this week, rising 2.42% to a 3-day high of $44,642.78.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Saqib Iqbal Ahmed and Chuck Mikolajczak; Additional reporting Sujata Rao and Saikat Chatterjee in London and Tom Westbrook in Singapore; Editing by Bernadette Baum, Will Dunham and Hugh Lawson)

USD/CAD Daily Forecast – Canadian Dollar Gains Ground As WTI Oil Moves To New Highs

U.S. Dollar Is Under Pressure Against Canadian Dollar

USD/CAD is currently trying to settle below the support at 1.2650 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index settled below the support at 93.10 and made an attempt to settle below the 93 level. A move below the 93 level will push the U.S. Dollar Index towards the support at the 20 EMA at 92.85 which will be bearish for USD/CAD.

Today, U.S. reported that Initial Jobless Claims increased from 335,000 (revised from 332,000) to 351,000 while Continuing Jobless Claims grew from 2.71 million (revised from 2.67 million) to 2.85 million.

Foreign exchange market traders also had a chance to take a look at flash readings of PMI reports for September. Manufacturing PMI declined from 61.1 in August to 60.5 in September while analysts expected that it would grow to 61.5. Services PMI decreased from 55.1 to 54.4 compared to analyst consensus of 55. The reports put additional pressure on the American currency.

Meanwhile, Canadian dollar received support as WTI oil managed to get above the $73 level. Currently, WTI oil is trying to settle above $73.50. In case this attempt is successful, WTI oil will move towards the $74 level which will be bullish for commodity-related currencies, including Canadian dollar.

Technical Analysis

usd cad september 23 2021

USD to CAD settled below the 20 EMA at 1.2690 and is trying to settle below the next support level at 1.2650. In case this attempt is successful, USD to CAD will move towards the support at the 50 EMA at 1.2625.

A move below the support at the 50 EMA will open the way to the test of the next support level at 1.2590. If USD to CAD gets below this level, it will head towards the support at 1.2550.

On the upside, the previous support at the 20 EMA at 1.2690 will serve as the first resistance level for USD to CAD. In case USD to CAD gets back above this level, it will head towards the next resistance at 1.2710. A successful test of this level will push USD to CAD towards the resistance at 1.2730.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD: Loonie Hits One-Week High on Firm Oil Prices, Better-Than-Expected Retail Sales

The Canadian dollar hit over a one-week high against its U.S. counterpart, strengthening for the third straight day on Thursday as oil prices jumped and retail sales data for July were better-than-expected.

Compared with expectations for a decline of 1.2%, retail sales in Canada dropped 0.6% to $55.8 billion in July, while advance estimates showed a 2.1% increase in August. That boosted confidence among investors.

“The Fed caused a lot of volatility in the foreign currency market yesterday. Indeed, the greenback momentarily climbed to a monthly high as Jerome Powell announced that he was considering a key rate hike next year. USD/CAD traded at 1.2796 before dropping significantly back to 1.2660 following lower volatility as well as renewed hope surrounding the situation with Chinese real estate giant Evergrande,” noted analysts at Laurentian Bank of Canada.

“Despite the decline in the barrel, the loonie is benefiting from the weaker US dollar and the fact that much of the financial community was long gamma before Powell’s speech. In technical analysis, the next support level for the USD/CAD price is at 1.2636.”

The USD/CAD pair fell to 1.2631 today, down from Wednesday’s close of 1.277. The Canadian dollar lost over 1.2% last month and further depreciated over 0.3% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge higher as U.S. oil inventories fell. U.S. West Texas Intermediate (WTI) crude futures were trading 0.89% higher at $72.87 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.47% lower at 93.020. The greenback has largely ignored the announcement by the Federal Reserve on Wednesday that it will soon cease supporting pandemic-related stimulus.

“A potentially “hawkish” FOMC plus concerns over resolution of the US debt ceiling that creates a macro risk-off event could combine to deliver some near-term tactical gains in DXY,” noted analysts at Citi.

“Ultimately, such gains should be faded as – (1) pace of any Fed taper is likely gradual and the Fed, ECB, BoJ, PBoC support risk sentiment well into 2022; and (2) any potential government shutdown beyond September 30th is likely to be temporary. A 91.28 – 93.44 range in DXY remains the base case though FOMC/potential government shutdown could briefly take DXY above the March 2021 high at 93.44 towards 94.50.”

However, it is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of at least one rate hikes next year. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

How to Manage Risk in Your Forex Trading Account

Table of Content

Forex Money Management Defined

It is universally accepted that Forex money management is a set of processes that a Forex trader will use to manage the risk in their Forex trading account.

Successful Forex traders tend to accept the adage, “If I’m right on the entry, the upside will take care of itself. If I’m wrong, the downside or losses can be unforgiving.”

The underlying principle of Forex money management, or for that matter, any speculative investment, is to preserve trading capital. This doesn’t mean you won’t have any losing trades because that is impossible. The objective of Forex money management is to minimize trading losses so that they are “manageable”. That means keep your losses small and try to manage a winning trade to get the most profit out of the move.

Essentially a successful Forex trader doesn’t necessarily have more winning trades than losing trades, but rather the dollar amount of his winning traders are consistently bigger than the dollar amount of his losing trades.

The concept of money management is often used interchangeably with the term risk management. However, they are not the same. Risk management is about preparing for and managing all identifiable risks – that can include things as arbitrary as having a backup quote service or charting program. Money management, on the other hand, relates entirely on how to use your capital to grow your trading account balance without putting it in a position to risk it all.

How to Best Avoid Losing Money when Trading Forex Markets

The implementation of a Forex money management plan may be the best way to try to avoid losing money in the Forex market. No trading system is perfect nor are humans, or even robot traders. They all have similar traits (good or bad), but collectively, they do share common mistakes. These common mistakes are the ones that successful traders strive to avoid.

Successful Forex traders tend to think of trading as a business. In that business, there will be profitable trades and overall profitable days, but there will also be losses. Once again, if you want to stay in business then your profits are going to have to be greater than your losses. And once again, we are not saying that you can’t have any losses.

It is important to say at this time that yes, you can lose all your money in any investment where your funds are put at risk. So it is your job as trader/business owner to minimize the chance of that happening.

There are ways to fine tune a trading strategy i.e. optimal entry and/or optimal exit, tighter, well placed stop losses or identifying better profit objectives, with the goal to win more and lose less.

But that is not usually the main reason traders lose money in the Forex markets. The main reason tends to be having no specific money management rules to follow. Here is a list of the rules that top Forex money managers tend to follow.

Top Forex Money Management Rules to Follow

Define Your Risk Per Trade Using a Position-Sizing Model

The idea behind this rule is that a trader should risk only a small percentage of their trading capital on any one trade. Several books or papers on Forex trading preach the ‘2% rule” where a trader should risk 2% of their account on every trade.

This ‘Fixed Percentage Risk’ can actually be any amount you are comfortable with and can afford.

If your trading account has a $50,000 balance then 2% of that amount will be $1000 of risk per trade.

A $1000 risk per trade may be a huge amount to a trader with a balance of $5000 in his account. In this case, 2% risk will be $100 of risk per trade.

The reason you’ll want to risk a fixed percentage is because if the first trade is a loss then the next trade will carry a smaller amount of dollars at risk.

Taking a smaller amount of risk following a loss will allow you to ride out a losing streak longer than an individual who risks the same amount on every trade. This will buy you time and allow you to have a big enough balance to perhaps start a willing streak.

Know Your Maximum Drawdown Level

A drawdown is the difference in account value from the highest the account balance has been over a certain period and the account value after some losing trades. For example, if a trader begins with $5000 in his account and she loses $1000 then she has a 20% drawdown.

The larger the drawdown, the harder it is to become profitable.

Following a 20% drawdown, a trader would have to make 25% in the market just to get back to even. If your trading system has never shown that kind of return over a reasonable time period then your maximum drawdown rule will tell you to stop trading.

At that point, you can reevaluate your trading strategy. You can lower your fixed percentage of risk, but most of all you can relax and breathe again, allowing you to regroup and reload after you have learned from your mistakes.

Assign a Risk/Reward Ratio to Every Trade

The generally accepted rule in the trading industry is that traders should aim to have winning trades that are on average twice as big as losing trades. With this risk:reward ratio, the trader need win only a third of their trades to breakeven.

The mathematics behind this rule says if a trader choses a risk/reward ratio of 1:1, then the trader must win a higher number of trades (at least 6 out of 10) trades to be profitable. If the trader chooses a risk/reward ratio of 3:1, then they need to win fewer trades (1 in every 4 trades) to break even.

It should be noted that this rule works great on paper, but in reality a trader really has little control of the actual risk/reward he will achieve on a trade.

Furthermore, a trader may be able to control is losses through stops (provided there is no slippage), but at the same time, a trader could cut his profits by not allowing a winning trade to end naturally, for example, by hitting a trailing stop.

The best trading strategy tends to cut losses and let profits run. Over the long-run you’ll get the actual risk/reward ratio.

Essentially, a successful trader has larger average wins than average losses. The bigger the average win, the less a trader has to worry about having a high percentage of wins. For example, you can have 90% accuracy, but if you average loss is $50 per trade and your average win is $10 per trade then one average loss will wipe out 5 of your winning trades.

Use a Stop Loss and Set a Profit Objective

Using a stop loss locks in the maximum amount a trader can expect to lose in any one trade, while a profit objective order locks in the maximum amount the trader can profit.

Don’t just use dollar stops. Place a stop in a place where you are wrong on the trade.

Additionally, if your strategy has been tested for fixed profit levels then follow the rules. If your strategy calls for trailing stops to lock in profits then follow that strategy. Try to avoid mixing your exit strategies because it can skew the risk/reward ratio your trading system needs to be profitable over the long-run.

Remember, in order to be successful, you’ll need to have a few big winners to offset a series of small losses.

Only Trade with Risk Capital

Successful trading is only possible when a trader can make unemotional decisions about what to do when a trading opportunity presents itself.

If you are undercapitalized, you will trade scared. If you trade scared then you will cut corners which could be trading without a stop, taking profits too soon, doubling down on a losing trade or putting yourself in a position too big to handle. If you do any of those things then you limit your chances of success.

Only trade with money you can afford to lose.

A Busy Economic Calendar and the BoE to Keep the Markets Busy

Earlier in the Day:

It was another particularly quiet start to the day on the economic calendar this morning. There were no major stats from the Asian session to provide the markets with direction.

While there were no stats, the markets responded further to the overnight FOMC projections, statement, and press conference.

For the Majors

At the time of writing, the Japanese Yen was down by 0.03% to ¥109.810 against the U.S Dollar, with the Aussie Dollar down by 0.08% to $0.7241. The Kiwi Dollar was down by 0.06% to $0.7005.

The Day Ahead

For the EUR

It’s a busy day ahead on the economic calendar. Prelim September private sector PMIs for France, Germany, and the Eurozone are due out along with Spanish GDP numbers.

Expect the PMIs to draw plenty of interest as the markets look for any further signs of a slowdown in momentum.

At the time of writing, the EUR was up by 0.06% to $1.1694.

For the Pound

It’s a particularly busy day ahead on the economic calendar.

On the economic data front, prelim September private sector PMIs will be in focus. Expect the Services PMI to have a greater impact.

The main event of the day, however, will be the BoE monetary policy decision. With inflationary pressures lingering, will there be any decent to bring the Pound back to life?

At the time of writing, the Pound was flat at $1.3622.

Across the Pond

It’s a relatively busy day ahead. Key stats include prelim private sector PMIs for September and the weekly jobless claim figures.

Expect the jobless claims and services PMI to be the key drivers on the day.

Following Wednesday’s FOMC projections, FOMC member chatter will also influence.

On Wednesday, the U.S Dollar Spot Index rose by 0.26% to end the day at $93.450.

For the Loonie

It’s a relatively quiet day ahead for the Loonie. Retail sales figures for July will be in focus later in the day.

With little else for the markets to consider, expect today’s stats to influence.

At the time of writing, the Loonie was up by 0.01% to C$1.2771 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Exchange Rate Prediction – The Dollar Slides After Fed Decision

The dollar eased as the Fed kept interest rates on hold, which put pressure on the greenback. The Fed also said if the recovery in the United States continued to remain on track, they would consider removing some accommodation. Market pundits seem to believe that the Fed will begin its tapering of bond purchases in either November or December of 2021.

Technical Analysis

The dollar eased against the Loonie following the Fed Decision. The exchange rate hit resistance near an upward sloping trend line that comes in near 1.2910. Support on the exchange rate is seen near the 10-day moving average at 1.2710 and the 50-day moving average at 1.2607. The exchange moved from the overbought territory as the fast stochastic generated a crossover sell signal. Medium-term momentum is positive as the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a rising trajectory which points to a higher exchange rate.

The Fed Sees Growth Slowing

The committee now sees GDP rising just 5.9% this year, compared to a 7% forecast in June. However, 2023 growth is now set at 3.8%, compared to 3.3% previously, and 2.5% in 2023, up one-tenth of a percentage point. Projections also indicated FOMC members see inflation stronger than indicated in June. Core inflation is projected to increase 3.7% this year, compared to the 3% forecast the last time members indicated their expectations. Officials then see inflation at 2.3% in 2022, compared to the previous projection of 2.1%, and 2.2% in 2023, one-tenth of a percentage point higher than the June forecast.

Fed Signals Bond-Buying Taper Coming ‘soon,’ Rate Hike in 2022

The moves, which were included in the Fed’s latest policy statement and separate economic projections, represent a hawkish tilt by a central bank that sees inflation running this year at 4.2%, more than double its target rate, and is positioning itself to act against it.

That action may proceed slowly, with interest rates seen rising to 1% in 2023, faster than projected by the Fed in its projections in June, and then to 1.8% in 2024, which would still be considered a loose monetary policy stance.

Inflation throughout that time would be allowed to run slightly above the Fed’s 2% target, consistent with its new, more tolerant approach to the pace of price increases, while unemployment is seen falling back to around the pre-pandemic level of 3.5%. Policymakers also downgraded their expectations for economic growth this year, with gross domestic product expected to grow 5.9% compared to the 7.0% projected in June.

Still, the shift shows movement among policymakers divided over whether the coronavirus pandemic’s ongoing impact on the economy or the threat of breakout inflation constitutes the bigger risk.

While no decisions have been made on the exact pace and timing of how the central bank will reduce its asset purchases, Fed Chair Jerome Powell said it seems “appropriate” that the taper could begin “soon” and be completed by the middle of 2022.

“Participants generally view that as long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” he said in a news conference after the end of the Fed’s latest two-day policy meeting.

Powell told reporters financial conditions would remain accommodative even after the Fed stops purchasing Treasuries and mortgage-backed securities and emphasized that the decision on the bond-buying program was separate from any actions regarding interest rates.

The Fed on Wednesday held its current target interest rate steady in a range of 0% to 0.25%.

“It’s probably a little bit more hawkish than many would have anticipated basically acknowledging that should the economy continue to grow as we have seen it would warrant a tapering to occur,” said Sam Stovall, chief investment strategist for CFRA Research in New York. “You could say it’s a tentative tapering announcement even though they did lower their 2021 GDP forecast.”

U.S. stocks extended gains after the release of the statement before retreating slightly during Powell’s news conference, with the S&P 500 index up 1.2% on the day. The dollar rose while the yield on the U.S. 10-year Treasury note edged lower.

SLOWING RECOVERY

Though acknowledging the new surge of the pandemic had slowed the recovery of some parts of the economy, overall indicators “have continued to strengthen,” the central bank’s policy-setting Federal Open Market Committee said in its unanimous policy statement.

If that progress continues “broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” it said.

The statement had been widely expected to signal that the Fed would soon begin winding down the $120 billion in monthly bond purchases it has been making to blunt the economic impact of the pandemic.

Fed officials said last December that they would continue purchasing bonds at the current pace until there was “substantial further progress” on the central bank’s goals for maximum employment and inflation.

Powell on Wednesday said officials could decide as soon as the next policy meeting in November that both of those standards have been met, based on what happens with the labor market and the broader economy, and make a decision on whether to taper.

But it was in their broader economic outlook that Fed policymakers made a less anticipated change.

The outlook for inflation jumped 0.8 percentage point for 2021 and the unemployment rate seen at the end of this year rose. In turn, two officials brought forward into 2022 their projected timeline for slightly lifting the Fed’s benchmark overnight interest rate from the current level, enough to raise the median projection to 0.3% for next year.

The move to lower GDP growth expectations for 2021 reflected concerns that the coronavirus is weighing on the economy.

“The sectors most adversely affected by the pandemic have improved in recent months, but the rise in COVID-19 cases has slowed their recovery,” the Fed said in its policy statement.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Howard Schneider; Additional reporting by Jonnelle Marte and U.S. Finance and Markets Breaking News teamEditing by Paul Simao)

FOMC Teases Start of Taper “soon”

The actions, which were included in the Fed’s latest policy statement and separate economic projections, represent a hawkish tilt by a central bank that sees inflation running this year at 4.2%, more than double its target rate, and is positioning itself to act against it.

The current target interest rate was held steady in a range of 0% to 0.25%.

In a press conference after the statement Fed Chair Jerome Powell elaborated that if the economy continues to improve the FOMC could easily move ahead with tapering at the next meeting in November. The bar for lifting rates from zero is much higher than for tapering, he said.

STOCKS: The S&P 500 briefly extended a rally and was last unchanged from before the statement up 0.95%

BONDS: The 10-year U.S. Treasury note yield seesawed and was last up at 1.3226% and the 2-year yield firmed to 0.2342%

FOREX: The dollar index turned 0.2% firmer

COMMENTS

LAWRENCE GILLUM, FIXED INCOME STRATEGIST, LPL FINANCIAL, FORT MILL, SOUTH CAROLINA

“There are some notable takeaways. The divergence of views within the committee is interesting. We’re seeing a 50-50 split in terms of rate hikes in 2022. There’s just a big divergence of opinions on rate hikes and even further into 2023, a big range of potential Fed Fund target rates.

“The Fed did talk about potentially moderating its asset purchases soon, that’s setting up the committee to announce tapering in November, with a decision to actually taper coming in December. The Fed has made progress in that taper timeline and we think that will likely take place this year.”

“The other takeaways were the adjustments to the summary of economic projections. Inflation expectations have move higher for a touch longer than they originally thought, and then those growth expectations have come down a touch as well.”

JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON

“Very mixed signals from the Fed, resulting in the dollar’s choppy performance. Once the dust settles it seems that there are enough hawkish signals to keep the dollar biased higher, as the market pencils in a sooner-than-expected rate hike. Inflation also continues to trend higher. And although the Fed marked down its forecasts for growth and unemployment, it still has robust expectations for the economy.”

KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CAMBRIDGE GLOBAL PAYMENTS, TORONTO

“Markets initially read the statement as hawkish, but that reaction is fading out as traders read more deeply into the Statement of Economic Projections. Fed officials acknowledged making ‘substantial further progress’ toward the central bank’s inflation goal, and demonstrated confidence in the labor market meeting that test by the end of the year.

“The FOMC warned markets of an imminent tapering decision, saying that a ‘moderation in the pace of asset purchases may soon be warranted’ if  economic conditions continue to evolve as expected.

“A record number of participants are worried about upside risks on the inflation front, suggesting that the central bank could move aggressively if price growth remains elevated into the early part of next year.”

“Officials are now deadlocked on raising rates in 2022, but the median forecast is for a 1% Fed funds rate in 2023, and only 1.8% by the end of 2024. This is not rapid tightening by any means – it’s slightly slower than the 25-basis-point-per-quarter pace seen in previous cycles.

“This could also mean that estimates of the ‘terminal rate’ at the end of the cycle have been lowered. This is dovish, and will be welcomed in financial markets. The dollar could tumble from here, particularly if Powell follows prior patterns and tramples on the dot plot during the presser.”

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA Research, NEW YORK

“It’s probably a little bit more hawkish than many would have anticipated basically acknowledging that should the economy continue to grow as we have seen it would warrant a tapering to occur. You could say it’s a tentative tapering announcement even though they did lower their 2021 GDP forecast.”

“The reason the Fed is tapering is because the economy and corporate earnings are strong enough to withstand it. So investors are basically saying let’s buy equities because the economy is strong and the Fed won’t be raising rates until a year plus from now.”

“The Fed is not going to get behind the curve and won’t have to end up surprising us by raising rates much more quickly than currently anticipated.”

JOHN CANAVAN, LEAD ANALYST, OXFORD ECONOMICS, NEW YORK

“Basically what we’re seeing here is a (U.S. Treasury yield) curve flattening shift in response to the summary of economic projections pulling forward Fed rate hikes. The Fed is now projecting a rate hike in 2022 as their median forecast, which is up from steady in the July summary of economic projections. As a result, what we’re seeing is a little bit of pressure on the front end (of the curve), while the long end views the slightly more hawkish Fed as a positive sign for keeping inflation in check along with some potential risk of the Fed moving too quickly and acting to slow the economy in the coming years.”

“We have seen a bit of an acceleration in the curve flattening based on the view that we’ve seen peak inflation and some of the risks related to the slowing economy in the third quarter.”

STEVEN VIOLIN, PORTFOLIO MANAGER, F.L.PUTNAM INVESTMENT MANAGEMENT COMPANY, WELLESLEY, MASSACHUSETTS

“It is an interesting point in time here, the tapering of quantitative easing seems very likely now in November but this was something of a given and remains couched in a lot of qualifying criteria in the event that various risks emerge, whether it is the debt ceiling debate, COVID outlook, the China property market intervening. The increase in the Fed’s projections in future interest rates though seems to be more what has caught the market by surprise at the margin, it is still consistent with our view that the Fed is likely to continue allowing inflation to run hot and remain anchored in the same measured pace as prior cycles. It really only increases the inflation risk that we have been taking seriously as we see some of the supply chain and labor shortages clearly not resolving with the end of unemployment benefits. Longer-term there is a lot of powerful disinflationary forces but for the moment they are clearly being offset and the risk is that becomes entrenched in consumer expectations.”

“For the moment, the markets seem to be taking this in stride with a relatively positive reaction from the stock market and from longer-term bonds, as far as the inflation outlook goes, I’m not sure this is a positive development.”

“It is also the measured pace, some increase in the dots was expected by the market and priced in to some extent but there wasn’t any acceleration, in fact there is a deceleration, which indicates perhaps some members of the committee have revised lower their terminal rate, it is hard to know, but the current dots as they are showing fewer increases in the out years and this is the first look we have gotten in the 2024 projections. So that is a notable development that perhaps is what is driving the positive response in longer-term interest rates and the shifts in currency markets.”

TOM GARRETSON, SENIOR PORTFOLIO STRATEGIST, RBC WEALTH MANAGEMENT, MINNEAPOLIS

“Across the board it’s exactly what we were expecting, the Fed took another step towards a formal taper announcement, and that’s probably going to come at the next meeting or two.

“The key behind the potential rate hike was the upgrade to their inflation outlook. There are signs inflationary pressures are going to be transitory, but they are more persistent than expected. That’s the key driver as to why the balance has shifted to a potential rate hike in 2022 as opposed to 2023.

“We’re watching yield curves flatten. The Treasury market’s interpreting it as a hawkish surprise.

“It was very inline with expectations. Powell will use the press conference to reiterate to the idea that tapering is coming in the several months. It’s what I expected, not too hawkish and not too dovish.”

JOSEPH LAVORGNA, AMERICAS CHIEF ECONOMIST, NATIXIS, NEW YORK

“Unless we know who is who, which we don’t, I’m not sure the dot-plot accurately reflects the Fed’s thinking. I don’t think the Fed’s tightening is going to be anywhere near as hawkish as they anticipate. It’s going to be hard for them to execute on this plan as the economy slows next year.”

For a look at all of today’s economic events, check out our economic calendar.

(Compiled by the U.S. Finance & Markets Breaking News team)

Dollar Choppy After Fed Statement, Evergrande Exhale Lifts Risk-Sensitive Currencies

The Federal Reserve on Wednesday cleared the way to reduce its monthly bond purchases “soon” and signaled interest rate increases may follow more quickly than expected, with half of the 18 U.S. central bank policymakers projecting borrowing costs will need to rise in 2022.

“The tapering of quantitative easing seems very likely now in November but this was something of a given and remains couched in a lot of qualifying criteria in the event that various risks emerge, whether it is the debt ceiling debate, COVID outlook, the China property market intervening,” said Steven Violin, portfolio manager at F.L.Putnam Investment Management Company in Wellesley, Massachusetts.

The dollar index rose 0.094%, alternating between gains and declines after the announcement, with the euro down 0.1% to $1.1711.

Property giant and Asia’s biggest junk bond issuer Evergrande said it “resolved” one payment due on Thursday via a private negotiation, easing concerns of default and possible contagion risk, while the People’s Bank of China injected 90 billion yuan into the banking system to support markets.

“Being able to make tomorrow’s bond coupon payment, that definitely lifted risk sentiment overnight and you saw a typical follow-through reaction in risk currencies, so Canadian dollar high, Aussie dollar higher, Kiwi dollar higher – that was kind of an understandable reaction,” said Erik Bregar, an independent FX analyst in Toronto.

Still, uncertainty remains whether the developer will be able to pay the coupon on its offshore dollar bonds, due on Thursday.

The Australian dollar rose 0.33% versus the greenback to $0.726 after rising as much as 0.49% to $0.7268 while the Canadian dollar rose 0.58% versus the greenback to 1.27 per dollar.

The offshore Chinese yuan strengthened versus the greenback to 6.4628 per dollar.

The safe-haven Japanese yen weakened 0.50% versus the greenback to 109.78 per dollar in the wake of the Bank of Japan’s decision to keep policy on hold.

Sterling was last trading at $1.3637, down 0.16% on the day ahead of a policy announcement by the Bank of England on Thursday, with expectations for a rate hike being pushed down the road by investors.

In cryptocurrencies, Bitcoin last rose 6.93% to $43,409.48 following three straight days of declines.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chuck Mikolajczak; Editing by Will Dunham and Andrea Ricci)

USD/CAD Daily Forecast – Test Of Support At 1.2730

U.S. Dollar Is Losing Ground Against Canadian Dollar

USD/CAD is currently trying to settle below the support at 1.2730 while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index has recently declined towards the support level at 93.10. A move below this level will push the U.S. Dollar Index towards the next support at 92.80.

Today, foreign exchange market traders will focus on Fed Interest Rate Decision and the subsequent commentary. Fed Chair Jerome Powell will provide the latest updates on the fate of Fed’s asset purchase program, which will have a significant impact on markets. Volatility will likely increase when Powell begins to speak, and traders should be prepared for fast moves.

Meanwhile, commodity-related currencies are gaining ground as commodity markets are moving higher. WTI oil managed to settle back above the $71 level and is trying to get above the $72 level. In case this attempt is successful, it will move towards the resistance at $72.50 which will be bullish for Canadian dollar.

Technical Analysis

usd cad september 22 2021

USD to CAD managed to get below the support at 1.2760 and is testing the next support level at 1.2730. A successful test of this level will open the way to the test of the next support at 1.2710.

If USD to CAD declines below the support at 1.2710, it will head towards the next support which is located at the 20 EMA near 1.2690. A move below the 20 EMA will open the way to the test of the support level at 1.2650.

On the upside, the previous support at 1.2760 will serve as the first resistance level for USD to CAD. In case USD to CAD manages to get back above this level, it will head towards the resistance at 1.2785. A successful test of the resistance at 1.2785 will push USD to CAD towards the next resistance level which is located near today’s highs at 1.2830.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD: Loonie Strengthens as Oil Prices Bounce Back; FOMC Decision Eyed

The Canadian dollar strengthened against its U.S. counterpart on Wednesday as oil prices jumped after industry data showed U.S. crude stockpiles decreased more than expected last week following two hurricanes.

“The loonie remained a little volatile after the federal election. Despite a heated race between the Liberals and the Conservatives, the minority takeover of power by the PLC has supported the Canadian currency somewhat. At the time of this writing, the USD/CAD price is trading at 1.2782,” noted analysts at Laurentian Bank of Canada.

“In technical analysis, the next support level for the USD/CAD price is at 1.2759 while the first resistance level holds at 1.2865.”

The USD/CAD pair fell to 1.2746 today, down from Tuesday’s close of 1.2815. The Canadian dollar lost over 1.2% last month and further depreciated over 1% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge higher as U.S. oil inventories fell. U.S. West Texas Intermediate (WTI) crude futures were trading 1.52% higher at $71.55 a barrel. Higher oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie.

“Increasing concerns about the persistence of domestic elevated inflation and prospect of BoC’s goal of absorbing around 350k job gains insight could see the BoC start to consider signalling rate rises as early as by H1’2022. Together with Citi’s expectations for Brent crude to trade higher in Q4 (USD75-80), this could make CAD the “buy of the quarter in Q4” vs USD, EUR, JPY, CHF. USDCAD is struggling to break below strong support at 1.2555-79. A decisive break below this range is needed to open up for extended losses towards the double lows from Jul’21 at 1.2422-28,” noted analysts at Citi.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.03% lower at 93.173 ahead of the Federal Reserve monetary policy decision. The dollar reaches a one-month high on Monday, boosted by recent strong economic data and speculation regarding Fed tapering. Today, Fed policymakers could open discussions about reducing their monthly bond purchases are expected.

It is highly likely that the world’s dominant reserve currency, the USD, will rise by end of the year, largely due to the expectation of two rate hikes by the Fed in 2023. With the dollar strengthening and a possibility that the Federal Reserve will raise interest rates earlier than expected, the USD/CAD pair may experience a rise.

USD/CAD Ascending Channel but the Price is Ranging

The POC zone comes around 1.2650 and we could see a move to the upside. However, watch for the FOMC today. If the markets dips to the POC watch for a bounce. Above 1.2890 we should see a bullish move. The target then will be 1.3060. Below 1.2550 watch for 1.2478 and 1.2341 as the price will turn bearish.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,

Nenad