Turkish Lira flash crash ignites "risk off" across all markets. USD higher across the board. Crude oil inventory data and FOMC Minutes today.
Summary
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USDCAD: Dollar/CAD is rocketing higher this morning as markets are in “risk off” mode following a flash crash in Turkish lira overnight. The Nikkei and USDJPY collapsed, commodities are getting hit, and the USD is exploding higher across the board. As we write, USDTRY is now trading 5% higher on the day!!! USDCAD is all of a sudden trading with a 1.29 handle again, with traders now focused on chart resistance in the 1.2910-1.2925 area. Today sees the weekly DOE oil inventory data release at 10:30amET, followed by the FOMC Minutes at 2pmET, but all eyes for the time being will be glued on Turkey and the market’s broader appetite for risk.
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EURUSD: The Euro has resumed its downward trend this morning; following the TRY lower with every wave of selling overnight. Some weak PMI data from Markit didn’t help the fundamental backdrop. Chart support at 1.1690-1.1720 is now being tested, but as we mentioned last week there’s not much in the way of strong technical support until the mid 1.15s. Today sees 2.4blnEUR+ in options rolling off between 1.1750 and 1.1780, so markets may find a bid here ahead of 10amET. EURJPY is getting crushed this morning (-1.5%) and is keeping EURUSD heavy.
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GBPUSD: Traders were content to keep selling sterling in Asia and early European trading overnight amidst broad USD strength. Then the UK reported weaker than expected CPI for April (+2.4% vs +2.5% expected), and the floor fell out of the market as trend-line support in the 1.3380s gave way. The market is now scrambling to find support, but there is not much in our opinion until the 1.3280s (61.8% Fibo retrace of the June17-April18 rally). EURGBP is working on a bullish outside day pattern, should the cross close above 0.8790 today. Should this happen, it could become a drag on GBPUSD going into month end.
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AUDUSD: The Aussie is understandably weaker this morning, considering yesterday’s reject of the 76 handle, broad USD buying overnight and selling in copper futures today. AUDUSD has pulled back to test trend-line support in the 0.7520-0.7550 level and looks like it may find buyers, but we’d need EURUSD and copper to recover a bit here. The chart for copper now looks uncertain considering yesterday’s failed breakout attempt.
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USDJPY: Dollar/yen is taking the brunt of the “risk off” theme this morning in markets, with the market plunging through support at 110.50, 110 and 109.85. The Nikkei fell 2% overnight. US 10 yr yields are down 5bps. The S&P futures are off 16 pts. Some buyers have stepped in at trend-line support in the 109.60-70s, and there’s a rather large option expiry today that could attract some bids here near term (2blnUSD+ at 109.90-110.00 strikes). Watch US equities and US yields, especially after the option expiry today. Traders will then have their sights set on the FOMC Minutes, which are set to be released at 2pmET. Yesterday’s reject of the 111 level proved rather ominous.
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