• Financial Institutions
  • Corporations
  • Travelers
  • Foreign Bank Note Exchange
  • International Drafts
  • International Wire Transfers
  • Global EFT
  • Foreign Check Clearing
  • Foreign Draft Issuance
  • Travel
  • Technology Companies
  • Payroll
  • Healthcare
  • Nonprofit
  • Partnerships

Month-end USD demand noted yesterday. FOMC gives market slightly hawkish hold on rates. US ISM on deck and US NFPs tomorrow.

CXI February 1st, 2018


  • USDCAD: Month-end USD demand was evident leading up to the London fix yesterday (11amET).  This theme rescued USDCAD, bringing the pair quickly back above the important trend-line support level we’ve been talking about (1.2315).  Later on, the FOMC kept rates unchanged (which was widely expected), but they inserted the word “further” into their statement, which wasn’t in there last time around.  “The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate,".  The market chatter we’ve been hearing since the announcement suggests that this was a slightly hawkish (USD positive) hold from the Fed, and increases the odds of four rate hikes in 2018 as opposed to three.  All that being said, FX markets didn’t react much to the FOMC.  The broader USD held its post London-fix bid, for the most part, going into the NY close.  USDCAD is currently trading marginally above trend-line support (which is positive considering yesterday’s turn-around), but it doesn’t have much momentum behind it as the broader USD is trading mixed so far today (higher against AUD and JPY, but lower against EUR and GBP).  Plus we have a couple of big US headlines on deck (US Jan ISM at 10am and US non-farm payrolls at 8:30amET tomorrow).  EURCAD and GBPCAD cross demand is helping USDCAD this morning.  US/CA 2s remain firm at +31bp at this hour.

  • AUDUSD: The wave of USD buying into the London fix yesterday took a big dent out of the Aussie rally.  The 0.8080s gave way easily and we went straight down to test support in the 0.8030-0.8050 region.  This area held post FOMC, but it gave way overnight after an awful print on Australian Dec Building Approvals (-5.5% YoY vs +11.5% expected).  AUDUSD has fallen all the way back to trend-line support in the 0.7990-0.8000 level.  This support level is holding for now.  If it breaks, the next support level is 0.7960-0.7970.  Resistance is now 0.8030-0.8050 (yesterday’s support).  Copper is steady today, and not providing much influence.  A reminder that the RBA meets to announce monetary policy on Tuesday next week.

  • EURUSD: The Euro slumped into the London fix yesterday as well.  We saw further selling into the upper 1.23s when the 1.2430s gave way, and while the FOMC announcement didn’t do much to repair the technical chart damage, we’ve seen a fresh round of EURUSD buying come in as Europe got going today.  With that, the market is now comfortably back above the 1.2430s (trend-line support), keeping the bulls in charge.  There hasn’t been much in the way of EUR specific news today, aside from some decent PMIs from Italy, France, Germany and the broader Eurozone.  Traders will now focus on today’s US ISM numbers and tomorrow’s NFP report.  USDCNH has stalled today, after regaining 6.30 late yesterday.  Given recent correlations, we would not be surprised if EURUSD stalls at some point today as well.  Option expiries could be a negative influence today going into 10am with over 4.4bln EUR going off between 1.2400 and 1.2425, but we don’t see this happening unless the 1.2430s give way in the next hour.  EURGBP has completely given up its brief pop from month-end flows, and is now trading back below trend-line support in the 0.8770s (EURUSD negative).  EURJPY, on the other hand, continues roaring higher, now back above 136.50 (close to recent highs).  This has probably been the biggest influence on EURUSD today.

  • GBPUSD: Sterling had a mixed session yesterday, and had a rather muted response to both the month end USD demand and the slightly hawkish hold from the FOMC.  Combine that with the fact that GBPUSD closed comfortably above trend-line support in the 1.4120s, and traders felt comfortable taking prices higher overnight.  GBPUSD failed however at 1.4250-1.4260 (Friday’s highs) earlier, and has since pulled back, and it’s currently testing the upper end of yesterday’s NY range (which is a bit negative).  We think today could potentially be mixed to lower for GBPUSD if EURGBP recovers and the broader USD goes range-bound ahead of the NFPs tomorrow.

  • USDJPY: Dollar-yen benefitted handsomely from the month end USD demand into the London fix yesterday.  The market punched through chart resistance at 109.25, and while it wobbled around post FOMC, it managed to close right at this resistance level (which given recent price action is pretty positive).  The positive momentum continued overnight, led by broad JPY selling and rising US yields.  Global equities are taking some heat over the last hour, and this is starting to chip away at the USDJPY gains for the day.  USDJPY also ran into horizontal and trend-line chart resistance at 109.70 over the last hour, which didn’t help.  Support today in USDJPY checks in at 109.25-109.35.

The EBC Trading Desk is now on Twitter @EBCTradeDesk.  Stay tuned for real-time news, commentary and analysis throughout the trading day!


Market Analysis Charts








Charts: TWS Workspace

About the Author

Erik Bregar

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.

Interested in creating a custom foreign exchange trading plan? Contact Us or call EBC's trading desk directly at 1-888-728-4918.

About Exchange Bank of Canada
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.

Disclaimer: All product names, logos, and brands are property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, logos, and brands does not imply endorsement.

This publication has been prepared by Exchange Bank of Canada for informational and marketing purposes only. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Exchange Bank of Canada, its affiliates or any of their employees incur any responsibility. Neither Exchange Bank of Canada nor its affiliates accept any liability whatsoever for any loss arising from any use of this information. This publication is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any of the currencies referred to herein, nor shall this publication be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The general transaction, financial, educational and market information contained herein is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a "call to action" or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. You should note that the manner in which you implement any of the strategies set out in this publication may expose you to significant risk and you should carefully consider your ability to bear such risks through consultation with your own independent financial, legal, accounting, tax and other professional advisors. All Exchange Bank of Canada products and services are subject to the terms of applicable agreements and local regulations. This publication and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced in whole or in part, or referred to in any manner whatsoever nor may the information, opinions and conclusions contained in it be referred to without the prior express written consent of Exchange Bank of Canada.