Overnight Headlines
*USD closed lower again near one-month lows
*US stocks were mixed to kick off the month
*Oil prices little changed after OPEC+ ratified output hike
USD started September on the back foot, similar to the final days of last month. DXY made a new one-month low at 92.37 as EUR strengthened to an intraday high of 1.1857 before closing lower. USD/JPY is still toying with 110 after making a new two-week high at 110.41. Both AUD and NZD again strengthened with the aussie now up to the 50-day SMA. The kiwi is trying to hold above the top of the recent range, beyond 0.7050.
US equities started the new month mixed amid disappointing US private payrolls but better manufacturing. Energy and materials were the only sectors lower as oil and commodity prices fell. Small caps and growth both led the way higher with more support from the macro data. Asian stocks are mixed today, with China continuing to crack down on big tech. European and US futures are marginally in the red.
Market Thoughts – No surprises at the OPEC+ meeting
After much build-up, OPEC+ agreed to maintain their existing plan for gradual oil production increases. Ministers backed the 400k barrel-a-day output hike scheduled for next month. The group continue to believe that fundamentals are improving, even though there remains plenty of uncertainty around the pandemic.
The outcome had little effect on oil prices as it was widely expected. After prices popped above $73 on Hurricane Ida, we are now back to the 50% retracement level of the July-August drop at $71.39. Oil price increases have been an important cog in driving global inflation higher this year.
Chart of the Day – USD/CAD coiling
Tuesday’s shocking GDP report had little effect on USD/CAD as interest rate markets barely flickered. But with the third quarter also getting off to a tough start, minds will certainly be focused going into next Wednesday’s BoC meeting. Money markets are currently pricing in a quarter point hike in the second half of 2022 with tapering ongoing.
USD/CAD is compressing with tight ranges this week around 1.26. Technical risks point to more downside with the 50-day and 200-day SMA below at 1.2540. Mid and end of July lows sit at 1.2423 as major support. The longer prices coil, the bigger breakout we should get. Resistance above comes in at 1.2696/1.2708. A move to 1.28 is on the cards if we break that.
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