Dollar’s decline accelerates today on improving risk sentiment and pull back in treasury yields. Aussie is gaining most so far but Yen catching up quickly. Euro is struggling to extend the post-ECB rally, as dragged down by selloff in crosses, in particular against Swiss Franc. Canadian Dollar turned weaker after huge employment miss.
Technically, EUR/CHF’s fall form 0.9684 extends lower today and outlook is unchanged. That is, corrective rebound from 0.9550 has completed and larger down trend is ready to resume. Retest of 0.9550 should be seen next and break of confirm this bearish view. For now, USD/CHF is also diving after prior rejection by 0.9884 resistance. If EUR/CHF could hold firm above parity, down trend resumption in EUR/CHF would mean steeper decline in USD/CHF.
In Europe, at the time of writing, FTSE is up 1.47%. DAX is up 1.39%. CAC is up 1.48%. Germany 10-year yield is down -0.041 at 1.688. Earlier in Asia, Japan 10-year JGB yield rose 0.53%. Hong Kong HSI rose 2.69%. China Shanghai SSE rose 0.82%. Singapore Strait Times rose 0.91%. Japan 10-year JGB yield dropped -0.0008 to 0.251.
Canada employment dropped -39.7k in Aug, unemployment rate jumped to 5.4%
Canada employment dropped -39.7k in August, much worse than expectation of 15.0k growth. Unemployment rate jumped from 4.9% to 5.4%, above expectation of 5.0%. That’s the first rise in unemployment rate in seven months. Participation rate ticked up 0.1% to 64.8%. Average hourly wages of employees rose 5.4% yoy.
ECB Knot: we only have one problem on our plate – inflation
ECB governing council member Klaas Knot told Dutch radio BNR today, “We expect inflation to keep rising in the coming months, so that means we only have one problem on our plate: inflation. And that will mean that we will have to slow economic growth at least a bit to reduce inflation”.
Another Governing Council member Peter Kazimir said , “Inflation remains unacceptably high. The priority now is to vigorously continue the normalization of monetary policy.” While not commenting on the terminal rate of the current cycle, he said that ECB was still “quite far” from neutral rate.
Francois Villeroy de Galhau said, the central bank must be “orderly and determined” with rate hike. He expects inflation to stay high next year and come back to 2% target by 2024.
BoJ Kuroda: We will watch exchange rate moves carefully
BoJ Governor Haruhiko Kuroda said, “When the yen is moving 2 to 3 yen per day, that’s a rapid move. We will watch exchange rate moves carefully.” The comment came after Kuroda met Prime Minister Fumio Kishida, where currency matters were discussed.
Separately, Finance Minister Shunichi Suzuki said the the government would not rule out any options on foreign exchange moves.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 0.9677; (P) 0.9730; (R1) 0.9758; More…
USD/CHF’s decline from 0.9868 accelerates to as low as 0.9546 so far. Current fall is seen as the corrective pattern from 1.0063. Intraday bias stays on the downside for 0.9369 support. On the upside above 0.9707 minor resistance will turn intraday bias neutral first.
In the bigger picture, current development suggests that up trend from 0.8756 (2021 low) is still in progress. Sustained break of 1.0063 will target 100% projection of 0.9149 to 1.0063 from 0.9369 at 1.0283, and then 1.0342 (2016 high). For now, this will remain the favored case as long as 0.9369 support holds, even in case of deep pull back.
Economic Indicators Update
Money Supply M2+CD Y/Y Aug
CPI Y/Y Aug
PPI Y/Y Aug
France Industrial Output M/M Jul
Net Change in Employment Aug
Unemployment Rate Aug
Capacity Utilization Q2
Wholesale Inventories Jul F