Trump displeasure with rising rates/USD takes wind out of broad USD rally. CAD traders eyeing Canadian Retail Sales/CPI out momentarily. GBP traders awaiting comments from EU's Barnier.

Summary

• USDCAD: Dollar/CAD is trading with a soft tone this morning as markets await Canadian Retail Sales and CPI data.  Yesterday’s rally stalled at trend-line resistance in the 1.3270s, and then we got the Trump headlines from CNBC (President not happy about rising interest rates and the rising dollar) which led to a spike lower in the USD across the board.  Buyers bought the dip in USDCAD, leading to a decent NY close, but the upward momentum couldn’t carry into Asia after a significant rise in the USDCNY fix and subsequent rise in USDCNH got faded by intervention rumors from Chinese banks at the 6.81 level.  Long story short, we didn’t see the broad USD follow-through that we saw the night before (against EUR, GBP, AUD and JPY) and so USDCAD backed off the same trend-line resistance level again.  Traders are expecting +1.1% MoM for May Retail Sales and +0.7% ex. Autos.  June CPI is expected +2.4% YoY (+0.1% MoM), +1.4% on core (-0.1% MoM on core).  Expect a downward test of support in the 1.3170-80 area on strong data, and an upward test of the 1.3320-30s on weak data.  Mixed data will likely see the market whip around current levels (1.3220-1.3280).

• EURUSD: The Trump headlines yesterday arguably saved EURUSD as the market was able to break back above chart resistance in the 1.1630s (which we said kept the downtrend intact).  We traded as high as the 1.1670s, pulled back some, but now continue to hold the 1.1630s despite the USDCNH volatility overnight.  Expect range bound to higher prices now going into the weekend.  This weekend features the G20 meeting in Buenos Aires, where we’ll likely get some comments out of US Treasury secretary Steve Mnuchin.  Be on the lookout for potentially more Italian headlines following some political infighting that hurt Italian assets today (more here: https://www.reuters.com/article/eurozone-markets-italy-dimaio/update-1-italy-deputy-pm-denies-demanding-economy-minister-resignation-idUSL8N1UG29W).  All eyes next week will be on the ECB, when they meet again on Thursday to announce their latest monetary policy decision.

• GBPUSD:Sterling is drifting higher this morning as well, following EURUSD for the most part after the Trump headlines rescued GBPUSD back above the 1.3000 support level.   We got some comments over the last hour from the BoE’s Tenreyro reiterating that the Q1 slowdown was temporary.  The next BoE meeting is Aug 2^nd.  Be on the lookout for Brexit headlines from the EU today as Michel Barnier is expected to comment on Theresa May’s plan at some point (more here: https://www.independent.co.uk/news/uk/politics/brexit-live-latest-updates-theresa-may-northern-ireland-barnier-chequers-speech-matt-hancock-a8455821.html).  GBPUSD is currently testing upside resistance in the 1.3040-50 area.  A move above invites the 1.3070s.  Should that level give way, the next major level is the 1.3140s.

• AUDUSD: The Aussie escaped the abyss of support below the 0.7330s yesterday on the Trump headlines as well.  Last night’s higher USDCNY fix and subsequent rise in USDCNH had a more pronounced negative effect on AUDUSD vis a vis the rest of the majors, but the Chinese bank intervention rumors saved the day and buyers stepped in again just below 0.7330.  We’re now sitting in a range-bound to higher pattern, following EURUSD as NY trading gets underway.  Copper prices are rebounding too, but the market is struggling to regain trend-line support in the mid 2.73s.  Next week features Australian CPI.

• USDJPY:The Trump headlines definitely took the wind out the sails in USDJPY yesterday.  Some rumors made the round that US bond traders got the leg up on this as US yields started their move lower well before the CNBC interview.   Either way, USDJPY smashed through chart support in the 112.60-80s, moving almost all the way down to the 112 figure.  We saw a bounce at the NY close and a couple attempts to regain the 112.60s in Asia (around the time of the higher USDCNY fix), but this failed and so the market is leaking lower towards yesterday’s low in the 112.10s, where the next trend-line support level also lies.   Japan reported June CPI at +0.7% YoY vs. +0.8% expected, well below the BOJ’s policy target.

Tune in @EBCTradeDesk for more real-time market coverage.

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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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