NY Open: Wall Street's Huawei game

Deputy chair and CFO of Huawei Meng Wanzhou was arrested by Canadian authorities (at the request of the US Justice Department) last Saturday, but financial markets were unaware until yesterday afternoon. That caused a kerfuffle, the effects of which are reverberating throughout financial markets in New York trading.

Wall Street returned from a day of mourning for former president George H.W. Bush only to start mourning for what could be the demise of the US/China trade truce.  The major US indices plunged at the open, and by 14:00 GMT, the Dow Jones Industrial Average was down 455.47 points, the S&P 500 was 1.76% lower, and the Nasdaq had lost 1.62%.

The US dollar clawed back some of its overnight losses after a string of US economic data reports were a tad softer than expected. Initial Jobless Claims, Trade Balance and ADP Employment change were lower than forecast. Factory Orders dropped 2.1% in October, but ISM non-manufacturing results were slightly better than expected. 

USDJPY snapped the uptrend that had guided moves since late October when prices broke below 112.60. Traders are looking for support at 112.30 to crumble and extend losses to 111.70. The spike in safe-haven demand following the Huawei news and the steep drop in US Treasury yields exacerbated selling pressures.

USDCAD soared on the Huawei news which followed on the heels of a steep rise after the Bank of Canada issued a surprisingly dovish policy statement yesterday  Any hopes that markets misunderstood the policy message were dashed this morning after BoC governor Poloz’s speech. The governor confirmed the dovish shift, repeating that recent data releases were disappointing and noting that the plunge in oil prices would have “a meaningful impact on the Canadian macroeconomy.” 

USDCAD technicals are bullish following the break above triple top resistance at 1.3380 and are targeting 1.3550.