US dollar presses further as commodity currencies stumble

Softness in the risk trades adds another leg to the move

The loonie and New Zealand dollar are carving out fresh lows against the US dollar after the Nasdaq dive weighed on broader sentiment. The loonie is also navigating a possible US SPR release.
The driving force behind the dollar strength today is the re-nomination of Jerome Powell as Fed chair. That’s pushed US 2-year yields up 6.9 bps to 0.574% on expectations he will be more hawkish than Brainard would have been.
That belief will be tested in time but it fits nicely into the current theme of US dollar. It’s been a one-way march higher in the dollar for weeks as the market prices in divergence with the ECB, BOJ and others.
In terms of today’s move, NZD/USD has fallen to a fresh low since October 12 and a minor uptrend is going to be tested soon. Beyond that are the Sept and Aug lows.

Softness in the risk trades adds another leg to the move

Sen. Warren says she will vote against Powell’s renomination

Powell will need at least one Republican vote

Powell will need at least one Republican vote
Warren came out against Powell in public comments before he was re-nominated so this isn’t a surprise. She had called him a ‘dangerous man’.
“It’s no secret I oppose Chair Jerome Powell’s renomination, and I will vote against him. I will support the President’s nomination of Lael Brainard as Vice Chair. Powell’s failures on regulation, climate, and ethics make vice chair spot critically important.”
I’m fairly certain that Biden will throw the progressives a bone by allowing them to pick someone who is unfriendly to Wall Street (or less friendly) as the vice chair for supervision. That pick will come in early December.
As for Powell’s confirmation, virtually all Republican Senators voted for him last time and it would be quiet a switcheroo for all of them to vote against the guy that Trump nominated.

Dollar moves a bit higher on Powell news. New 2021 high for the DXY.

The  DXY is above the 50% of the range from the 2020 high.

The DXY index has moved up and traded at the highest level since July 2020.  The price has been ticking higher but has so far closed below the 50% of the trading ranges since 2020. Friday was the highest close in the current cycle. That close level came in at 96.06. That was just below the midpoint at 95.094.

The  DXY is above the 50% of the range from the 2020 high.

The move higher has taken the new 2021 high to 96.32 and more comfortably above the 50% level. Stay above the 50% is more bullish.
The US stocks are a bit higher with the pre-market futures implying:
  • Dow up 161 point
  • S&P up  up 19.25 points
  • NASDAQ up 83 points
Yields are higher with the 5 year up 6.6 basis points. It was up 4.6 basis points at the start of the North American session.
US yields

Powell to be re-nominated as Fed chair

Powell to return, Brainard to be nominated as vice-chair

The White House will nominate Jerome Powell for a second four-year term. Markets had mostly expected this but PredictIt had him priced around 79% just ahead of the announcement.
The second part of the announcement is that Brainard will be nominated as vice-chair. This is a bit of a surprise given that Clarida holds that post. She was expected to be given the vice-chair of supervision role if not the chairman. That spells the end for Clarida.

EURUSD continues the skim along the 2021 lows

Friday the pair made another new low but quickly rebounded

The EURUSD is continuing “the skim” along the 2021 lows as the pair trades in a narrow 31 pip trading range for this Monday. The average range over the last 22 days is 68 pips. There is room to roam.
Today, the pair high has come in at 1.12898. That was just above the 61.8% retracement level of the range since 2020 at 1.12876, but that move above failed.  That level will be eyed for clues but finding sellers near that level keeps the sellers in control.
Friday the pair made another new low but quickly rebounded

Having said that the low today (1.12592) was near the swing low from Wednesday’s trading (1.1263). Many a bottom have been formed when the price can’t get to the bottom but stalls at an interim bottom like today’s.

The fact is the pair is “skimming”. The buyers and sellers are battling, BUT the sellers still have more control (the buyers are hoping for a bounce).  Watch the levels, but a move back below the 1.12633 could/should give the buyers more to worry about and the sellers more confidence.
EURUSD on the hourly chart

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China financial regulators said to tell banks to issue more loans for property projects

Reuters reports, citing sources with knowledge of the matter

Adding that some Chinese banks were told to show positive growth in outstanding loans for property projects in November as compared to October.
This seems like a bit of touching up and to maintain the facade that the crackdown on the property sector isn’t leading to any major meltdowns, at least not imminently.
But expect the struggle to continue through to next year as China continues to keep its focus on ‘common prosperity’ while progressing to mitigate credit/debt risks as a whole.

SNB total sight deposits w.e. 19 November CHF 719.3 bn vs CHF 719.2 bn prior

Latest data released by the SNB – 22 November 2021

  • Domestic sight deposits CHF 646.7 bn vs CHF 644.1 bn prior
Prior week’s release can be found here. Surprisingly not a meaningful increase in overall sight deposits even as EUR/CHF broke to fresh lows since 2015 on Friday last week. Perhaps the SNB is biding their time to step in but one should figure that they may step up interventions in general as the franc threatens to break higher.

Eurostoxx futures +0.1% in early European trading

Light gains in early trades

  • German DAX futures +0.1%
  • UK FTSE futures +0.2%
  • Spanish IBEX futures +0.2%
Risk sentiment is holding up decently as we look towards the session ahead, with US futures also keeping higher by around 0.3% currently.
That points to a more optimistic mood on the balance of things, as tech stocks (Nasdaq specifically) will be looking to advance to fresh record highs again later.
Keep in mind that trading this week will be a shorter one – or at least normal trading conditions – considering the Thanksgiving holiday on Thursday.
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