US yields and $USD weaker overnight as Trump reveals short-list for next Fed chair $CAD $EUR $JPY

Summary

• Asia offers up USD across the board as Trump reveals his short list of Fed chair candidates.  Yellen not looking so hot (Jeffrey Gundlach says no chance Trump wants Yellen).  While betting markets (PredictIt) show Kevin Warsh out front, the more moderate Jerome Powell got a big jump on positive comments from Treasury secretary Mnuchin.  US 10yr yields have been trending weaker ever since.

• AUDUSD the clear winner overnight with the market breaking back above 0.7850.  EURUSD follows suit as the US/GE yield spread narrows, but yesterday’s NY high still resisting.  Negative Euro-zone retail sales and the ongoing Catalonia drama a drag.  The selling in GBPUSD finally stops after six straight days of position liquidation.  Light EURGBP resistance in the 0.8880s and better than expected UK service PMI helping.  USDJPY predictably lower with lower US yields, but finding support as longs continuing to accumulate (JPY open interest now up five days in a row, +40k contracts).  USDCAD drifts lower on not much else than the broader USD weakness.  The BOC’s Leduc comments yesterday were slightly dovish.  TD likes selling USDCAD closer to 1.2650.

• US ADP jobs figures on deck for 8:15amET this morning (market expecting +140k).  ISM Services at 10am.  Oil inventories 10:30am (APIs last night reported a draw for crude and a build for distillates).  Yellen gives a speech at a community banking event at 3pm.  Aussie trade figures and retail sales tonight at 8pm.

• CME open interest changes 10/3: AUD +515, GBP -2064, CAD -319, EUR +1672, JPY +9227

Currency Calendar

Bank holidays and impactful report releases for select countries.

By The Numbers: Daily FX Snapshot

USD/CAD - Canadian Dollar

Dollar/CAD continues to struggle with key resistance in the 1.2520-30s.  Some traders appear to be giving up as open interest is down for two straight days.  Friday’s Cdn and US employment reports will be the key event risk of the week, but option markets are not bidding up premium all that much (1 week ATM straddle just 93 pts, and implied volatility (6.7%) well below month and week-ago levels).  Market sitting at light support right now (1.2460s).  Better support at 1.2410-20.  Market needs to regain the 1.25 handle to resume upward momentum.  While GBPCAD continues to be a drag, recent EURCAD buying looks like it could support USDCAD.

EUR/USD - European Central Bank Euro

The EUR has had a lot of headline risk to deal with today, but longs appear to be hanging in there.  Support 1.1740s.  Resistance in 1.1780s being tested as we speak.  There’s talk again on the wires of huge option expiries, this time post NFP on Friday ($3.5bln from 1.1700-50).  A rally back into the 1.18s would be technically positive on the charts.

USD/JPY - Japanese Yen

Fresh longs are getting tested today as USDJPY dips below yesterday’s NY low (112.70).  Gold now up $9, silver up 1.4%, US 10yr futures on pace to test 125’20s (all a little bit bullish for JPY at the moment).  The four recent faliures to rally above 113 on the daily chart appear to weighing on longs as well.  Expect range-bound to lower action today unless the market can regain the 112.80s.

Market Analysis Charts

USD/CAD Chart

EUR/USD Chart

USD/JPY Chart

Charts: TWS Workstation

About the Author

Erik Bregar - Trader

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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