USD broadly weaker but lacking momentum. Commodites leading CAD and AUD. EUR traders watching Italian politics.

Summary

• USDCAD: Dollar/CAD has a neutral to bid tone as we enter North American trading this morning. This follows a thin holiday session yesterday where USDCAD succumbed to higher oil prices and completely reversed Friday’s CPI driven gains.  The economic calendar is light this week, with just the FOMC Minutes on Wednesday and Durable Goods on Friday.  We’ll have some Fed speak as well, including a speech from Powell on Friday. Canadian dollar futures traders trimmed positions in the week ending May 15, but are still net long USD (short CAD) 20k+ contracts for the 8^th week in a row. Yesterday’s sharp reversal lower has hurt upward momentum and so we feel USDCAD likely ranges here for awhile.  Support today lies at 1.2750-60, while resistance is 1.2785-95.

• EURUSD: Euro/dollar is entering North American trading this morning with a constructive tone as the market put in a decent NY close (reversed emerging market related losses yesterday) and bounced higher after a downward test of the 1.1760s (a resistance level it broke above late yesterday).  Continued de-escalation of the trade spat between the US and China (positive comments from Mnuchin yesterday and China reducing import duties on autos), a bounce in Italian bonds (after yesterday’s panicky move lower), and strength in the emerging market FX space today is helping create a “risk on” (sell USD) tone as well.  We think EURUSD consolidates yesterday’s bounce with the 1.1760s supporting and the 1.1830s resisting.  This week’s calendar is very light, with just the German IFO survey on Friday.  EUR futures traders continued to hold on to long positions, despite a move back down to the 1.1850s in the week ending May 15.  Keep an eye out for USDTRY as it continues to surge.  Also watch Italian politics as the new government is making Italian bond traders anxious.

• GBPUSD: Sterling is bid this morning too, following EURUSD for the most part.  We did get some comments earlier from BoE speakers including Mark Carney (inflation report hearing before UK Treasury committee), but they didn’t say anything notable for markets.  The UK reports April CPI and Retail Sales tomorrow, followed by some more BoE speak on Thursday, and finally UK Q1 GDP on Friday.  Pound futures traders at CME marginally trimmed longs and added shorts in the week ending May 15^th.  While we think sterling’s bounce higher today is constructive technically, we feel the key Fibonacci level in the 1.3480s has to be regained before any positive momentum can return in GBPUSD.

• AUDUSD: The Aussie is trading marginally higher this morning, following a rip higher yesterday (much like CAD).  The market’s ability to hold the 75 handle despite selling in EUR yesterday’s proved important and when copper and other commodities took off, it wasn’t long before resistance in the mid 75s gave way.  Downward sloping trend-line resistance at 0.7600 is capping at this hour, and we think this is the key level to watch today.  A close above would prompt further buying into the 0.7620s while a close below will likely invite some weakness back into the 0.7570s.  There’s no notable Australian data points this week, but the RBA’s Lowe is giving a speech in Sydney tomorrow.  Watch copper prices here as the daily chart looks poised to break out.

• USDJPY: Dollar/yen is trading with a soft tone this morning as yesterday’s breakout rally above the 111 figure quickly reversed.  We feel this now invites some profit taking into the mid to high 110s, with the first level of support likely being Sunday’s opening gap at 110.80, then a Fibo support level in the 110.50s.  There’s no notable data out of Japan this week.  Futures traders have flipped back short USD (long JPY), but the net position is very small.  We think USDJPY takes a breather here as US yields cool and the broader USD cool off for a bit.

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

Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

EUR/USD Daily Chart

EUR/USD Hourly Chart

GBP/USD Daily Chart

GBP/USD Hourly Chart

AUD/USD Daily Chart

AUD/USD Hourly Chart

July Copper Daily Chart

USD/JPY Daily Chart

USD/JPY Hourly Chart

Charts: TWS Workspace

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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