$CAD offered to start week as net longs at 5yr high. Cross buying EURCAD and GBPCAD.
Summary
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The broader USD starts the week mixed, but it’s been quiet trade so far as the markets digest political headlines from Europe, Friday’s COT positioning data showing extended EUR, AUD and CAD longs, weekly technicals and the economic calendar for the week.
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Politics: Austria elects non-establishment Kurz over the weekend (a blow for the EU), Lower Saxony snap election hurts Merkel’s party in bid to form coalition, Spain now giving Catalonia until Thursday to clarify independence position, UK’s May & Davis to head to Brussels on short notice to revive negotiations with the EU’s Barnier and Juncker, China’s 19th National Congress begins Wednesday, European Commission Summit on Thursday (plenty of headline risk ahead this week for EUR, GBP and CNH)
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Friday’s COT Report (Positioning as of 10/10): EUR net long extends to highest since 2011 as longs add. CAD net long makes marginally 5yr high as shorts cover. GBP shorts start to add again, but market still net long surprisingly. JPY traders continue to pile in on the short side, net short grows for third straight week.
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Upcoming data this week: The Bank of Canada’s Business outlook survey is out today at 10:30. Tomorrow sees, US Industrial Production, UK CPI and RBA minutes. Wednesday we’ll get the UK employment figures. UK Retail Sales, Australia’s job figures, Phily Fed survey are on deck for Thursday. Finally, we get Canadian CPI on Friday.
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CME open interest changes 10/13: AUD +1355, GBP +1138, CAD -1122, EUR -1711, JPY -896
Currency Calendar
| Date | Releases / Holiday | Entity |
|---|---|---|
| October 16, 2017 | Consumer Price Index (YoY) (Sep) | CNY |
| October 16, 2017 | Consumer Prices Index (YoY) (3Q) | NZD |
Bank holidays and impactful report releases for select countries.
By The Numbers: Daily FX Snapshot
USD/CAD - Canadian Dollar
Dollar/CAD starts the week with a bullish bias as the 1.2450-60 region holds in post US CPI trading on Friday and the broader USD gets a post weekend bid against EUR and AUD. We’re also dealing with 5yr highs in net CAD long (net USD short) positioning which continues to make the market vulnerable to short covering. Just as we go to press, we’re seeing some heavy buying of EURCAD and GBPCAD. EURCAD probed the 1.47s in early London trade but has regained the 1.4750 yet again and is now attacking the 1.48 handle. GBPCAD is now trading above Friday’s NY high, teasing traders with a resumption of the bullish cup n’ handle pattern we mentioned last month and possibly a bullish H&S bottom. All of this is giving USDCAD legs this morning as North American traders get going. Spot is currently testing resistance in the 1.2530-40s. Next 1.2560-70. Support 1.2500-10. The Bank of Canada’s business outlook survey is out at 10:30amET. Next Bank of Canada meeting is Oct 25. OIS swaps pricing in 25% of 25bp rate hike.
EUR/USD - European Central Bank Euro
The Euro continues to see pressure from EURJPY and EURGBP selling. This is easing a bit now as NY trading gets going. The extended net long position (6yr high) and the potential political headline risks out of Europe this week is not helping so far. We continue to watch the developing H&S topping pattern on the daily chart and how well EURJPY responds to the critical 131.60-80 support area. Near term support 1.1750-60. Resistance 1.1820s.
USD/JPY - Japanese Yen
After a week full of option expiries last week, USDJPY is finally seeing some movement. The market blew through the 112 support level on the weaker than expected US CPI print on Friday, regained the level in Asian trade but is weaker again now as NY trading gets underway. Short JPY (long USD) positioning may start to weigh here as well as the trade has not made money over the last week. US treasuries, which are holding their post CPI bid, are not helping as well. Support 111.30-50. Market looks technically better above 112.25.
Market Analysis Charts
USD/CAD Chart
GBP/CAD Chart
USD/JPY Chart
Charts: TWS Workstation
About the Author
Erik Bregar - Trader
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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