EU says no to May on renegotiating deal
Summary
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USDCAD: Dollar/CAD is trading higher this morning amid some broad USD strength coming out of Europe, but we continue to hold familiar levels in the mid to high 1.33s. US Retail Sales for November have just beaten expectations, coming in at +0.2% MoM vs +0.1% expected. Crude oil is trading steady, but just shy of trend-line resistance in the 52.70s after a bullish outside day was recorded on the charts yesterday. Today is also when January options expire for the WTI crude contract. We think crude oil could break higher here, and so USDCAD might continue to struggle to benefit from the broad USD buying that is occurring elsewhere. We feel the 1.3360-80s zone is the pivot for price action heading into next week. Stay above and we can continue to trade higher, but trade below and we’ll likely see pressure.
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EURUSD: Euro/dollar is falling apart this morning, after some dismal PMI prints out of the Europe today (France most especially) add credence to Mario Draghi’s dovish comments yesterday about the balance of risks [to the growth outlook] now moving to the downside. Trend-line support in the 1.1290s is the level to watch today in our opinion. Stay below and we could see continued pressure into the mid 1.12s, but regain the level and there would be room for a 30pt retracement. Monday’s bearish outside day pattern has proven ominous for EURUSD this week. We think the EURUSD technicals have deteriorated enough here to keep the sellers in charge near term. Over 1blnEUR in options expire at both the 1.1250 and 1.1300 strikes this morning.
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GBPUSD: Sterling is dropping sharply this morning too, on a combination of EURUSD led losses and what appears to be a turn for the worse when it comes to Theresa May’s credibility with EU leaders. A video is circulating this morning with what looks like a tense exchange between the UK PM and the EU’s Juncker at the EU summit in Brussels. More here. We’re also reading reports that EU leaders have now reneged on a joint draft statement to be released after the EU summit, in an effort to help Theresa May sell her Brexit deal to parliament. GBPUSD has fallen back down through Fibo chart support in the 1.2620s, and traders are now listening to Theresa May as she begins a press conference. Near term chart support lies in the 1.2520s, then the 1.2480s.
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AUDUSD: The sellers are pummeling the Aussie today after China reported much weaker than expected Retail Sales and Industrial Production figures for November overnight. Retail Sales were also the weakest since 2003 and Industrial Production was the slowest since early 2016. Add to this the dismal PMIs out of Europe today and the subsequent fall in EURUSD, and AUDUSD is in a world of hurt this morning as NY trading gets underway. Last week’s bearish outside week pattern has proven ominous, and we don’t see what changes the negative narrative as this point. Chart support today lies in the 0.7150s, but then there is not much else until the 0.7100 mark.
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USDJPY: Dollar/yen is holding up amazingly well today, despite a 20pt drop in the S&P futures this morning. Broad USD buying is outpacing safe haven demand for the JPY, and traders appear to also be gunning for the today’s 1.4blnUSD option expiry at 113.75. The market is pivoting around a trend-line level in the 113.50s, and we think any move above will keep the buyers in charge near term. Japan reported a decent read on its Q4 Tanken manufacturing survey last night, but traders largely ignored this.
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About the Author
Exchange Bank of Canada (EBC) is a Schedule 1 bank based in Toronto, Canada. EBC specializes in foreign exchange services and international payments providing a wide range of services to financial institutions and corporations, including banknote foreign currency exchange, travelers' cheques, foreign currency cheque clearing, foreign currency bank drafts, Global EFT and international wire transfers through the use of EBC's innovative EBCFX web-based FX software www.ebcfx.com.