Volatile overnight session sees USD trading mixed into NY trade

Summary

• USDCAD: Traders managed to push USDCAD above the 1.3230s in yesterday’s trade, and this was made possible when Mario Draghi ushered some dovish comments that drove EURUSD off its intra-day highs.  An overnight headline titled “TRUMP, XI AGREED TO REACH MUTUALLY BENEFICIAL AGREEMENTS: GENG – BBG” saw the S&Ps rocket 20pts higher and the USD plunge lower, but this was quickly erased after China’s foreign secretary Geng clarified that this referred to comments with Trump during a phone call on Nov 1st.  In the case of USDCAD, these headlines saw the market test the 1.3230s but then bounce.  Today’s calendar features a speech from Fed vice chair Clarida at 8:30amET titled “Data Dependence and US Monetary Policy” and then we’ll have three Fed members (Bostic, Evans and George) speaking this afternoon at 2:30pmET.  The CFTC was out with its weekly futures positioning report late yesterday, and it showed position accumulation across the board from both the speculative funds and corporate hedgers during the week ending Nov 20th.  The net USD long (CAD short) fund position grew as the result of longs adding more than shorts, but the position is still near the lowest it has been all year.  January crude oil continues to trade steady as traders gear up for this week’s inventory data.  We think USDCAD could extend to the 1.3280s today, but the current choppy tones of the other major currency pairs might make this difficult.  The initial comments from Clarida are quite hawkish.  Tune in @EBCTradeDesk for more.

   

  *Gradual Rate Hikes Appropriate As Data Shows Way To Neutral Policy Stance

  *Risks Now More Symmetric, Less Skewed To Downside Than In Past

  *Would Back More Rate Hikes Than Expected If Inflation Surprised To Upside

• EURUSD: Euro/dollar has had a whippy overnight session.  After a brief bounce in Asian trade, GBPUSD selling drove the market lower in Europe.  The Trump/Xi headlines saw us spike higher but then recede.  And now some broad USD selling flows are emerging coming into NY trade.  There hasn’t been much in the way of news out of Italy today, other than talk about an Italian budget debate in Italy’s lower house on Dec 3rd, and so the BTP/Bund spread trades steady at +290bp.  The market has some work to do here technically after some dovish comments from Mario Draghi affirmed the near term down trend for EURUSD yesterday.  This morning’s move back above the 1.1320s is supportive, but the shorts should still breathe easy under the 1.1370s.  The funds cut longs and added to short positions during the week ending Nov 20th, bring their 8-week net short EUR (long USD) position back to its recent highs.

• GBPUSD: Sterling saw some swift selling in overnight trade as the Brexit headlines turn negative once again.  The UK Parliament will now vote on Theresa May’s EU-approved Brexit draft on Dec 11th, but the headlines today forecast no chance of it passing.  GBPUSD broke the chart support zone of 1.2790-1.2810 in early European trade, and then traders made a bee-line for the next support level in the 1.2740-50s.  This level appears to be holding for now, but the fund shorts still appear skittish.  Any positive surprise (like we saw last Thursday) could see this market shoot higher once again.  We think this helps explains last week’s further reduction in the net short GBP (long USD) fund position (as of Nov 20th).  The net short position is now back down to July levels.

• AUDUSD: The Aussie has had a very volatile past 24hrs of trade.  Yesterday’s overnight gains completely evaporated in NY trade, and the charts recorded a bearish, inverted hammer close on the daily.  Some EURUSD buying in Asia and then the Trump/Xi headlines came to rescue however, allowing AUDUSD to form a higher base back above chart support in the 0.7230s.  It’s from this base now that the Aussie has rallied higher still, and we’ve just tested trend-line resistance in the 0.7250s.

• USDJPY: Dollar/yen isn't doing much today, but it continues to hold yesterday’s impressive gains that came initially from global equity buying, but then from broad EURUSD weakness.  The 113.50-60 region is now acting as chart support, despite the S&Ps drifting back down to their overnight lows.  We think the market might stall here a little bit, as over 1.4blnUSD in options expire at the 113.50 strike tomorrow.  Both longs and shorts trimmed positions during the week ending Nov 20th, leaving the fund net long USD (short JPY) position more or less unchanged, close to their October highs.

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

Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

January Crude Oil Daily Chart

EUR/USD Daily Chart

EUR/USD Hourly Chart

USD/CNH Hourly Chart

GBP/USD Daily Chart

GBP/USD Hourly Chart

EUR/GBP Daily Chart

AUD/USD Daily Chart

AUD/USD Hourly Chart

December Copper Daily Chart

USD/JPY Daily Chart

USD/JPY Hourly Chart

December S&P 500 Daily 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.

Interested in creating a custom foreign exchange trading plan? Contact Us or call EBC's trading desk directly at 1-888-729-9716.