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Canadian Dollar rebound strongly in early US session after stronger than expected job data. Commodity currencies are also generally firm with European stocks and US futures, followed by Sterling. On the other hand, Yen, Swiss Franc and Dollar are turning softer, but Euro is not too far away. The question now is whether the risk markets would end the week on a strong note, setting up more selling in the greenback next week.

Technically, GBP/JPY's break of 152.27 temporary top suggests resumption of rebound from 149.16 for 153.42 resistance. That's another sign of Sterling strength. GBP/USD is now pressing 1.3890 resistance and break will also resume the rebound from 1.3601. Such development would double confirm underlying bullishness of the Pound.

In Europe, at the time of writing, FTSE is up 0.39%. DAX is up 0.40%. CAC is up 0.27%. Germany 10-year yield is up 0.013 at -0.347. Earlier in Asia, Nikkei rose 1.25%. Hong Kong HSI rose 1.91%. China Shanghai SSE rose 0.27%. Singapore Strait Times rose 0.88%. Japan 10-year JGB yield rose 0.0050 to 0.045.

Canada employment grew 90.2k in Aug, unemployment rate dropped to 7.1%

Canada Employment grew 90.2k in August, well above expectation of 67.2k. That's the third consecutive monthly rise. Also, employment is within -0.8% of pre-pandemic level in February 2020. Job growth were concentrated in full-time work, which rose 69k. Unemployment rate dropped to 7.1%, down from 7.5%, better than expectation of 7.4%, lowest since February 2020 too.

US PPI rose 0.7% mom 8.3% yoy in Aug, record 12-month rise

US PPI for final demand rose 0.7% mom in August, above expectation of 0.6% mom. For the 12 months ended in August, PPI rose 8.3% yoy, accelerated from 7.8%, matched expectations. That's the largest advance since 12-month date were first calculated in 2010.

PPI for final demand less foods, energy, and trade services rose 0.3% mom. For the 12 months, PPI rose 6.3% yoy, also the largest advance since the data was first calculated in 2014.

UK GDP grew just 0.1% mom in Jul, -2.1% below pre-pandemic level

UK GDP grew just 0.1% mom in July, below expectation of 0.5% mom. Overall, the economy remains -2.1% below its pre-pandemic level in February 2020. For the month, production output grew 1.2% mom while manufacturing was flat services was broadly flat, and construction was down -1.6% mom. Output in consumer-facing services dropped -0.3% mom, first decline since January. Also released good trade deficit widened slightly to GBP -12.7B in July, worse than expectation of GBP -10.9B

From Germany, CPI was finalized at 0.0% mom, 3.9% yoy in August. France industrial output rose 0.3% mom in July, versus expectation of 0.4% mom. Italy industrial output rose 0.8% mom in July, versus expectation of 0.1% mom.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.2614; (P) 1.2671; (R1) 1.2719; More...

USD/CAD's fall from 1.2760 extends lower today but stays above 1.2492 support. Intraday bias remains neutral first. On the downside, break of 1.2492 will target 1.2421 key structural support next. Sustained break there should indicate completion of whole choppy rise form 1.2005. On the upside, above 1.2760 will bring retest of 1.2947 high instead.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). It should have completed after hitting 1.2061 (2017 low) and 50% retracement of 0.9406 to 1.4689 at 1.2048. Sustained break of 38.2% retracement of 1.4667 to 1.2005 at 1.3022 will pave the way to 61.8% retracement at 1.3650 and above. Overall, medium term outlook remains neutral at worst with 1.2048/61 support zone intact.

Economic Indicators Update

US PPI for final demand rose 0.7% mom in August, above expectation of 0.6% mom. For the 12 months ended in August, PPI rose 8.3% yoy, accelerated from 7.8%, matched expectations. That's the largest advance since 12-month data were first calculated in 2010.

PPI for final demand less foods, energy, and trade services rose 0.3% mom. For the 12 months, PPI rose 6.3% yoy, also the largest advance since the data was first calculated in 2014.

Full release here.

Canada Employment grew 90.2k in August, well above expectation of 67.2k. That's the third consecutive monthly rise. Also, employment is within -0.8% of pre-pandemic level in February 2020. Job growth were concentrated in full-time work, which rose 69k. Unemployment rate dropped to 7.1%, down from 7.5%, better than expectation of 7.4%, lowest since February 2020 too.

Full release here.

Gold is making another technical sell pattern in the midst of the risk on.

Gold has been the best market to trade in 2021. Simply, all trades have been technically aligned and I personally have made great profits on gold trades which can also be confirmed by myfxbook account. 1800-10 is the sell zone. If bears could make gold go below 1780 then the next target is 1750. At this point it's just sold at rallies.

The Australian dollar regained traction on Friday and bounced to three-day high, confirming initial reversal signal., after Thursday’s Doji candle signaled that three-day pullback from new highest in nearly two months (0.7478) lost traction.

Fresh advance was underpinned by growing optimism on Biden-Xi call as two presidents discussed avoiding conflict that lifted risk-sensitive Aussie.

Bulls face strong barriers at 0.7408/11 (daily cloud base/50% retracement of 0.7478/0.7345 bear-leg) and break here would signal an end of corrective phase and reversal, with weaker US dollar on pre-weekend profit-taking.

However, risk of recovery stall is still in play, keeping the downside vulnerable.

Daily studies are mixed as falling thickening daily cloud weighs and bullish momentum is fading, partially offsetting positive signals from DMA’s (10,20,30,55) in bullish configuration and forming multiple bull-crosses.

Expect initial direction signals on break of either 0.7345 (Sep 8 low) or 0.7408 (daily cloud base).

Res: 0.7408, 0.7426, 0.7478, 0.7498.
Sup: 0.7378, 0.7345, 0.7327, 0.7308.

Notes/Observations

• European markets broadly higher following gains in Asia.
• Hang Seng Index outperforms as internet and gaming stock rebound.

Asia

• (JP) Japan Minister Kono officially declares candidacy for LDP Leadership (as expected).
• Toyota Cuts FY21 Production guidance to 9.0M units (prior 9.3M) citing coronavirus impact in Southeast Asia and parts shortages.
• (CN) China Aug Wholesale vehicle sales -17.8% y/y - CAAM.
• (AU) Australia Aug Port Hedland Iron Ore Exports 44.4Mt v 44.3Mt prior.
• (CN) China said to have issued a draft ruling that would limit taller building in small cities.
• (JP) Japan Minister Kono: confirms run for the LDP leadership race; Not considering raising sales tax, but not cutting it, either.
• (HK) Hong Kong Monetary Authority (HKMA): Confirms launch of Wealth Connect, to conduct exams on northbound business.
• (CN) China Foreign Ministry spokesperson: President Xi and US Pres Biden agreed to maintain frequent contact by various means.
• (CN) China regulators reportedly met several platform companies, including Meituan, Didi, Tencent over labor issues - press.
• (KR) Japan, US and South Korea said to hold North Korea talks on Sept 14th in Tokyo - press.

Coronavirus

• (SG) Singapore Health Ministry: to start COVID booster shots from Sept 14th; Not reversing restrictions for now.

Europe

• (FR) CAC 40 index to include Eurofins Scientific; Atos to be excluded; effective Sept 17th.
• (NO) Norway's OBX index to include Frontline, Golden Ocean, Kahoot! and MPC - press.
• (IT) Italy said to sell off Alitalia assets to avoid potential sanctions - Press.
• (DE) German ZDF Poll on Sept elections: SPD: 25% (no change); Merkel CDU/CSU bloc: 22% (no change).
• (IE) Ireland PM Martin: Sees potential to solve NI protocol; window in the next month to solve Brexit.
• (UA) Ukraine President Zelensky: there is a possibility of a war with Russia; Interested in a substantive meeting with Russian Pres Putin.

Americas

• (US) NHC: Hurricane Larry heading towards Newfoundland.
• (CN) China Commerce Ministry (MOFCOM): to collect deposits on certain chemicals (monoalkyl ethers of ethylene glycol and propylene glycol) imported from the US.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.31% at 469.04, FTSE +0.39% at 7,051.91, DAX +0.43% at 15,690.95, CAC-40 +0.54% at 6,721.03, IBEX-35 -0.13% at 8,789.50, FTSE MIB +0.29% at 25,986.00, SMI +0.21% at 12,141.58 , S&P 500 Futures +0.45%].
• Market Focal Points/Key Themes: European indices open generally higher but divided as the session wore on with periphery indices underperforming; general improvement in risk sentiment attributed to call between Biden and Xi; sectors leading to the upside include consumer discretionary and technology; lagging sectors include real estate and telecom; automotive subsector under pressure following outlook cut by Toyota; Atos to be replaced by Eurofins on CAC40; reportedly Icade looking to spin off it’s healthcare real estate unit; Holcim to divest Brazil unit; Sampo divests a portion of it’s Nordea holdings; focus on continuing Eurogroup meeting through the day; earnings expected in the upcoming US session include Oracle and Kroger.

Equities

• Consumer discretionary: LVMH [MC.FR] +2% (analyst action), Cineworld Group [CINE.UK] -1% (to pay $170M to holders).
• Consumer staples: Nestle [NESN.CH] -1% (sees higher input cost inflation next year).
• Technology: Atos [ATO.FR] -2% (CAC 40 exclusion).
• Materials: FLSmidth [FLS.DK] +4% (completes placing).

Speakers

• (AT) ECB's Holzmann (Austria): Reiterates PEPP must expire next year [2022] with recovery.
• (CN) China Cyberspace official Zeliang: China should better regulate AI industry.
• (EU) Various EU Ministers commenting at Eurogroup meeting.
• Belgium Fin Min: debt rate in Belgium is one of the concerns we have.
• Portuguese Fin Min: we need to focus on recovery from crisis this year and next.
• Spanish Fin Min: we hope to start reducing Spanish debt already from 2021.
• EU Economic Commissioner Gentiloni (Italy): we are ending summer with a positive economic outlook.
• EU's Dombrovskis (trade chief): we will need a debt reduction path that is realistic for EU countries; intends to restart talks on fiscal rules.
• France Fin Min Le Maire: need quickest possible recovery plans implementation; need start of tailor made support for hard hit sectors; Will reduce public debt and deficit next year in France.

Currencies/Fixed Income

• USD weaker amid flows away from safe havens, with risk sentiment getting a boost following Xi-Biden talks; USD/CHY drifting lower.
• EUR/USD supported following results of ECB meeting, weaker dollar, higher yields.
• GBP/USD hits weekly high on improved risk outlook.

Economic data

• (NL) Netherlands July Trade Balance: €5.8B v €6.7B prior.
• (NL) Netherlands July Manufacturing Production M/M: 1.3% v 4.4% prior; Y/Y: 14.1% v 17.9% prior.
• (FI) Finland July Industrial Production M/M: +1.0% v -1.8% prior; Y/Y: 5.0% v 4.1% prior.
• (UK) July Monthly GDP M/M: 0.1% v 0.5%e; GDP 3M/3M: 3.6%e v 3.8%e.
• (DE) Germany Aug Final CPI M/M: 0.0% v 0.0% prelim; Y/Y: 3.9%e v 3.9% prelim.
• (UK) July Visible Trade Balance: -£12.7B v -£11.0Be; Overall Trade Balance: -£3.1B v -£1.6Be; Trade Balance Non EU: -£7.0B v -£7.1B prior.
• (NO) Norway Aug CPI M/M: 0.0% v -0.2%e; Y/Y: 3.4% v 3.2%e.
• (DK) Denmark Aug CPI M/M: -0.2% v +0.7% prior; Y/Y: 1.8% v 1.9%e.
• (UK) July Index of Services M/M: 0.0% v 0.6%e; 3M/3M: 4.5% v 4.7%e.
• (UK) July Industrial Production M/M: +1.2%e v 0.4%e; Y/Y: 3.8%e v 3.0%e.
• (RO) Romania Aug CPI M/M: 0.2% v 0.3%e; Y/Y: 5.3% v 5.2%e (4th month above target range).
• (FR) France July Manufacturing Production M/M: 0.3% v 0.4%e; Y/Y: 4.0% est v 4.2%.
• (ES) Spain July Industrial Production M/M: -1.1% v +0.5%e; Y/Y: 3.4% v 5.9%e.
• (CZ) Czech Aug CPI M/M: 0.7% v 0.2%e; Y/Y: 4.1% v 3.6%e.
• (TR) Turkey July Unemployment Rate: 12.0% v 10.6% prior.
• (AT) Austria July Industrial Production M/M: -0.3% v -1.8% prior; Y/Y: 9.7% v 11.3% prior.
• (CZ) Czech July Export Price Index Y/Y: 7.7% v 3.4% prior; Import Price Index Y/Y: 7.9% v 5.1% prior.
• (CN) Weekly Shanghai copper inventories (SHFE): 61.8K v 69.3K tons prior.
• (RU) Russia Narrow Money Supply w/e Sept 3rd (RUB): 14.35T v 14.24T prior.
• (IT) Italy July Industrial Production M/M: +0.8% v -0.1%e; Y/Y: 7.0% v 5.2%e.
• (CN) China Aug Aggregate Financing (CNY): 2.96T v 2.75Te.
• (CN) China Aug M2 Money Supply Y/Y: 8.2% v 8.4%e.
• (CN) China Aug New Yuan Loans (CNY): 1.220T v 1.325Te.

Fixed income Issuance

• (EU) European Investment Bank (EIB) to sell EUR-denominated Nov 2030 bond; guidance seen -12bps to mid-swaps.
• ABN.NL To sell EUR-denominated 20-year notes; guidance seen +10bps to mid-swaps.
• Prices 7-yr $500M Eurobond issue with a 2.6% coupon.

Looking Ahead

• 06:00 (IE) Ireland July Industrial Production M/M: No est v -4.4% prior; Y/Y: No est v 12.0% prior.
• 06:00 (PT) Portugal Aug Final CPI M/M: No est v -0.2% prelim; Y/Y: No est v 1.5% prelim.
• 06:00 (PT) Portugal Aug Final CPI Harmonized M/M: No est v -0.1% prelim; Y/Y: No est v 1.3% prelim.
• 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to raise Key 1-Week Auction Rate by 50bps to 7.00%.
• 07:00 (MX) Mexico July Industrial Production M/M: +0.2%e v -0.5% prior; Y/Y: 7.2%e v 13.5% prior; Manufacturing Production Y/Y: 5.4%e v 16.3% prior.
• 07:30 (CL) Chile Central Bank Economist Survey.
• 07:30 (IN) India Weekly Forex Reserve w/e Sept 3rd: No est v $633.6B prior.
• 08:00 (IN) India July Industrial Production Y/Y: 10.0%e v 13.6% prior.
• 08:00 (IS) Iceland Aug Unemployment Rate: No est v 6.1% prior.
• 08:00 (BR) Brazil July Retail Sales M/M: +0.5%e v -1.7% prior; Y/Y: 3.0%e v 6.3% prior.
• 08:00 (BR) Brazil July Broad Retail Sales M/M: -0.6%e v -2.3% prior; Y/Y: 4.0%e v 11.5% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Aug PPI Final Demand M/M: 0.6%e v 1.0% prior; Y/Y: 8.2%e v 7.8% prior.
• 08:30 (US) Aug PPI (ex-food/energy) M/M: 0.6%e v 1.0% prior; Y/Y: 6.6%e v 6.2% prior.
• 08:30 (US) Aug PPI (ex-food/energy/trade) M/M: 0.6%e v 0.9% prior; Y/Y: 6.3%e v 6.1% prior.
• 08:30 (CA) Canada Aug Net Change in Employment: +66.8Ke v +94.0K prior; Unemployment Rate: 7.3%e v 7.5% prior; Full Time Employment Change: No est v.
• +83.0K prior; Part Time Employment Change: No est v +11.0K prior; Participation Rate: 65.3%e v 65.2% prior; Hourly Wage Rate: No est v 0.6% prior.
• 08:30 (CA) Canada Q2 Capacity Utilization Rate: 81.3%e v 81.7% prior.
• 08:30 (US) Weekly USDA Net Export Sales.
• 09:00 (RU) Russia July Trade Balance: $17.7Be v $18.3B prior; Exports: $45.0Be v $43.9B prior; Imports: $26.5Be v 25.6B prior.
• 10:00 (US) July Final Wholesale Inventories M/M: 0.6%e v 0.6% prior; Wholesale Trade Sales M/M: No est v 2.0% prior.
• 12:00 (RU) Russia Q2 Preliminary GDP (2nd reading) Y/Y: 10.3%et v 10.3% advance.
• 13:00 (US) Weekly Baker Hughes Rig Count.

Speakers/events

• Eurogroup meeting.
• 05:30 (EU) ECB chief Lagarde at Eurogroup meeting.
• 06:10 (NL) ECB’s Elderson (Netherlands, SSM member).
• 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision.
• 11:00 (EU) Potential sovereign ratings after European close: S&P on Luxembourg, Norway, Austria, Malta and Portugal.

Oil partially reverses overnight losses

Oil prices continue to trade in a choppy but ultimately range-trading manner. News that China was releasing some strategic oil reserves into domestic markets put the bears in the ascendancy. However, I suspect a lower than expected fall in official Crude Inventories had more to do with the falls. Brent crude fell by 1.80% to USD 71.35, and WTI slumped by 2.0% to $67.95 a barrel.

The Biden/Xi phone call has had the same effect on oil markets as it has other asset classes, with any hope that US/China relations, no matter how small, are construed as positive for global trade and basically almost every asset. Oil markets are no different with the China reserve story quickly forgotten as Brent crude and WTI rise 0.75% in Asia to USD 71.85 and USD 68.50 a barrel.

The Biden/Xi phone call should be a powerful enough incentive to keep the music playing into New York, and I expect oil to continue retracing its overnight losses and climb to the top of its recent range.

Brent crude has resistance at USD 73.20 and USD 73.70 a barrel, with support at USD 71.00 and USD 70.50 a barrel. WTI has resistance at USD 68.85 and USD 70.50 a barrel, with support at USD 67.50 and USD 67.00 a barrel. It would be a huge surprise if oil finished the week outside of those ranges tonight.

Gold remains punch drunk

The fall in US yields and easing of the US dollar was enough to lift gold slightly higher overnight, rising 0.30% to USD 1794.50 an ounce. In Asia, it too has received a modest US/China tailwind as it climbs another 0.20% to USD 1798.00 an ounce.

In the bigger picture, gold still looks punch drunk, and its price action is most unimpressive. The balance of risks continues to be skewed to the downside, with gold’s upward momentum vanishing this week. Even when US yields and the US dollar fall, gold can still not create a meaningful rally, suggesting that there are many stale speculative long positions out there.

Gold has contracted into a narrow USD 1780.00 to USD 1800.00 an ounce range, and a break higher unlikely to seriously test the 200-DMA at USD 1809.40, or the 100-DMA at USD 1815.90 an ounce, let alone the much more formidable USD 1835.00 an ounce region. Failure of nearby support at USD 1780.00 an ounce could see stop-loss selling emerge, pushing gold quickly lower to USD 1750.00 an ounce.

Asian currencies rally on US/China hopes

Currency markets had another dire overnight session, with volatility proving an elusive beast these days. Lower US yields were enough to send the dollar index just 0.20% lower to 92.52, easing another 0.06% to 92.47 this morning. EUR/USD tested support at 1.1800 overnight, but this held, and EUR/USD has recovered to 1.1830 this morning. GBP/USD rallied by 0.47% to 1.3835 overnight after a Bank of England official talked rate hikes. GBP/USD has risen to 1.3848 today but still faces stern resistance between 1.3900 and 1.3920, its 100-day moving average (DMA).

This morning’s phone call between Presidents Biden and Xi phone call has propelled Asian currencies higher today, with USD/ASEAN around 0.20% and USD/KRW also falling by 0.22% after a tough week for the won. AUD/USD and NZD/USD, with a high beta to Asia at the best of times, have climbed by 0.22% to 0.7383 and 0.7120, respectively, alleviating their downside pressures of the past few days. 0.7300 and 0.7080 should mark interim lows now, setting Asia FX and AUD and NZD up for further advances into next week.

USD/JPY, still a dull US/Japan rate differential place, plummeted by 0.50% to 109.70 before recovering marginally to 109.80 this morning. The culprit was the fall in US yields across the curve, notably in the 30-year tenor, after a robust 30-year US bond auction. With tapering talk in the US dominating the narrative this week, there are likely to be quite a few longs above 110.00 quite nervous now. A failure of support at 109.60 could spur a reactionary sell-off to 109.00.

Despite some individual noises and the moves in USD/Asia today, volatility in currency markets remains muted. In the bigger picture, the dollar index is bouncing around in a wider 92.00 to 93.20 range. German and Canadian elections are unlikely to be enough to lift the lethargy in forex markets; we may require a surprise from this month’s FOMC to achieve that.

Asian markets gain on US/China thaw

This morning, President Biden and Xi’s phone call has spurred hopes of a thaw in US/China relations. That is ostensibly good for trade everywhere and spurred a decent rally in stocks across Asia. That has sharply reversed the negative sentiment that dominated the US session, where a technical correction to an extended rally this week has been painted as tapering nerves.

Overnight, the S&P 500 fell by 0.46%, the Nasdaq eased by 0.25%, and the Dow Jones fell by 0.42%. US index futures have picked up a Biden/Xi shuffle themselves in Asia, though. Dow futures rising by 0.30%, S&P futures by 0.20%, and Nasdaq futures by 0.12%.

Needing no further cues, Japan’s Nikkei 225 has leapt 1.30 higher today, with South Korea’s Kospi rising by 0.30%. The Shanghai Composite is oddly muted in China, rising only 0.05% today, although the narrower Shanghai 50 had jumped by 0.72%. It is all systems go elsewhere, though, with the CSI 300 climbing 0.44% and the Hang Seng leaping 1.65% higher after Hong Kong list mainland tech giants endured a torrid day yesterday. Sentiment in Hong Kong may also be aided by Ever-Teflon, I mean Evergrande, pulling off another stay of execution.

Regionally, Singapore has risen by 0.65%, with Taipei 0.75% higher, although Kuala Lumpur and Bangkok have edged 0.20% lower. Jakarta and Manila are 0.10% and 0.45% higher. Australian markets also share the good cheer, the All Ordinaries rising by 0.25%, and the ASX 200 climbing by 0.45%. The rally is led by, you guessed it, resource companies and banks.

I expect European bourses to take a neutral ECB, and the potential olive branch of US/China relations to heart and open higher today, as should US markets, where some good news and Joe Biden in the same sentence have become a rare commodity of late.

The US dollar retreated against a number of its counterparts yesterday yet seems about to end the week higher after two consecutive weeks of losses. It should be noted that the week begun with widespread worries for the possibility that the Fed may delay the tapering of its QE program after a weak NFP figure being released for August, yet since then a number of Fed officials have suggested that a taper is still possible this year. It’s characteristic that Fed Governor Bowman stated yesterday that the weak August labor report won’t throw the central bank off course. On the other hand, US stock markets ended the day rather mixed with little gains as the US weekly initial jobless claims figure came out lower than expected spurring hope among investors yet worries for the possible adverse effect of the Delta variant were still present. It should be noted that US President Biden yesterday stated that he will order additional vaccinations and targeted the anti-vaccine movement while it should be noted that he also had a call with Chinese leader Xi Jinping in an effort to deescalate tensions in the US-Sino relationships which could create some safe haven outflows. Today we may see traders turning their attention to the US PPI rates while US fundamentals could also affect USD.

The USD Index dropped yesterday stabilizing between the 92.75 (R1) resistance line and the 92.30 (S1) support line. We tend to expect a sideways motion currently, given that the RSI indicator below our 4-hour chart run along the reading of 50, implying a rather indecisive market, yet fundamentals may alter the index’s path to either direction. Should a selling interest be displayed by the market we may see the Index breaking the 92.30 (S1) support line and aim for the 91.75 (S2) support level. Should buyers be in charge, we may see the index breaking the 92.75 (R1) resistance line and aim for the 93.20 (R2) resistance level.

CAD could fluctuate from August’s employment data

The Loonie strengthened against the USD yesterday and during todays’ Asian session as the expectation of BoC tapering its QE program in October remained intact and today’s employment data for August, are expected to be closely watched by CAD traders. The employment change figure is expected to rise, while the unemployment rate is expected to retreat and if so, could provide some support for the Canadian currency as it would be a clear indication for further tightening of the Canadian employment market which could boost the confidence of BoC. It should be noted that BoC Governor Macklem yesterday stated that the bank plans to raise the key rate before winding down its bond buying program spurring hopes for an earlier tightening of the banks’ monetary policy. On the other hand, oil prices were clipped as China seems about to release state oil reserves to reduce pressure on domestic refiners and if so could weaken demand for oil.

USD/CAD dropped yesterday yet seems to remain playful with the 1.2650 (R1) level. We end to maintain a bias for a sideways movement for now given that the RSI indicator below our 4-hour chart is near the reading of 50, yet we also note the bearish tendencies for the pair. Should the bears actually take over, we may see the pair aiming if not breaking the 1.2495 (S1) support line. Should the bulls take over we may see the pair breaking the 1.2650 (R1) resistance line and take aim if no break the 1.2785 (R2) level.

Other economic highlights today and the following Asian session:

Today during the European session, we highlight UK’s GDP rate and manufacturing output growth rate, both for July while from Germany we get final HICP rate for August. On the monetary front we note Lagarde’s participation in the Eurogroup meeting after yesterday’s ECB interest rate decision to remain on hold. In the American session, we get Canada’s employment data for August and from the US the PPI rates for August, while oil traders may be more interested in the release of the Baker Hughes weekly oil rig count. On Monday’s Asian session we note Japan’s Corporate Goods prices for August.

USD Index H4 Chart

Support: 92.30 (S1), 91.75 (S2), 91.30 (S3)

Resistance: 92.75 (R1), 93.20 (R2), 93.70 (R3)

USD/CAD H4 Chart

Support: 1.2495 (S1), 1.2375 (S2), 1.2270 (S3)

Resistance: 1.2650 (R1), 1.2785 (R2), 1.2920 (R3)