Big day for CAD ahead as traders await Canadian data points and OPEC decision. Bullish outside day patterns scored in EURUSD and GBPUSD. USDJPY sidelined.

Summary

• USDCAD: Dollar/CAD is backing off recent highs this morning as bullish technical patterns in EURUSD, GBPUSD and August crude oil weigh on broad USD sentiment.  The 1.3310-1.3330 resistance area proved formidable again yesterday, and the market is now trading below upward sloping trend-line support in the 1.3290s.  Next up at 8:30amET we have Canadian Retail Sales for April and Canadian CPI for May.  Markets are expecting a flat reading on headline Retail Sales and +0.5% ex autos, while the expectation for CPI is +2.5% YoY, +0.3% MoM and +1.4% on core.  Expect better than expected numbers to prompt further profit taking, while weaker than expected figures to ignite a resumption of the rally higher in USDCAD.  After the Canadian data, the focus will turn to the much anticipated OPEC meeting, which features a communiqué at 1pmET.  Market chatter late yesterday suggested that we’re going to get a 1mln bpd increase in “notional” production, but the “actual” increase will be 500-600k bpd because several OPEC producers are maxed out.  The big wild card is Iran, which doesn’t want to see an increase in supply and has veto power within the cartel.  However, there is historical precedent for OPEC acting without Iran despite the fact an agreement needs the consent of all parties (think November 2014, and we all know what happened to the price of oil after that).  August crude oil is trading with a technically positive tone after regaining the 66.10-20 level in overnight trade.  This opens the door to a rally back towards $68/barrel, and so USDCAD traders should take note.  See here for today’s OPEC schedule: http://www.opec.org/opec_web/static_files_project/media/downloads/press_room/174th%20OPEC%20Meeting%20and%204th%20OPEC%20non-OPEC%20Meeting%20Program.pdf

• EURUSD: Euro/dollar is trading higher today after a bullish outside daily close yesterday.  The day started on shaky ground yesterday after two euro-sceptics were appointed to Italian parliamentary positions, which saw Italian 2yr yields spike again.  However, finance minister Tria was quick to come on the wires around the NY open reiterating Italy’s commitment to the EUR and we then saw the market recover.  Much weaker than expected numbers from the Philadelphia Fed survey then ignited some broad USD selling which saw EURUSD rally past chart resistance in the 1.1585-1.1600 area.  The market managed to extend further into the afternoon session and close mildly off its highs...a closing pattern that boded well for EURUSD going into today.  Some better than expected Markit PMI data for France and Germany helped the market extend past trend-line resistance in the 1.1630s earlier, but traders are starting to hit the sell key in the last couple hours after a Der Spiegel report saying Germany’s SPD is preparing for new elections.  This shouldn’t be surprising given the ultimatum and deadline given to Merkel from the CDU party regarding the migrant crisis.  EURUSD has tested the 1.1630s on the headlines but is holding for the time being.  

• GBPUSD: Sterling is trading significantly higher this morning after a hawkish hold on monetary policy from the Bank of England yesterday.  The hawkishness stemmed from BoE member Haldane, which dissented against a hold on interest rates, and in turn changed the vote split from 7-2 in favor of holding rates at previous meetings to 6-3.  This saw GBPUSD rocket higher into the 1.32s.  The rally in EURUSD also helped.  Yesterday’s close was a bullish outside day pattern as well, with the closing print right near the daily highs in the 1.3260s.  This technically positive NY close has allowed the market to extend further overnight but GBPUSD has run into some more resistance now in the 1.3300-1.3315 area.  Support today lies in the 1.3280s, then 1.3260s.

• AUDUSD: The Aussie is also have a good day today, riding higher on the coattails of EURUSD strength and a decent NY close yesterday (closed just above chart resistance in the 0.7380s).  There’s not much technical resistance on the chart until the 0.7450-60s, and so today’s bounce has room to extend further.  Copper prices are trading in a quiet range.

• USDJPY:Dollar/yen is struggling this morning to regain lost ground after yesterday’s equity and yield driven drop.  Yesterday’s price action saw USDJPY reject trend-line resistance in the 110.70s and break support in the 110.50 rather decisively and from there it was a firm push lower to the next support level in the 109.70-80 area.  We think USDJPY continues to range trade here.

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Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

August Crude Oil Daily

EUR/USD Daily Chart

EUR/USD Hourly Chart

GBP/USD Daily Chart

GBP/USD Hourly Chart

AUD/USD Daily Chart

AUD/USD Hourly Chart

USD/JPY Daily Chart

USD/JPY Hourly Chart

Charts: TWS Workspace

About the Author

Erik Bregar - Director, FX Trading

Erik works with corporations and institutions to help them better navigate the currency markets. His desk provides fast, transparent, and low cost trade execution; up to the minute fundamental and technical market analysis; custom strategy development; and post-trade services -- all in an effort to add value to your firm’s bottom line. Erik has been trading currencies professionally and independently for more than 12 years. Prior to leading the trading desk at EBC, Erik was in charge of managing the foreign exchange risk for one of Canada’s largest independent broker-dealers.

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