Analysis: Why the Fed Might Welcome a Bond Market Tantrum

Persistently low yields are a feature of bond markets across the developed world, with central banks mostly in no hurry to raise interest rates and a global savings glut that keeps debt securities in constant demand.

But it is in the United States that the contradiction between economic recovery and bond yields is starkest.

Even with growth tipped to surpass 6% this year and a “taper” in sight for the Fed’s bond-buying programme at the end of this year, 10-year yields are still stuck at just above 1.3%..

The Fed probably rejoiced at low yields in the initial stages of the economic recovery, but now needs bonds to respond to the end of pandemic-linked recession, said Padhraic Garvey, head of research for the Americas at ING Bank.

Current pricing, analysts say, looks more consistent with heightened economic uncertainty, whereas higher yields would align markets more with the signals coming from central banks.

“To facilitate that, we argue that there needs to be a tantrum. If the Fed has a taper announcement … and there is no tantrum at all, that in fact is a problem for the Fed,” ING’s Garvey said.

Analysts say a bond market tantrum would involve yields rising 75-100 basis points (bps) within a couple of months.

The original “taper tantrum” in 2013 boosted U.S. yields just over 100 bps in the four months after then Fed boss Ben Bernanke hinted at an unwinding of stimulus measures.

But that kind of sudden jump in yields looks unlikely right now, given how clearly the Fed has telegraphed its plans to taper its bond-buying. And as 2013 showed, bond market tantrums carry nasty side-effects including equity sell-offs and higher borrowing costs worldwide.

A happy medium, analysts say, might be for benchmark yields to rise 30-40 bps to 1.6-1.8%

FED AND BANKS NEED AMMUNITION

Besides wanting higher yields to better reflect the pace of economic growth, the Fed also needs to recoup some ammunition to counter future economic reversals.

The Fed funds rate – the overnight rate which guides U.S. borrowing costs – is at zero to 0.25%, and U.S. policymakers, unlike the Bank of Japan and the European Central Bank, are disinclined to take interest rates negative.

The Fed won’t want to find itself in the position of the ECB and BOJ, whose stimulus options at the moment are limited to cutting rates further into negative territory or buying more bonds to underwrite government spending.

Jim Leaviss, chief investment officer at M&G Investments for public fixed income, said policymakers would probably like the Fed fund rate to be at 2%, “so, when we end up in the next downturn, the Fed will have some space to cut interest rates without hitting the lower bound of zero quickly”.

Another reason higher yields might be welcomed is because banks would like steeper yield curves to boost the attractiveness of making longer-term loans funded with short-term borrowing from depositors or markets.

Thomas Costerg, senior economist at Pictet Wealth Management, notes that the gap between the Fed funds rate and 10-year yields of about 125 bps now is well below the average 200 bps seen during previous peaks in economic expansion.

He believes the Fed would favour a 200 bps yield slope, “not only because it would validate their view that the economic cycle is fine but also because a slope of 200 bps is healthy for the banking sector’s maturity transformation.”

GRAVITATIONAL FORCE

But even a tantrum might not bring a lasting rise in yields.

First, while the Fed may look with envy at Norway and New Zealand where yields have risen in expectation of rate rises, it has stressed that its own official rates won’t rise for a while.

Structural factors are at play too, not least global demand for the only large AAA-rated bond market with positive yields.

The Fed also, in theory at least, guides rates towards the natural rate of interest, the level where full employment coincides with stable inflation.

But this rate has shrunk steadily. Adjusted for projected inflation, the “longer-run” funds rate – the Fed’s proxy for the natural rate – has fallen to 0.5% from 2.4% in 2007. If correct, it leaves the Fed with little leeway.

Demographics and slower trend growth are cited as reasons for the decline in the natural rate though a paper https://bit.ly/3nVMxMv presented last month at the Jackson Hole symposium also blamed a rise in income inequality since the 1980s.

The paper said the rich, who are more likely to save, were taking a bigger slice of overall income and the resulting savings glut was weighing on the natural rate of interest.

“One lesson from this year is that there is massive gravitational force, a price-insensitive demand which is pressing down on Treasury yields,” Pictet’s Costerg said.

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

(Reporting by Stefano Rebaudo; Additional reporting by Dhara Ranasinghe in London and Dan Burns in New York; Editing by Sujata Rao and David Clarke)

 

USD/CAD Daily Forecast – Canadian Dollar Is Under Pressure At The Start Of The Week

U.S. Dollar Gains Ground Against Canadian Dollar

USD/CAD made an attempt to settle above the resistance at 1.2900 but lost momentum and declined towards 1.2830 while the U.S. dollar lost momentum against a broad basket of currencies.

The U.S. Dollar Index faced strong resistance at 93.40 and declined towards 93.20. The nearest support level for the U.S. Dollar Index is located at 93.10. In case the U.S. Dollar Index declines below this level, it will head towards the support at 92.80 which will be bearish for USD/CAD.

While it’s an Election Day in Canada, foreign exchange market traders focused on general market sentiment and dynamics of commodity markets which were under pressure on fears about financial problems of China’s Evergrande.

U.S. dollar was gaining ground against a broad basket of currencies as demand for safe-haven assets increased. However, traders were not ready to push the U.S. currency towards yearly highs as they remained cautious ahead of the Fed meeting.

Meanwhile, Canadian dollar was under pressure as WTI oil made an attempt to settle below the psychologically important $70 level. If WTI oil settles below this level, it will head towards the 50 EMA at 69.40 which will be bearish for commodity-related currencies, including Canadian dollar.

Technical Analysis

usd cad september 20 2021

USD to CAD is currently trying to settle back above 1.2830. RSI is close to the overbought territory, but there is enough room to gain upside momentum in case the right catalysts emerge.

In case USD to CAD manages to settle above 1.2830, it will head towards the next resistance level at 1.2850. A successful test of this level will open the way to the test of the resistance at 1.2865. If USD to CAD gets above 1.2865, it will head towards the next resistance at 1.2900.

On the support side, a move below 1.2830 will push USD to CAD towards the support at 1.2785. In case USD to CAD declines below 1.2785, it will head towards the support at 1.2760. A move below 1.2760 will open the way to the test of the support at 1.2730.

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

USD/CAD: Loonie Hits Over One-Month Low on Subdued Oil Prices, Election Uncertainties

The Canadian dollar hit over a one-month low against its U.S. counterpart, sliding for the third straight day on Monday as falling energy prices and snap election uncertainties weighed on the commodity currency.

The USD/CAD pair rose to 1.2895 today, up from Friday’s close of 1.2766. The Canadian dollar lost over 1.2% last month and further depreciated over 1.5% so far this month.

Today’s federal reserve decision and the election in Canada will be closely watched by investors. There is no sign of a majority in the Canadian election on Monday, a second time in a row, leaving either Justin Trudeau or Erin O’Toole trying to govern with a minority.

Investors are concerned that elections will lead to a deadlock that hinders government action against COVID-19 and impedes the recovery of the economy.

“What we think will matter the most from a market perspective is whether there will eventually be a workable majority. Up until some majority emerges, the Canadian dollar may continue to discount political uncertainty,” noted Francesco Pesole, FX Strategist at ING.

“At the same time, barring the worst-case scenario of a hung parliament and new elections, we still expect a gradual dissipation of political risk in the coming weeks to help CAD close its mis-valuation gap (USD/CAD is 2% overvalued, according to our short-term fair value model) as the loonie may start to benefit more freely from its good fundamentals – and above all, the prospect of more BoC policy normalisation. We still expect USD/CAD to trade below 1.25 in 4Q21.”

Canada is the world’s fourth-largest exporter of oil, which edge lower as production in the Gulf of Mexico slowly returns. U.S. West Texas Intermediate (WTI) crude futures were trading 1.38% lower at $70.99 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

“We don’t think the federal election is weighing on the CAD in any significant way.  In fact, while the CAD has fallen against the USD this week, it has lost less ground than most of its G10 currency peers.  Short-term CAD vols have firmed but remain within this year’s range (1w vol peaked at 9% in February),” noted Shaun Osborne, Chief FX Strategist at Scotiabank.

“The election race remains tight, and another minority government remains the most likely outcome.  Research by our Scotia Economics colleagues suggests that there is ultimately very little difference in the fiscal outcomes through 2025 between either the Liberal or Conservative parties’ platforms.  Either way, a minority will limit the next government’s room for significant manoeuvre.”

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.01% higher at 93.204. The dollar reaches a one-month high, boosted by recent strong economic data and speculation regarding Fed tapering. Fed policymakers will meet this week and 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.

A Quiet Economic Calendar Leaves the Dollar in the Spotlight

Earlier in the Day:

It was a quiet start to the day on the economic calendar this morning. With the China and Japan markets closed today, there were no material stats for the markets to consider in the early hours.

The lack of stats left the markets to respond to moves through the U.S session on Friday, which had left riskier assets in the red.

For the Majors

At the time of writing, the Japanese Yen was down by 0.05% to ¥109.990 against the U.S Dollar, with the Aussie Dollar down by 0.25% to $0.7261. The Kiwi Dollar was down by 0.17% to $0.7028.

The Day Ahead

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Wholesale inflation figures for Germany are due out later today.

Barring a marked spike, however, we don’t expect the August figures to have a material impact on the EUR.

At the time of writing, the EUR was down by 0.01% to $1.1724.

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.

The lack of stats will leave the Pound in the hands of market risk sentiment as the markets look ahead to Thursday’s MPC decision.

At the time of writing, the Pound was down by 0.12% to $1.3725.

Across the Pond

It’s also particularly quiet day ahead. There are no material stats due out to provide the Dollar and the broader markets with direction.

The lack of stats will leave the markets to continue to focus on the FOMC and what to expect on Wednesday.

The U.S Dollar Spot Index ended Friday up 0.28% to $93.195.

For the Loonie

It’s a particularly quiet day ahead for the Loonie, however. There are no major stats due out of Canada to provide the Loonie with direction.

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

At the time of writing, the Loonie was down by 0.06% to C$1.2774 against the U.S Dollar.

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

The Week Ahead – Central Banks back in Focus with the BoE and the FED in Action

On the Macro

It’s a quiet week ahead on the economic calendar, with 37 stats in focus in the week ending 17th September. In the week prior, 62 stats had also been in focus.

For the Dollar:

Prelim private sector PMIs for September will be in focus on Thursday.

Expect the services PMI to be the key stat of the week.

Other stats include housing sector data that will likely have a muted impact on the Dollar and the broader market.

The main event of the week, however, is the FOMC monetary policy decision on Wednesday.

With the markets expecting the FED to stand pat, the economic and interest rate projections and press conference will be pivotal. FED Chair Powell prepped the markets for the tapering to begin this year. The markets are not expecting any hint of a shift in policy on interest rates, however…

In the week ending 17th September, the Dollar Spot Index rose by 0.66% to 93.195.

For the EUR:

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

Prelim September private sector PMIs for France, Germany, and the Eurozone will draw plenty of interest on Thursday.

While Germany’s manufacturing PMI is key, expect influence from the entire data set. Market concerns over the economic recovery have tested support for riskier assets. Softer PMI numbers would test EUR support on the day.

For the week, the EUR fell by 0.75% to $1.1725.

For the Pound:

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

On the economic data front, CBI Industrial Trend Orders and prelim private sector PMIs are due out.

Expect the services PMI for September to be the key stat on Thursday.

While the stats will influence, the BoE’s monetary policy decision on Thursday will be the main event.

Persistent inflationary pressure has raised the prospects of a sooner rather than later move by the BoE. Weak retail sales figures have made things less clear, however.

Expect any dissent to drive the Pound towards $1.40 levels.

The Pound ended the week down by 0.71% to $1.3741.

For the Loonie:

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

Early in the week, house price figures for August are due out. The numbers are not expected to have a material impact on the Loonie, however.

Retail sales figures for July, due out on Thursday, will influence, however. Another sharp increase in spending would deliver the Loonie with much-needed support.

The Loonie ended the week down 0.57% to C$1.2764 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

There are no major stats to provide the Aussie Dollar with direction.

While there are no major stats, the RBA monetary policy meeting minutes on Tuesday will influence. The markets will be looking for forward guidance following the latest lockdown measures.

The Aussie Dollar ended the week down by 1.05% to $0.7279.

For the Kiwi Dollar:

It’s another quiet week ahead.

Early in the week, consumer sentiment figures for the 3rd quarter will be in focus.

Trade data, due out on Friday, will be the key numbers for the week, however.

Away from the economic calendar, however, COVID-19 news updates will also be key.

The Kiwi Dollar ended the week down by 1.03% to $0.7040.

For the Japanese Yen:

It’s a relatively busy week on the economic calendar.

Inflation and prelim private sector PMIs are due out on Friday. We don’t expect the numbers to influence the Yen, however.

On the monetary policy front, the BoJ is in action on Wednesday. We aren’t expecting any surprises, however, as the Delta variant continues to deliver economic uncertainty.

The Japanese Yen rose by 0.01% to ¥109.93 against the U.S Dollar.

Out of China

There are also no major stats due out of China for the markets to consider, with the Chinese markets closed early in the week.

On the monetary policy front, the PBoC is in action. We don’t expect any changes to the Loan Prime Rates, however.

The Chinese Yuan ended the week down by 0.34% to CNY6.4661 against the U.S Dollar.

Geo-Politics

Iran, China, and Russia remain the main areas of interest for the markets. News updates from the Middle East, in particular, will need continued monitoring following recent events in Afghanistan.

The Weekly Wrap – Economic Data and Policy Jitters Delivered a Boost for the Greenback

The Stats

It was a busier week on the economic calendar, in the week ending 17th September.

A total of 61 stats were monitored, which was up from 42 stats in the week prior.

Of the 61 stats, 21 came in ahead forecasts, with 27 economic indicators coming up short of forecasts. There were 13 stats that were in line with forecasts in the week.

Looking at the numbers, 29 of the stats reflected an upward trend from previous figures. Of the remaining 32 stats, 30 reflected a deterioration from previous.

For the Greenback, upbeat economic data and sentiment towards monetary policy delivered support in the week. In the week ending 17th September, the Dollar Spot Index rose by 0.66% to 93.195. In the previous week, the Dollar had risen by 0.59% to 92.582.

Out of the U.S

Early in the week, inflation figures were in focus.

In August, the annual rate of core inflation softened from 4.3% to 4.0% versus a forecasted 4.2%. While softer than expected, 4% continued to sit well above the FED’s 2% target, leaving tapering on the table.

Mid-week, industrial production and NY Empire State manufacturing figures were market positive.

On Thursday, retail sales, Philly FED Manufacturing PMI, and jobless claims figures were of greater interest, however.

In August, retail sales increased by 0.7% versus a forecasted 0.2% decline. Core retail sales jumped by 1.8% versus a 0.1% decline. In July retail sales had fallen by 1.1% and core retail sales by 0.4%.

Manufacturing numbers were also upbeat, with the Philly FED Manufacturing PMI increasing from 19.4 to 30.7 in September.

Jobless claims figures failed to impress, however, with sub-300k remaining elusive. In the week ending 10th September, initial jobless claims rose from 312k to 332k. Economists had forecast an increase to 330k.

At the end of the week, consumer sentiment improved, albeit moderately. In September, the Michigan Consumer Sentiment Index rose from 70.3 to 71.0, falling short of a forecasted 72.0.

Out of the UK

It was also a busy week. Employment, inflation, and retail sales figures were in focus. The stats were skewed to the positive.

In August, claimant counts fell by a further 58.6k after having fallen by 48.9k in July. In July, the unemployment rate fell from 4.7% to 4.6%.

The UK’s annual rate of inflation accelerated from 2.0% to 3.25 in August, also delivering Pound support.

At the end of the week, retail sales disappointed, however. Month-on-month, core retail sales fell by 1.2% in August, following a 3.2% slide in July. Retail sales fell by 0.9% after having fallen by 2.8% in July. Economists had forecast a pickup in spending.

In the week, the Pound fell by 0.71% to end the week at $1.3741. In the week prior, the Pound had fallen by 0.23% to $1.3839.

The FTSE100 ended the week down by 0.93%, following a 1.53% loss from the previous week.

Out of the Eurozone

Economic data included wage growth, industrial production, trade, and finalized inflation figures for the Eurozone.

Finalized inflation figures for Spain, France, and Italy were also out but had a muted impact on the EUR.

In the 2nd quarter, wage fell by 0.4%, year-on-year, partially reversing a 2.1% increase recorded in the previous quarter.

Industrial production and trade data were positive, however.

Production increased by 1.5%, reversing a 0.1% fall from June, with the Eurozone’s trade surplus widening from €17.7bn to €20.7bn.

At the end of the week, finalized inflation figures for the Eurozone were in line with prelim figures. The Eurozone’s annual rate of inflation accelerated from 2.2% to 3.0% in August.

For the week, the EUR fell by 0.75% to $1.1725. In the week prior, the EUR had fallen by 0.56% to $1.1814.

The CAC40 slid by 1.40%, with the DAX30 and the EuroStoxx600 ending the week with losses of 0.77% and 0.96% respectively.

For the Loonie

Economic data included manufacturing sales, inflation, and wholesale sales figures.

The stats were mixed in the week.

In July, both manufacturing sales and wholesale sales disappointed with falls of 1.5% and 2.1% respectively.

Providing support, however, was a pickup in the annual rate of inflation from 3.3% to 3.5%.

The pickup in inflationary pressure and rising oil prices were not enough to support the Loonie against the Greenback.

In the week ending 17th September, the Loonie fell by 0.57% to C$1.2764. In the week prior, the Loonie had fallen by 1.34% to C$1.2692.

Elsewhere

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

The Aussie Dollar fell by 1.05% to $0.7279, with the Kiwi Dollar ending the week down by 1.03% to $0.7040.

For the Aussie Dollar

Business and consumer confidence figures were in focus in the 1st half of the week.

In spite of the latest lockdown measures, the stats were skewed to the positive.

The NAB Business Confidence Index rose from -8 to -5 in August.

More significantly, the Westpac Consumer Sentiment Index increased by 2.0% in September. The index had fallen by 4.4% in August.

On Thursday, employment figures disappointed, however.

In August, full employment fell by 68k following a 4.2k decline in July. Employment tumbled by 146.3k, however, versus a forecasted 90.0k decline. In July, employment had risen by 2.2k.

According to the ABS,

  • The unemployment rate fell from 4.6% to 4.5%, with the participation rate declining from 66.0% to 65.2%.
  • Year-on-year, the number of unemployed was down by 298,000.

For the Kiwi Dollar

It was also a mixed week on the economic data front.

2nd quarter GDP numbers impressed, with the NZ economy expanding by 2.8%, quarter-on-quarter. The economy had expanded by a more modest 1.4% in the previous quarter.

On the negative, however, was a slide in the Business PMI from 62.6 to 40.1 in August. The figures reflected the impact of the latest lockdown measures on production, justifying the RBNZ’s decision to leave the cash rate unchanged.

For the Japanese Yen

It was a relatively quiet week, with the numbers skewed to the negative.

According to finalized figures, industrial production fell by 1.5% in July. While in line with prelim figures, this was a partial reversal of a 6.5% jump from June.

In August, Japan’s trade balance fell from a ¥439.4bn surplus to a ¥635.4bn deficit. Exports rose by 26.2%, year-on-year, after having been up by 37% in July.

The Japanese Yen rose by 0.01% to ¥109.93 against the U.S Dollar. In the week prior, the Yen had fallen by 0.21% to ¥109.94.

Out of China

Fixed asset investment and industrial production figures were in focus mid-week.

There were yet more disappointing numbers from China for the markets to consider.

In August, fixed asset investment increased by 8.9%, year-on-year. This was softer than a 10.3% increase in July.

More significantly, industrial production was up by 5.3% in August versus 6.4% in July.

In the week ending 17th September, the Chinese Yuan fell by 0.34% to CNY6.4661. In the week prior, the Yuan had ended the week up by 0.18% to CNY6.4443.

The CSI300 and the Hang Seng ended the week down by 3.14% and by 4.90% respectively.

Dollar Touches Three-Week High, Lifted by Recent Data, Fed Taper View

The dollar index, a gauge of the greenback’s value against six major currencies, rose to 93.220, the highest since the third week of August. It was last up 0.4% at 93.207.

For the week, the dollar index gained 0.6%, its largest weekly percentage rise since mid-August.

The Fed holds a two-day monetary policy meeting next week and is expected to open discussions on reducing its monthly bond purchases, while tying any actual change to U.S. job growth in September and beyond.

“While we doubt that the FOMC will set out a plan for tapering its asset purchases, the new economic projections may shed some light on its reaction function given building cyclical inflationary pressures,” wrote Jonathan Petersen, markets economist at Capital Economics, in its latest research note.

“Our view remains that inflation in the U.S. will stay elevated for longer than the FOMC and investors currently anticipate, in turn supporting higher U.S. yields and a stronger dollar,” he added.

Speculation about a Fed taper this year gathered pace after U.S. retail sales unexpectedly increased in August, data showed on Thursday, rising 0.7% from the previous month despite expectations of a 0.8% fall. A business sentiment survey also showed a big improvement.

In afternoon New York trading, the euro slid 0.3% to $1.1729, after hitting a three-week low of $1.1724 earlier in the session.

The University of Michigan consumer sentiment for September inched higher to 71 versus the final August reading of 70.3, but overall analysts said the rise was nowhere near the improvements seen in the Empire States and Philadelphia Fed manufacturing surveys.

The dollar held gains after the Michigan sentiment report.

Currency markets were generally quiet on Friday with traders reluctant to take on new positions ahead of a clutch of important central bank meetings next week including the Fed, the Bank of Japan and the Bank of England.

The dollar was up 0.5% against the Swiss franc at 0.9320 francs, after earlier hitting a five-month high of 0.9324 francs .

The dollar rose 0.2% to 109.92 yen.

The yen has shown limited reaction to the ruling Liberal Democratic Party’s leadership race, which formally kicks off on Friday ahead of a Sept. 29 vote. The LDP’s parliamentary dominance means the party’s new leader will become prime minister.

The dollar also rose to a two-week high against the offshore yuan and was last up 0.3% at 6.4711. The yuan is being pressured by growing worries about China’s real estate sector as investors fear property giant China Evergrande could default on its coupon payment next week.

The British pound fell 0.4% to $1.3738 as UK retail sales undershot expectations. However, with investors bringing forward forecasts for a Bank of England interest rate hike to mid-2022, sterling remains supported.

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

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Muralikumar Anantharaman, Alex Richardson and Sonya Hepinstall)

USD/CAD: Loonie Hits Nearly One-Month Low Ahead of Snap Election

The Canadian dollar hit a near one-month low against its U.S. counterpart on Friday as falling energy prices and September 20 election uncertainties weighed on the commodity currency.

Next week’s federal reserve decision and the election in Canada will be closely watched by investors. Investors are concerned that Monday’s elections will lead to a deadlock that hinders government action against COVID-19 and impedes the recovery of the economy.

The USD/CAD pair rose to 1.2762 today, up from Thursday’s close of 1.2681. The Canadian dollar lost over 1.2% last month and has depreciated about 1% so far this month.

“Barring the scenario of a hung parliament, political uncertainty in Canada should ultimately dissipate, helping CAD realign with its short-term fair value. The latest data (labour market and inflation) have all but confirmed the view that the Bank of Canada will have to step in with another round of tapering in October, which should leave it on track to fully unwind QE by year-end, or by early-2022,” noted Francesco Pesole, FX Strategist at ING.

“Ultimately, markets will be left with some room to speculate that the first hike will be delivered before mid-2022 (which is currently in the BoC rate-path projections). The set of good fundamentals should, in our view, provide some sustained support to CAD into year-end, and we expect USD/CAD to trade consistently below 1.25 in 4Q21.”

Canada is the world’s fourth-largest exporter of oil, which edge lower as production in the Gulf of Mexico slowly returns. U.S. West Texas Intermediate (WTI) crude futures were trading 1.29% lower at $71.66 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

On Thursday, Canada’s Statistics Canada reported that wholesale sales declined 2.1% to $70.1 billion in July, as building materials and supplies sales plummeted. In total, it was the second consecutive decline and the biggest since April 2020. That raises concerns among investors that the economy is slowing.

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.25% higher at 93.164. The dollar reaches a three-week high, boosted by recent strong economic data and speculation regarding Fed tapering. Fed policymakers will meet next week and 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 Daily Forecast – Test Of Resistance At 1.2760

Canadian Dollar Is Losing Ground Against U.S. Dollar

USD/CAD is currently trying to settle above the resistance at 1.2760 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index is testing the resistance level at 93.10. In case this test is successful, the U.S. Dollar Index will move towards the next resistance level at 93.40 which will be bullish for USD/CAD.

Today, U.S. released Michigan Consumer Sentiment report which indicated that Consumer Sentiment improved from 70.3 in August to 71 in September compared to analyst consensus of 72.

WTI oil managed to get below the $72 level and made an attempt to settle below $71.50 which was bearish for commodity-related currencies, including Canadian dollar.

Foreign exchange market traders also focused on the developments in U.S. government bond markets. The yield of 10-year Treasuries is currently trying to settle above monthly highs near 1.38%. A move above this level will push it towards the resistance at 1.42% which will be bullish for the American currency.

Technical Analysis

usd cad september 17 2021

USD to CAD settled above the resistance level at 1.2730 and is trying to settle above the next resistance at 1.2760. In case this attempt is successful, USD to CAD will move towards the resistance at 1.2785.

A successful test of the resistance at 1.2785 will open the way to the test of the next resistance level which is located at 1.2810. If USD to CAD gets above the resistance at 1.2810, it will continue its upside move and head towards the next resistance level at 1.2830.

On the support side, the previous resistance at 1.2730 will serve as the first support level for USD to CAD. In case USD to CAD manages to settle below this level, it will head towards the next support at 1.2710.

A successful test of the support at 1.2710 will push USD to CAD towards the next support at 1.2685. If USD to CAD declines below this level, it will move towards the support at the 20 EMA at 1.2650.

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

UK Retail Sales Puts the Pound in the Spotlight

Earlier in the Day:

It was a quiet start to the day on the economic calendar this morning. The Kiwi Dollar was back in action this morning.

For the Kiwi Dollar

Business PMI figures were in focus in the early hours.

In August, the Business PMI tumbled from 62.6 to 40.1. The PMI had risen from 60.7 to 62.6 in July.

According to the August survey,

  • Down by 22.1 points from July, the PMI avoided a fall to sub-30 levels seen amidst the level 4 lockdown of 2020.
  • The production sub-index took the biggest hit, slumping from 63.9 to 27.7.
  • New orders fell from 63.7 to 44.4, with deliveries and finished stocks also falling below the 50 mark.
  • By contrast, the employment sub-index saw a more modest fall from 57.9 to 54.5.

The Kiwi Dollar moved from $0.70726 to $0.70715 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.01% to $0.7074.

Elsewhere

At the time of writing, the Japanese Yen was flat at ¥109.730 against the U.S Dollar, while the Aussie Dollar was up by 0.04% to $0.7295.

The Day Ahead

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Finalized August inflation figures for the Eurozone are due out later today.

With little else for the markets to consider, expect any upward revisions to influence the EUR.

At the time of writing, the EUR was down by 0.02% to $1.1765.

For the Pound

It’s a busy day ahead on the economic calendar. Retail sales figures for August are due out later this morning.

With the markets looking ahead to next week’s BoE monetary policy decision, we can expect Pound sensitivity to the numbers.

Following a pickup in inflationary pressure and better than expected employment figures, positive numbers would suggest a more hawkish MPC.

At the time of writing, the Pound was up by 0.02% to $1.3798.

Across the Pond

It’s a relatively quiet day ahead. Michigan consumer sentiment and expectation figures are due out later today.

With market sensitivity to consumer sentiment heighted as a result of the Delta variant, expect the numbers to influence market risk sentiment.

The U.S Dollar Spot Index ended Thursday up 0.41% to $92.932.

For the Loonie

It’s a particularly quiet day ahead for the Loonie, however. There are no major stats due out of Canada to provide the Loonie with direction.

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

At the time of writing, the Loonie was up by 0.02% to C$1.2681 against the U.S Dollar.

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

Dollar Index Climbs After U.S. Retail Sales Show Surprise Rebound

The dollar index, which measures the U.S. currency against six others, added to gains following the report and was last up 0.5% at 92.866. It hit its highest level since Aug. 27.

Retail sales rose 0.7% last month, boosted in part by back-to-school shopping and child tax credit payments, while data for July was revised down.

A separate report showed U.S. initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 332,000 for the week ended Sept. 11. Economists had forecast 330,000 applications for the latest week.

“If you look at the retail sales number, it’s quite constructive even with the revisions, so we are seeing the dollar benefit from that, particularly against the funding currencies like the euro, Swiss and the yen,” said Bipan Rai, North American head of FX strategy for CIBC Capital Markets in Toronto.

The news could bolster investor expectations for next week’s Federal Reserve policy meeting and how soon the U.S central bank will start to taper stimulus.

“It feels like whatever lingering concerns there were with the underlying economy … that was kind of washed away a little bit. So as we move towards the Fed next week, the evidence backs up the idea that we’re going to get a taper signal from the Fed at the meeting,” he said.

On Tuesday, the dollar index fell to a one-week low of 92.321 after a softer-than-expected inflation report. Its low for the month was 91.941, on Sept. 3, when payrolls data disappointed.

Investors are looking for clarity on the outlook for both tapering and interest rates at the Fed’s two-day policy meeting that ends next Wednesday.

Tapering typically lifts the dollar as it suggests the Fed is one step closer to tighter monetary policy.

It also means the central bank will be buying fewer debt assets, in effect reducing the amount of dollars in circulation, which in turn lifts the currency’s value.

The dollar also gained 0.3% to 109.70 yen , after sliding to a six-week low of 109.110 in the previous session.

The euro was 0.4% lower at $1.1766.

The Swiss franc also fell against the dollar and was last at 0.9263 franc per dollar.

Elsewhere, the Australian dollar was down 0.5% at $0.7296.

Earlier, data showed the country’s jobless rate unexpectedly fell to 4.5%, but the statistics bureau said the change reflected a drop in the participation rate rather than a strengthening of the labor market.

In cryptocurrencies, moves in bitcoin were relatively subdued. It was last down 0.9% at $47,711. Ether changed hands at $3,589, down 0.7%.

AMC Entertainment Holdings Inc boss Adam Aron said in a tweet this week that the theater chain would accept ether, bitcoin cash and litecoin alongside bitcoin for ticket purchases.

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

(Reporting by Caroline Valetkevitch; Additional reporting by Ritvik Carvalho in London and Kevin Buckland in Tokyo; Editing by Alexander Smith, Mark Potter and Jonathan Oatis)

 

USD/CAD Daily Forecast – U.S. Dollar Moves Higher After Strong Retail Sales Report

Canadian Dollar Declines Against U.S. Dollar

USD/CAD is currently trying to settle above the strong resistance level at 1.2685 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index managed to get above the resistance level at 92.80 and is trying to develop additional upside momentum. In case this attempt is successful, the U.S. Dollar Index will move towards the next resistance at 93.10 which will be bullish for USD/CAD.

Today, U.S. reported that Retail Sales grew by 0.7% month-over-month in August while analysts expected that they would decline by 0.8%. Initial Jobless Claims increased from 312,000 to 330,000, while Continuing Jobless Claims declined from 2.85 million to 2.67 million. Better-than-expected Retail Sales and Continuing Jobless Claims reports provided support to U.S. dollar as positive economic data increases chances that Fed will announce the reduction of its asset purchase program on September 22.

In Canada, foreign exchange market traders had a chance to take a look at ADP Employment Change report for August which showed that economy added 39,400 jobs compared to analyst consensus of 180,000.

Technical Analysis

usd cad september 16 2021

USD to CAD continues its attempts to settle above the resistance level at 1.2685. RSI remains in the moderate territory, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

If USD to CAD manages to settle above 1.2685, it will get to the test of the next resistance level at 1.2710. A successful test of the resistance at 1.2710 will open the way to the test of the resistance at 1.2730. In case USD to CAD settles above 1.2730, it will head towards the next resistance at 1.2760.

On the support side, the nearest support level for USD to CAD is located at 1.2650. A move below this level will lead to a test of the 20 EMA at 1.2640. In case USD to CAD declines below the 20 EMA, it will head towards the next support level which is located at 1.2625.

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

USD/CAD: Loonie Weakens as Oil Prices Slip, Election in Focus

The Canadian dollar weakened against its U.S. counterpart on Thursday as the firm greenback and falling energy prices weighed on the commodity currency ahead of the September 20 election.

The USD/CAD pair rose to 1.2688 today, up from Wednesday’s close of 1.2633. The Canadian dollar lost over 1.2% last month and has depreciated about 0.6% so far this month.

Canada is the world’s fourth-largest exporter of oil, which edge lower as the U.S. storm threat fades. U.S. West Texas Intermediate (WTI) crude futures were trading 0.92% lower at $71.96 a barrel. Lower oil prices lead to lower U.S. dollar earnings for Canadian exporters, resulting in a decreased value of the loonie.

Moreover, Canada’s Statistics Canada reported that wholesale sales declined 2.1% to $70.1 billion in July, as building materials and supplies sales plummeted. In total, it was the second consecutive decline and the biggest since April 2020. That raises concerns among investors that the economy is slowing.

“In the near term, CAD faces a number of headwinds. Economic data momentum has turned negative. Softening incoming data combined with an impending election (20 September) means that BoC messaging is likely neutral in the near term,” noted analysts at Citi.

“However, for our medium-term view, given Canada’s high vaccination rate, more lockdowns seem very unlikely, and the economic data should come in more strongly as we shift away from 2Q prints. Canada will also likely see more fiscal post-election.”

The dollar index, which measures the value of the dollar against six foreign currencies, was trading 0.37% higher at 92.892. On Thursday, retail sales data showed an unexpected increase in August, easing some concerns about slowing economic growth, which supported the greenback.

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.

Jobless Claims and Retail Sales Put the Greenback and the U.S Economy in the Spotlight

Earlier in the Day:

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

For the Kiwi Dollar

GDP numbers were in focus in the early hours.

In the 2nd quarter, the New Zealand economy expanded by 2.8% versus a forecasted 1.3%. The economy had expanded by 1.4% in the previous quarter.

According to NZ Stats,

  • Services industries led the way, with retail trade and accommodation the largest contributor to growth.
  • Air transport and transport support services also delivered support.
  • Household consumption expenditure fell by 1.4%, however, due to a 1.9% decline in household spending on services.

The Kiwi Dollar moved from $0.71253 to $0.71334 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.23% to $0.7122.

For the Aussie Dollar

Employment figures were key this morning.

In August, full employment fell by 68k following a 4.2k decline in July. Employment tumbled by 146.3k, however, versus a forecasted 90.0k decline. In July, employment had risen by 2.2k.

According to the ABS,

  • The unemployment rate fell from 4.6% to 4.5%, with the participation rate declining from 66.0% to 65.2%.
  • Year-on-year, the number of unemployed was down by 298,000.

The Aussie Dollar moved from $0.73431 to $0.73365 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.10% to $0.73367.

For the Japanese Yen

In August, Japan’s trade balance fell from a ¥439.4bn surplus to a ¥635.4bn deficit. Economists had forecast a deficit of ¥47.7bn

According to figures released by the  Ministry of Finance,

  • Exports increased by 26.2%, year-on-year, while imports were up 44.7%.
  • To China, exports rose by 12.6%, with exports to the U.S up 22.8%.
  • Exports to Western Europe increased by 14.1%.
  • Imports from China rose by 23.2%, with imports from the U.S up 33.5%.
  • From Western Europe, imports rose by 48.4%.

The Japanese Yen moved from ¥109.359 to ¥109.424 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.04% to ¥109.340 against the U.S Dollar.

The Day Ahead

For the EUR

It’s a quieter day ahead on the economic calendar. Trade data for the Eurozone will be in focus later today. Barring dire numbers, however, the numbers are unlikely to have a material impact on the EUR.

On the monetary policy front, ECB President Lagarde is due to speak later today. Any chatter on policy or the economic outlook would move the dial.

At the time of writing, the EUR was flat at $1.1817.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK ahead of tomorrow’s retail sales figures.

With the lack of stats, we can expect further market reaction to the employment and inflation figures from earlier in the week.

At the time of writing, the Pound was up by 0.02% to $1.3843.

Across the Pond

It’s a busy day ahead. Retail sales, jobless claims, and the Philly FED Manufacturing PMI for September are due out.

Expect the jobless claims and retail sales figures to have a greater impact on the Dollar and market risk sentiment

At the time of writing, the U.S Dollar Spot Index was flat at 92.475.

For the Loonie

It’s a quiet day ahead for the Loonie.

Wholesale sales figures for July are due out later today. Barring particularly dire numbers, however, the numbers should have a muted impact on the majors.

Market risk sentiment will be the key driver on the day.

At the time of writing, the Loonie was down by 0.02% to C$1.2632 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 Slips Despite Solid Import Prices

The dollar continued to slide following the softer than expected U.S. CPI report. The dollar was lower most other major currencies as traders awaited the Fed decision. Tuesday’s consumer price report showed a deceleration in inflation expectations which weighed on the greenback. Powell is likely hold off on tapering to a least the November Fed meeting.

Technical Analysis

The USD/CAD eased but remained above support near the 10-day moving average at 1.2610. Additional support is seen near the 50-day moving average at 1.2580. Short-term momentum has flip flopped and turned negative as the fast stochastic generated a crossover sell signal. Medium-term negative momentum has decelerated as the MACD (moving average convergence divergence) index generated is poised to generate a crossover buy signal. This situation occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in positive territory after recently generating a crossover buy signal. This points to higher prices for the USD/CAD.

Inflation in the U.S. Decelerates

Inflation in the U.S. decelerated, according to the Labor Departments CPI report. Both headline and core cpi came in softer than expected. According to the Labor Department, the consumer price index increased by 0.3% month over month compared to expectations that it would rise by 0.4%. CPI excluding food and energy came in at 0.1% in August compared to expectations that it would increase by 0.3%. Core CPI came in at 4% year over year.

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

Canadian Dollar Moves Higher As WTI Oil Tests The $73 Level

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

The U.S. Dollar Index is currently stuck between the support level at the 50 EMA at 92.45 and the resistance level at the 20 EMA at 92.60. In case the U.S. Dollar Index settles above the 20 EMA, USD/CAD will get more support.

Today, foreign exchange market traders had a chance to take a look at inflation data from Canada. The reports indicated that Inflation Rate increased by 0.2% month-over-month in August compared to analyst consensus of 0.1%. On a year-over-year basis, Inflation Rate increased by 4.1% compared to analyst consensus of 3.9%. Core Inflation Rate grew by 3.5% year-over-year compared to analyst forecast of 3.3%.

In the U.S., traders focused on Industrial Production and Manufacturing Production reports. Industrial Production increased by 0.4% month-over-month, in line with the analyst consensus. Manufacturing Production grew by 0.2% compared to analyst consensus of 0.4%.

It should be noted that WTI oil has recently made an attempt to settle above the $73 level which provided support to commodity-related currencies, including Canadian dollar.

Technical Analysis

usd cad september 15 2021

USD to CAD has recently made another attempt to settle above 1.2685 but failed to develop sufficient upside momentum and pulled back towards the support level at 1.2650.

If USD to CAD settles below this level, it will head towards the 20 EMA at 1.2635. A successful test of this level will lead to the test of the next support at 1.2625. In case USD to CAD declines below the support at 1.2625, it will head towards the next support which is located near the 50 EMA at 1.2590.

On the upside, USD to CAD needs to settle above the resistance level at 1.2685 to have a chance to develop upside momentum in the near term. The next resistance is located at 1.2710. This level has been tested during the current trading session and proved its strength. A move above 1.2710 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 Gains as Inflation Hits Highest Since 2003, Firm Oil Lends Support

The Canadian dollar strengthened against its U.S. counterpart on Wednesday after the annual inflation rate increased to an 18-year high in August; firmness in oil prices also lent support.

Inflation ticked above the Bank of Canada’s 1%-3% control range for the fifth consecutive month in August, according to Statistics Canada. Last month, the consumer price index grew by 4.1%, the fastest rate since March 2003.

The USD/CAD pair fell to 1.263 today, down from Tuesday’s close of 1.2693. The Canadian dollar lost over 1.2% last month and has depreciated about 0.3% so far this month.

“The Canadian dollar has shown some tentative signs of recovery at the start of this week, but yesterday’s risk-off turn in global markets sent USD/CAD back to the 1.2700 level. We think political uncertainty is currently taking a toll on CAD and partly explaining the divergence with the other oil-sensitive G10 currency, Norway’s krone, which has instead found more solid support of late,” noted Francesco Pesole, FX Strategist at ING.

“We think CAD will struggle to stage a sustained rally before Monday’s Federal election, when the emergence of a potential coalition may ease the negative drag of political noise on the currency.”

Canada is the world’s fourth-largest exporter of oil, which edge higher on low U.S crude inventories fell. U.S. West Texas Intermediate (WTI) crude futures were trading 3.63% higher at $73.02 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 0.13% lower at 92.502. The greenback broadly fell on Tuesday after inflation slowed in August after reaching its highest level in 13 years in July. That raised the question of when the Fed will taper stimulus and hike rates from the current record low.

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 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.

A Busy Economic Calendar Puts the EUR, the Loonie, the Pound, and the Greenback in Focus

Earlier in the Day:

It was a busy start to the day on the economic calendar this morning. The Aussie Dollar was back in action in the early hours, with economic data from China also in focus.

For the Aussie Dollar

In September, the Westpac Consumer Sentiment Index rose by 2.0% to 106.2. The Index had fallen by 4.4% to 104.1 in August.

According to the latest Westpac Report,

  • In spite of lockdown measures in Australia’s two major cities, consumer sentiment remained resilient in September.
  • Improving vaccination rates supported consumer confidence in the month.

Looking at the sub-components:

  • Economic conditions next 12-months jumped by 4.6%, with conditions next 5-years up 4.8%.
  • Family finances vs a year ago rose by 1.7%, with finances next 12-months up 2.1%.
  • Time to buy a dwelling jumped by 8.8%, with the Unemployment Expectations Index falling by 3.3%.
  • While the House Price Expectations Index rose by 1.4%, time to buy a major household item fell by 2.7%.

The Aussie Dollar moved from $0.73191 to $0.73134 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.16% to $0.7305.

From China

Industrial production was up by 5.3%, year-on-year, in August versus a forecasted 5.8% increase. In July, production had been up by 6.4%.

Fixed asset investment was up 8.9% versus a forecasted 9.0%. In July, fixed asset investments had been up 10.3%.

The Aussie Dollar moved from $0.73083 to $0.73014 upon release of the figures.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.11% to ¥109.570 against the U.S Dollar, with the Kiwi Dollar down by 0.34% to $0.7074.

The Day Ahead

For the EUR

It’s a busier day ahead on the economic calendar. Industrial production and wage growth figures for the Eurozone are due out later today. Expect industrial production to have the greater influence on the EUR.

Finalized inflation figures for Italy and France are also due out but should have a muted impact on the EUR.

At the time of writing, the EUR was up by 0.03% to $1.1807.

For the Pound

It’s another busy day ahead on the economic calendar. Inflation figures for August are due out later this morning.

With the markets looking ahead to the BoE monetary policy decision next week, expect today’s figures to be key.

A further pickup in inflationary pressures may force the BoE to make a sooner rather than later move to curb the upward trend in consumer prices.

At the time of writing, the Pound was down by 0.11% to $1.3795.

Across the Pond

It’s another relatively busy day ahead. NY Empire State Manufacturing and industrial production figures will be the key stats of the day.

Import and export price index numbers are also due out but should have a muted impact on the Greenback and the broader markets.

At the time of writing, the U.S Dollar Spot Index was up by 0.02% to 92.641.

For the Loonie

It’s a relatively busy day ahead for the Loonie.

Inflation figures for August are due out later today. With inflation a key area of focus, expect plenty of influence from the numbers.

At the time of writing, the Loonie was down by 0.08% to C$1.2704 against the U.S Dollar.

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

Dollar Falters After U.S. Inflation Rise Eases, Safe-Haven Yen, Franc Up

Several Fed officials have suggested the U.S. central bank could reduce its buying of debt securities by the end of the year, but said an eventual interest rate hike would not happen for some time.

The Fed will hold a two-day monetary policy meeting next week, with investors keen to find out whether a tapering announcement will be made.

Tapering tends to benefit the dollar as it suggests the Fed is one step closer toward tighter monetary policy. It also means the central bank will be buying fewer debt assets, effectively reducing the number of dollars in circulation.

Data on Tuesday showing the U.S. consumer price index, excluding the volatile food and energy components, edged up just 0.1% last month has raised doubts about tapering this year, some analysts said.

August’s core CPI rise was also the smallest gain since February and followed a 0.3% rise in July. The so-called core CPI increased 4.0% on a year-on-year basis after gaining 4.3% in July.

“The softer inflation prints caused investors to push back on bets that the Fed could move sooner to taper bond purchases. Easing inflation would take the heat off the Fed to move prematurely,” said Fiona Cincotta, senior financial markets analyst at City Index.

She also cited U.S. core producer prices (PPI) data for August released last week, which also rose at a slower pace. Excluding the food, energy and trade services elements, producer prices rose 0.3% last month, the smallest gain since last November. The so-called core PPI shot up 0.9% in July.

“So the evidence does appear to be building that peak inflation has passed. That said, supply chain bottlenecks are expected to persist for a while so it’s unlikely that either PPI or CPI will drop dramatically or rapidly,” Cincotta added.

In afternoon trading, the dollar index was slightly down at 92.601, moving away from a more than a two-week high on Monday.

The euro was flat against the dollar at $1.1807.

Risk appetite soured on Tuesday as well, with Wall Street shares down while U.S. Treasury prices were up sharply, pushing yields lower.

Investors looked past decelerating inflation and focused on uncertainties about U.S. growth now clouded by the economic impact of the Delta variant.

Against the safe-haven Swiss franc, the dollar dropped 0.4% to 0.9189 francs.

Versus another safe-haven, the Japanese yen, the dollar fell 0.4% to 109.615 ye

In other currencies, the Australian dollar fell to a two-week low after Reserve Bank of Australia Governor Philip Lowe painted a very dovish policy outlook with no rate hikes on the horizon until 2024.

The Aussie dollar was last down 0.7% at US$0.7319. In cryptocurrencies, bitcoin was last up 3.1% at $46,400 . Ether changed hands at $3,344, up 1.9%.

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

(Reporting by Gertrude Chavez-Dreyfuss in New York; Additional reporting by Saikat Chatterjee in London and Shreyashi Sanyal in Bengalaru; Editing by Nick Zieminski and Paul Simao)

 

USD/CAD Daily Forecast – Resistance At 1.2685 Stays Strong

U.S. Dollar Gains Some Ground Against Canadian Dollar

USD/CAD has recently made an attempt to settle above the resistance at 1.2685 but failed to develop sufficient upside momentum and pulled back while the U.S. dollar remained under pressure against a broad basket of currencies.

The U.S. Dollar Index tested support at the 50 EMA at 92.45 but did not manage to settle below this level. The nearest resistance level for the U.S. Dollar Index is located at the 20 EMA at 92.60. In case the U.S. Dollar Index manages to get back above this level, it will move towards the resistance at 92.80 which will be bullish for USD/CAD.

Today, U.S. reported that Inflation Rate increased by 5.3% year-over-year in August, in line with the analyst consensus. Core Inflation Rate grew by 4% year-over-year compared to analyst consensus which called for growth of 5.2%.

The reports have put some pressure on the American currency as they indicated that inflation remained under control. However, there was no real sell-off. Meanwhile, the yield of 10-year Treasuries moved below 1.30% as bond traders purchased U.S. government bonds after the release of inflation reports. In case Treasury yields continue to move lower, U.S. dollar may find itself under more pressure.

Technical Analysis

usd cad september 14 2021

USD to CAD managed to settle above 1.2650 and tested the resistance level at 1.2685. In case USD to CAD manages to settle above this level, it will head towards the next resistance at 1.2710.

A successful test of the resistance at 1.2710 will open the way to the test of the resistance at 1.2730. If USD to CAD gets above the resistance at 1.2730, it will head towards the next resistance level which is located at 1.2760.

On the support side, the nearest support level for USD to CAD is located at 1.2650. A move below this level will push USD to CAD towards the support at the 20 EMA at 1.2630.

If USD to CAD declines below the 20 EMA, it will head towards the support level at 1.2590. A successful test of this level will push USD to CAD towards the 50 EMA at 1.2580.

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