USDCAD traders brace for Canadian Retail Sales data

Summary

• USDCAD: Dollar/CAD is trading back on the defensive this morning as oil prices recover most of their losses from yesterday.  Trend-line chart resistance in the 1.3350-60s capped prices in late NY/early Asian trade last night, and it’s been a slow trickle lower ever since.  Chart support in the 1.3310-20s (yesterday’s key pivot level) is being threatened now, but we’ll have to wait until the Canadian Retail Sales number comes out at 8:30amET to confirm momentum to the downside.  Traders are expecting -0.6% MoM for November and -0.4% MoM ax autos.  A better than expected number could spur USDCAD selling into the 1.3270-80s, whereas weaker than expected figures will likely see the market retest the Asian session high.

• EURUSD: Euro/dollar continues to hang on, after yesterday’s brief downside attempt below the 1.1350s was thwarted by GBPUSD buying into the London close.  Today’s price action is lacking any upside momentum however as traders have reason to sit on their hands ahead of the ECB meeting tomorrow.  EURJPY buying has been rather prominent today, and we think a breakout in the cross above the 125 level could help EURUSD.  We think the market could edge higher today if support continues to hold.

• GBPUSD: Sterling has been putting the screws to fund short positions over the last 24hrs by regaining the 1.2900-1.2920 level in decisive fashion going into the London close yesterday.  This allowed for follow-through buying into the next chart resistance level, which was the 1.2950s.  After a brief and shallow pull-back in Asian trade overnight, we’ve now resumed higher once again.  The talk of the town today is that the Labor party will support what’s being called the “Cooper amendment”, which will allow UK Parliament to come up with its own Brexit Plan B if Theresa May can’t do it in time.  More here.  Theresa May is arguing today that extending Article 50 (delaying Brexit) won’t solve anything, but markets appears to be looking at this as more reassurance that the UK will do whatever it takes to avoid a “no-deal” Brexit.  This proverbial “can-kicking” has now helped GBPUSD breach the 1.3000 resistance level.  The next stop is 1.3060-70 in our opinion should this momentum continue.

• AUDUSD: It’s been a very quiet 24hrs of trade for the Aussie.  The 0.7120s held yesterday despite a whole lot of red on the equity and copper market charts but, like EURUSD today, there hasn’t been any drive to push higher yet.  The S&Ps have edged back up above the 2630s, and USDCNH is lower to the tune of 0.5% today, both of which should support AUDUSD here.  It could be a matter of wait and see here as well, as Australia reports its December employment report tonight at 7:30pmET.  Traders are expecting +16.5k jobs gained, and an unemployment rate of 5.1%.

• USDJPY: Dollar/yen has regained the 109.60s today, and this comes on the heels of dovish hold on monetary policy from the Bank of Japan overnight.  The BOJ left interest rates and it’s yield curve control targets unchanged, but lowered its core CPI (inflation) forecasts once again for 2019 and 2020.  While this shouldn’t come as a surprise to markets, USDJPY longs are enjoying this fundamental narrative to stay short JPY for the time being.  The US economic calendar will be quiet again today because a number of figures can’t be reported due to the ongoing US government shutdown (now on day 33).  We think USDJPY can inch higher still, should the 109.50-60s hold.

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

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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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