OPEC dominated mood lifts risk sentiment. Selective CAD gains at the end of the day as the USD wins out overall - again. US yields dominate despite oil price lift, with USD/JPY now through 114.00. EUR/USD testing 1.0550 again.
The OPEC meeting dominated the headlines through Wednesday’s session, driving the risk currencies higher as talk of a deal on production fed through on a series of comments from participating oil ministers. WTI and Brent rallied throughout, hit sporadically as hiccups along the way also came out – one being the exclusion of Indonesia. That said, oil remains at the highs, giving the CAD a significant lift, but this has since been tempered against the USD as the ramifications saw USD yields rallying again.
Given the (perceived) impact on US inflation, the Fed rate hike cycle was ‘raised’, lifting the 5 and 10yr rates and sending USD/JPY in particular back to the highs seen at the end of last week. 114.00 contained gains at the time, and continued to do so late in the day before NY specs tripped stops more recently, but larger resistance levels expected through here.
These will be challenged after another series of strong US data as the ADP survey revealed a much higher than expected 216k read. Looking to the US payrolls ahead, few can see little past further USD positives ahead, and with US yields charging higher again, relentless gains in the greenback show no signs of abating. Headwinds for the US economy come from the rapid rise of the USD, but despite revisions lower in Q4 (Atlanta Fed) on this basis, we continue to push higher again.
EUR/USD is pressed into the mid 1.0500’s again, but demand ahead of 1.0550 yet to be challenged. Elsewhere, Cable is getting a bid ahead of 1.2400, and this has been facilitated by a fresh push in EUR/GBP into the mid .8400’s. 1.2300-1.2600 still contain the GBP spot rate, as some had suggested, with the USD side of the trade also proving restrictive into the 1.2500’s. The commodity currencies have also collapsed against the USD, with resistance ahead of .7500 well placed in AUD/USD.
Spot has now fallen through .7400, targeting .7350 initially, with NZD/USD looking to .7000 again after pushing up into the upper .7100’s. USD/CAD is the key currency in the spotlight, as US yields trumps the impact of oil – has was and has been the case ahead of and after the US election. Spot buyers ahead of 1.3350-00 have been quick to step in despite OPEC dominated trade, but CAD/JPY has pushed above 85.00, albeit cautiously so, having covered some decent ground amid the risk-on mood in the market.