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US Senate passes blueprint for tax reform. $USD bid. $CAD traders focused on CPI/Retail Sales.

CXI October 20th, 2017

Summary

  • US Senate passes blueprint for 2018 budget, an important first step in the long process of approving US tax reform.  Traders bid up USD across the board in Asia on the headline.

  • Politico reports, citing sources close to Trump, that it’s down to Jerome Powell and John Taylor for the next Fed Chair.  Decision to come in next few weeks.  PredictIt still has Powell out front.

  • Cdn CPI at 8:30amET.  Markets expecting +1.7%.  Cdn Retail Sales expected +0.4%.

  • Yellen speaking after the close of NY trading today, 7:30pm.  Could make for an interesting Sunday open.

  • CME open interest changes 10/19: AUD +1875, GBP +2037, CAD -2057, EUR +3187, JPY -7528

Currency Calendar

Date Releases / Holiday Entity
October 20, 2017 BOJ Kuroda speaks in Tokyo JPY
October 20, 2017 Consumer Price Index (YoY) (Sep) CAD
October 20, 2017 Fed's Yellen Speech USA

Bank holidays and impactful report releases for select countries.

By The Numbers: Daily FX Snapshot

USD/CAD - Canadian Dollar

Dollar/CAD popped a little higher on the broad USD bid in Asia, but the market is giving it all back now ahead of Cdn CPI and Retail sales, due at 8:30amET.  The two week range (triangular consolidation) of closing prices is getting narrower, which means a break is likely coming soon.  While we prefer to wait for the market to show its hand here in terms of trend, we continue to note more support levels on the charts as opposed to resistance levels.  Combine that with market positioning (which still appears crowded on the short USD side), and we feel the path of least resistance could be higher.  We’ll continue to look for signs of seller failure on the charts.  On the crosses, EURCAD traders seem determined to resolve the weekly triangular consolidation to the upside (see chart).  GBPCAD has been a drag all week, but the strong GBP bounce against USD and EUR this morning is providing a bid.  The Bank of Canada meeting will be the focus for next week (Oct 25).  Markets pricing in just 14% of 25bp rate hike.

 

EUR/USD - European Central Bank Euro

The 1.1850 level proved to formidable resistance for EUR/USD during NY trading yesterday.  US yields recovered as US stocks bottomed and the Politico headline, while initially causing some USD selling late in the day, was interpreted by traders as a mixed bag (remember Taylor is a hawk).  Asian traders tried once more to challenge the level but sold EURs along with everything else on the upbeat headlines about US tax reform.  Market feels heavy going into NY trading today.  Resistance 1.1830s.  Support 1.1750s.  The bearish daily H&S topping pattern is technically still in play.  Almost $3bln EUR in option expiries today (1.1800-1.1850) could keep things a little range bound in the early goings.  Flows from EURJPY continue to support but EURGBP, failing at the 90 handle again, is a negative headwind today.  We’re starting to pay attention to market chatter and sentiment indicators ahead of the ECB policy meeting next week (Oct 26).  USDCNH steady.

 

GBP/USD - British Pound

Sterling saw selling overnight on the US tax reform headlines as well, flushing out stops below 1.31, but the market has recovered smartly on positive Brexit comments from the EU’s Tusk and GBP cross buying (EURGBP rejects 0.9000 again and GBPJPY breaks back above the 148.60s).  It’s been a rough week for GBPUSD technicals considering last week’s progress on the charts.  We’re now back in a range unfortunately with support just below 1.31 and resistance in the 1.3240s.      

Market Analysis Charts

USD/CAD Chart

EUR/USD Chart

EUR/CAD Chart

GBP/USD Chart


About the Author

Erik Bregar

Erik Bregar - Trader


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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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