Weak oil prices leading USDCAD higher this morning. BoC’s Poloz to speak at 3:30pmET.

Summary

• USDCAD: Dollar/CAD continues its range trade this morning as traders await a speech from the Bank of Canada Governor Poloz before the House of Commons Finance Committee at 3:30pmET today.  We saw some broad USD buying in overnight trade, and it appears to be EUR driven after Italy reported stagnant GDP growth for Q3.  December crude oil continues to back off the $67 handle despite a “risk-on” tone to global equities following comments from Trump predicting a “great deal” with China.  The CAD crosses, EURCAD and GBPCAD, have some weight to them this morning as well.  We think the upward sloping trend-line level in the 1.3110s will be the pivot for price action today.  Trade above (as the market is attempting to do now) and we could head towards resistance at 1.3150.  Trade below and we could leak lower to the 1.3070s.  A firm close above the 1.3150s would be open the door to the 1.32s in our opinion.

• EURUSD: Euro/dollar has given up its attempt to bounce so far this week after Italy reported 0% QoQ growth in Q3 earlier today (versus expectations of +0.1%).  Italian bonds have given back yesterday’s gains and then some.  The BTP/Bund spread has widened back over +300bp again, and EURUSD has pushed below the 1.1370-80 chop zone from yesterday.  Weaker than expected Eurozone GDP data for Q3 is also weighing on sentiment, with those figures coming in at +0.2% vs. +0.4%.  The German unemployment change came in slightly less than expected.  USDCNH tried to push higher today after the PBOC fixed USDCNY at another marginal 10yr high, but the 6.9770s level from yesterday is still capping.  The next support level in EURUSD is the 1.1320s.  We think EURUSD might stage a recovery attempt here as almost 2.5blnEUR in options expire at 1.1385-1.1410 this morning.

• GBPUSD: Sterling continues to suffer, with today’s woes coming from a break of the 1.2780s chart support level.  Some buyers stepped in at the next trend-line support level (1.2760s), but this level has just given way too.  We think GBPUSD traders might attempt a bounce here as well, but we’d need to see EURUSD move higher and the EURGBP cross recede back below the 0.8905 area.  Theresa May had to squash rumors today of preparations for a new general election.  We also got some weak UK CBI retail sales data (which is not normally a market mover), but doesn’t help GBP sentiment here.

• AUDUSD: The Aussie is leading the G7 FX space higher today after stronger than expected Australian Building Permit data, positive comments from the RBA on the state of Australian banks, and Trump’s more positive comments on US/China trade front all combined to boost overall “risk” sentiment for the trade-sensitive currency.  AUDUSD is trading once again back above support in the 0.7080s, and is giving the entrenched fund short position something to think about here.  December copper is hanging on to the 2.70s for dear life and EURUSD weakness has been a drag throughout European trade today, which means it might be a tug of war here at the 0.7100 level.  We feel a close above this level will prompt some short covering.  Australia reports Q3 CPI tonight at 8:30pmET and the expectation is for +0.4% QoQ and +1.9% YoY.

• USDJPY: Dollar/yen continues its rally again today, after yesterday’s “risk-on” bounce vaulted the market back above the key 112.30 level.  Traders largely ignored yesterday’s late day plunge in US tech stocks (which is significant we feel), and we think it was the impressive defense of the 112.30s to the downside which sowed the seeds for today’s rally.  The BOJ will announce its latest decision on monetary policy tonight, but traders are not expecting any material changes to the Japanese central bank’s dovish outlook.  We think 113.00-113.10 will likely cap the trade ahead of the meeting tonight.

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

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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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