Monday August 30th, 2021

The US$ is flat, oil prices dips, equity markets strengthen while US yield ease driven by the Fed Chairs dovish comments. Friday’s Fed Chair’s Jackson Hole speech clarified that the Fed is targeting tapering by the end 2021 but tapering does not imply a rise in US interest rates. The US$ index dipped on Friday after Fed Chair’s dovish comments, but is steadying near 2-week lows in early trading. The US$ has room to rebound with ongoing US covid concerns, the UK bank holiday and US Pending Home Sales out today. In other news, Eurozone August economic sentiment weakened from a record July, hit by a sharp drop in optimism from France and The Netherlands. China factory orders continue to grow, but at a slower rate. Covid, Australia warns covid hospitalizations are likely to peak in October. Japan discovers 1 million more Moderna vaccines are contaminated and suspends its roll out. The US 7-day daily average covid cases hold near 157k new cases per day. In currency markets, currencies mixed after Friday’s US$ weakness. CNY is up slightly at 0.05%, Asian currencies mixed with SGD flat, TWD strengthens 0.45%, MYR rallies 0.8% vs US$. Trading currencies are mixed with JPY & MXN flat, NZD down 0.2%, AUD weakens 0.3% while ZAR strengthens 0.35% and NOK rallies 0.5% vs US$. Intraday expect markets to remain in tight ranges with no key data releases today.

Oil prices ease as Hurricane Ida is downgraded to a category 1 hurricane increasing anticipation that the Gulf of Mexico supply will come back online quickly. OPEC meets on Wednesday to discuss the scheduled 400k bpd increase in oil output. The C$ holds steady as it balances the prospect of ongoing low US$ rates vs easing oil prices after Hurricane Ida spares the Gulf of Mexico oil supply. Intraday CAD current Accounts (Q2) and US Pending Home sales may provide some intraday direction. Support resets to 1.2580, while resistance resets to 1.2690.

Euro holds near 1.18 close to its 3-week highs ahead of German CPI data. German CPI is expected to increase to 3.4% vs 3.1% in July, but EU Economic Sentiment fell vs expectations lead by falling optimism in France and The Netherlands. Intraday we expect 1.18 to hold as we look for a rebound in US$ strength as markets rebalance the Fed Chair’s comments. ECB’s Schnable’s speech may provide some additional direction to the markets today. Support holds at 1.1660 next, while resistance remains at 1.1810.

EURGBP edges higher in thin trading with UK bank holiday, but the cross continues to hold below the key .8600 resistance level. Support resets to .8426 (1.1868) Feb 2020, if breached look for .8274 (1.2086) Dec 2019, while resistance holds at .8600 (1.1628).

GBP remains under pressure despite the Fed’s dovish comments. GBP edges back towards 1.3750 in thin-holiday trading amid renewed Brexit concerns and ongoing covid concerns will continue to keep the GBP under short-term selling pressure. Intraday with key data releases we expect the pound to weaken for a retest of low 1.37 levels vs US$. Support holds at 1.3630 and resistance remains at 1.3780.