Yuan and gold weakness leading broad USD strength this morning. BoE's Haskel out with some dovish comments. Quiet North American calendar today.

Summary

• USDCAD: Dollar/CAD is drifting higher again this morning on the back of broad USD strength today.  With the lack of headlines so far today, one could argue part of it is some overhang of the broad “risk off” sentiment we saw in NY trading yesterday, part of it is gold prices collapsing to new swing lows, and part of it is Chinese yuan related (USDCNH trading at a new swing high in the 6.58s).   With this, USDCAD has managed to regain the 1.3290-1.3300 level, which it struggled with yesterday after the bearish outside day logged on Friday.  Negative momentum has stalled for the time being, which means an upward drift to the 1.3330s is possible, but continue to watch the upward sloping trend-line level at 1.3305 (blue line) as a move back below would be negative.  August crude oil is trading more or less flat today after consolidating Friday’s OPEC driven gains.  We think the chart structure for crude has improved considerably since OPEC’s clever communiqué last week where the cartel focused on supply cut compliance rather than an output boost of actual barrels per day.  We think a rally above the $69 level will weigh on USDCAD.

• EURUSD: Euro/dollar is trading softer this morning on not much news, but it’s been hard for traders to ignore the continued rally in USDCNH (depreciation in Chinese yuan).  EURUSD went on the defensive as soon as USDCNH broke above 6.5550 in Asian trade last night and the pair now sits back within yesterday’s NY range.  We expect range-bound to higher trade today in EURUSD with chart support at 1.1650 and resistance at 1.1690-1.1700.

• GBPUSD: Sterling is weaker this morning too, following EURUSD lower in the European AM and at the same time firmly rejecting chart resistance in the 1.3290s.  We got some mixed comments from BoE speakers McCafferty and Haskel earlier as well (McCafferty was hawkish as usual but Haskel was quite dovish), and seeing as Haskel replaces McCafferty as a voting member at the BoE later this year, GBP traders are not liking the sentiment and have pushed GBPUSD through chart support in the 1.3230s around the 5am hour.  More here: https://www.reuters.com/article/us-britain-boe-haskel/new-boe-rate-setter-haskel-strikes-cautious-note-sterling-falls-idUSKBN1JM1CE.  The level has been regained however as NY trading gets underway and so we see a range here today (1.3230-1.3270), with a rather large option expiry (1blnGBP) at 1.3250 being the anchor for price early on.  EURGBP has regained the 88 handle into months end, which may weigh on GBP near term.

• AUDUSD: Aussie/dollar continues to leak lower amid the broad “risk-off” sentiment in global equities, copper prices and now gold prices.  This will give the new shorts at CME confidence but we would caution momentum could still swing higher so long as AUDUSD stays above the 0.7370s.

• USDJPY:Dollar/yen saw a flash spike higher yesterday following comments from trade advisor Peter Navarro on CNBC (more here: https://www.cnbc.com/2018/06/25/navarro-no-plans-to-impose-investment-restrictions-on-china-and-other.html), but the move was very isolated to USDJPY and therefore likely stop driven.  USDJPY quickly cooled down back below chart resistance in the 109.80s and we’ve been trading in a range-bound pattern ever since.  Support today is 109.40-50.  Resistance is 109.85.  US 10-yr yields are inching back towards yesterday’s lows at this hour.

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Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

August Crude Oil Daily

EUR/USD Daily Chart

EUR/USD Hourly Chart

USD/CNH Daily Chart

GBP/USD Daily Chart

GBP/USD Hourly Chart

AUD/USD Daily Chart

AUD/USD Hourly Chart

August Gold 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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