Forex news for North American trade on Sept 20, 2021:
- NAHB Sept US housing market index 76 vs 75 expected
- Top US home builder cuts sales forecast on supply chain disruptions
- ECB's Schnabel: Premature policy tightening a bigger mistake than waiting
- Canadian election preview: Political intrigue but not a big market mover
- US restrictions on travel from Europe, UK, China and Brazil will be lifted
- Gold up $8 to $1762
- US 10-year yields down 6.6 bps to 1.304%
- WTI crude oil down $1.57 to $70.40
- S&P 500 down 75 points or 1.7% to 4357
- JPY leads, GBP lags
There's nothing in the headlines that explains the price action today because it was all about what's been building in China and worries that Evergrande is headed for an ugly collapse. The bigger fear is that Evergrande is merely a symptom of a philosophical change at the top of Chinese leadership and not an isolated, containable problem.
The backdrop was ugly before New York arrived with futures sharply lower. What was interesting was that equities continued to deteriorate once trading began but FX risk trades, commodities and bonds were much more stable.
The yen did continue to grind higher throughout the day, pushing USD/JPY down 62 pips to 109.34. The candles for today in CAD/JPY and GBP/JPY are both ugly and the latter testing the August low.
In the S&P 500, the 100-dma briefly provided support but it didn't last.
What's been interesting in the latter half of the day is that the US dollar hasn't been able to sustain a bid against the commodity currencies. USD/CAD spiked close to 1.29 early in New York trade but is back to 1.2835. The loonie is also dealing with election uncertainty, though I'd argue that's a minor factor.
AUD/USD briefly rose back to unchanged territory midway through US trading but is slated to finish around 30 pips lower. That's hardly the kind of drop you would expect with the situation in stocks.
All this adds much higher stakes to the Fed and PBOC rate decisions this week and ensures that volatility will remain elevated.