USD/CAD Open: 1.2648-52, Overnight Range: 1.2596-1.2656, Previous Close: 1.2629
WTI Oil is at USD$75.01 and gold is at USD$1,734.80. US markets are lower today.
For today, USD resistance is at 1.2728. Support is at 1.2650.
• WTI oil prices soared to $76.64/barrel
• Hawkish Fed-speak lifts Treasury yields
• US dollar rallying as interest rates rise
The Canadian dollar rallied in Asia in a move fueled by surging oil prices.
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West Texas Intermediate (WTI), the North American benchmark, extended the rally which began September 21, rising from Monday’s NY close of $75.42/barrel to $76.64/b at the European open before sliding to $76.25/b in NY.
According to some analysts, the oil price rally is due to concerns that a colder than usual start to winter combined with falling US inventories will drive prices to $85.00/b.
The gain in WTI is helping the Canadian dollar offset selling pressure from the steep rise in US Treasury yields, which touched 1.55% overnight. A slew of Fed policymakers has stoked rate hike fears following the hawkish FOMC meeting last week.
Yesterday, NY Fed President John Williams and Fed Governor Lael Brainard repeated that it would soon be time to begin paring asset purchases, which was suggested in the FOMC statement.
Fed Chair Jerome Powell and Treasury Secretary Janet Yellen testify before the Senate Committee on Banking, Housing, and Urban Affairs. Mr. Powell’s remarks have been released. He essentially repeated his opening remarks from the FOMC press conference.
The World Bank upgraded its GDP growth forecast for China to 8.5% from 8.1% previously. The Peoples Bank of China said it would safeguard the rights of housing consumers, which alleviated negative sentiment from the Evergrande crisis.
The surge in Treasury yields knocked the major European equity indexes lower, but they are off their worst levels in early NY trading. S&P 500 futures point to a negative open on Wall Street. The US dollar strength is weighing on gold prices which are down nearly 1.0%.
EURUSD is suffering from a mix of dovish comments from ECB officials, surging US Treasury yields, and bearish EURUSD technicals. The single currency traded in a 1.1673-1.1702 range with a decisive break below 1.1760 setting the stage for a test of 1.1600.
GBPUSD has fallen hard for the same reasons as EURUSD, but a UK gas shortage has exacerbated the drop. GBPUSD fell to 1.3587 from 1.3716.
USDJPY surged alongside the rise in 10-year US Treasury yields, climbing from 110.94 to 111.46. Higher oil prices supported the rally as Japan’s economy is fully reliant on oil imports.
Today’s US data is second-tier leaving Wall Street to drive FX direction.
Today’s Suggested Range USD/CAD: 1.2600 – 1.2700
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