FX Flows

From the FXWW Chatroom – It is NFP time again. CIBC Research said payrolls growth may have eased in August, but the pace was still solid and more than enough to see the unemployment rate fall further. Our forecast is up 206k versus previous 173k. 

On today’s release of Japanese data, our Strategist Patrick Bennett said the standout is Jobs-to-Applicants at 1.23, this is the highest since 1992, another is the household spending rising 2.9% annually from -0.3%. Japanese data rarely a market mover; BOJ Tankan published yesterday was okay, capex numbers were encouraging. Check all this against a still weak inflation and it is a tough call for further BOJ action. 

In G-10 space, Asian has a lacklustre session. Pre-empting a weak Nikkei open, fast money accounts said to be responsible for 119.78 print. Demand for AudJpy helped reverse UsdJpy back up. Nikkei started to pare losses and this gave UsdJpy a further boost to 120.00. I am told there are bids in the 119.70’s and stops from intraday guys developing above 120.20. 

We enjoyed a brief moment of fun in AudUsd during the release of Australian August retail sales. Improved to +0.4% from -0.1%, but this was in line with expectations. AudUsd jumped 10 points or so; then settled back to square one. Then in the late morning, AudUsd turned lower for no reason. Went from 0.7037 to 0.7012. We think the move was linked to weak Asian currencies. 

One real money PM pointed out the AudCad hourly chart and that it has broken the support line. Technically we agree but another reason to back this is the rates. Our rates trader Pawan said the rate differentials have been narrowing on the divergent monetary policy paths. This has been exerting downward pressure on AudCad and today is seeing some correction of the rate spread, but the medium term trend is still lower. 

Interesting price action in the Oil futures as market moved towards the end of NY close. Price took a quick dip, losing 35 cents and bounced right. Very few could offer an explanation – some said it was due to successful second oil auction as Mexico is seeking to increase its oil production; MarketWatch said Hurricane Joaquin could end up sinking oil prices; finally others said US Senate Banking Committee endorsed a bill to lift the four-decade-old ban on crude oil exports, which caused the jump. 

UsdCad was edging higher into the Toronto close; printed 1.3270 at the turn of the hour then slipped back to 1.3240’s. We encountered Usd selling to trigger some weak stops below 1.3240. Honestly, liquidity was bad. Nothing interesting to talk about on buy orders, offers are atop 1.3300. If oil prices stabilise, Canadian dollar could track the yields and lead UsdCad lower. 

I struggled to pen something on this Euro. One strategic name is trying to short this above 1.1215; heard better sellers up 1.1280-90’s. Interesting bids are starting to build up below 1.1130 

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