US/Mexico trade deal ignites broad risk-on rally
Summary
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USDCAD: Dollar/CAD is extending losses this morning after yesterday’s US/Mexico trade deal announcement spurred a broad “risk-on” rally. The S&P rallied to a new all-time high, the USD saw sales across the board, and even the CAD rallied in hopes there’s a light at the end of tunnel now for Canadian negotiations as well. Chart support in the 1.2950s held in Asian trade overnight, but another wave of broad USD selling in Europe sees us below the level now. October crude oil appears to be struggling with chart resistance in the 69.20s. We think the 1.2950 level is the level to watch today in our opinion. Expect further selling if we stay below and a bounce should we regain it. Canada’s Freeland heads to Washington today for talks. More here from Bloomberg: https://www.bloomberg.com/news/articles/2018-08-28/markets-bet-canada-will-stay-in-nafta-as-trump-raises-pressure.
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EURUSD: Euro/dollar is building upon yesterday’s “risk-on” gains, but we’re stalling now at 1.1700 temporarily where Fibo resistance and options expiries reside for today (900mlnEUR). USDCNH is struggling to bounce and hold gains above the 6.80 level, which helps EURUSD. Expect follow-though buying all the way up to 1.1750-60 perhaps, should the 1.1700 level hold.
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GBPUSD: UK traders returned from holiday today and sold sterling after an attempt to break yesterday’s NY highs failed in Asian trade overnight. Buyers have stepped in, however, at horizontal chart support in the 1.2860s and we’ve since seen a strong bounce back up to the 1.29 handle on broad USD weakness. We wouldn’t be surprised to see a test of upside resistance in the 1.2925-40 today, especially if EURUSD marches higher again. We think this is the level to watch today for sterling. Any rally above there will likely start putting the screws to the extended fund short position.
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AUDUSD: The Aussie is trading with a flat tone again this morning as the overnight fade of yesterday’s gains was erased by traders who bought the dip into 0.7320s support. Copper has popped above resistance in the 2.72s. We think AUDUSD could very well drift higher to chart resistance in the 0.7370s today. Watch EURUSD for clues.
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USDJPY: Dollar/yen is trading range-bound again this morning, taking its cue so far this week from the broader USD tone rather than the traditional equities/yield spread drivers. We think USDJPY marks time again today with broad USD selling being offset by broad JPY selling. Around 1blnUSD in options expire today between 110.90 and 110.95.
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Market Analysis Charts
USD/CAD Daily Chart
USD/CAD Hourly Chart
October Crude Oil Daily Chart
EUR/USD Daily Chart
EUR/USD Hourly Chart
USD/CNH Daily Chart
GBP/USD Daily Chart
GBP/USD Hourly Chart
EUR/GBP Daily Chart
AUD/USD Daily Chart
AUD/USD Hourly Chart
September Copper Daily Chart
USD/JPY Daily Chart
USD/JPY Hourly Chart
EUR/JPY Daily Chart
Charts: TWS Workspace
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.