$AUD breaks lower. $EUR & $GBP rangebound. $JPY at key support. $CAD traders await CPI

Summary

• ECONOMIC DATA HIGHLIGHTS IN THE LAST 24HRS: Cdn Manufacturing Sales come in +0.5%.  Philly Fed survey comes in a tad light at 22.7.  US Industrial Production beats estimates, coming in at +0.9% MoM.  Upcoming for the NY session today: Canadian CPI YoY for October, expected +1.4%.  US Housing Starts as well, expected 1190k or +5.6% MoM.

• CME OPEN INTEREST CHANGES 11/16: AUD -2797, GBP +1555, CAD -1970, EUR +48, JPY -5152

• AUDUSD: After hugging weekly support all day yesterday and into Asian trading last night, the Aussie has given up and broken down in European trade today.  We now sit at some light support in the 0.7530-40 area.  Next support is 0.7500-0.7515 (the 76.4% Fibo retrace of the May-Sep rally).  AUDUSD continues to look weak technically with near term resistance well above current levels (0.7620s).

• USDCAD: It was a choppy, range-bound session for USDCAD yesterday but buyers were still present.  In overnight trade, the 1.2720 support level was tested for a third time this week from the upside and the market bounced higher yet again.  The focus for today’s session will be Canadian October CPI.  A weaker than expected print would not be surprising given the Bank of Canada’s recent dovishness with regard to its forecasts (USDCAD supportive), whereas a stronger than expected reading would be a little more surprising and USDCAD negative (would cause traders to then look to Stephen Poloz for reaction).  Support today comes in at 1.2710-20.  Resistance 1.2770, then 1.2800.  Expect big follow through if break below 1.2710 or break above 1.2800 as the support/resistance levels thin out.  EURCAD not offering up any clues today as it sits in a bit of a range (1.5025-1.5050).   GBPCAD was highly earlier, now lower, but the movement has been all GBP driven.

• EURUSD: The Euro did practically nothing yesterday as expected, and it looks like it’s going to be more of the same today as the charts suggest continued consolidation the we have more large option expiries (+1.5bln EUR notional between 1.1820-1.1850) to deal with.  Near-term resistance 1.1820s.  Support 1.1770s, then 1.1750s.  EURGBP has finally found some support after a good two day run of profit taking.  If the cross can hold the 0.8920s, that should be supportive EURUSD.  EURJPY is struggling a bit however not to erase all the progress it made on the charts on Tuesday.  A strong close today back above 133 would be EURUSD supportive.

• GBPUSD: After more range-bound trade yesterday, sterling broke higher in overnight trade on not much news at all and has since collapsed right back down to where it started, suggesting this was a good old fashioned stop run.  Unfortunately, Brexit and UK political headlines continue to be the focus for this market, leaving traders fragile and unwilling to commit one way or the other, so we continue to respect the technicals of the range trade until it stops working.  We note today’s daily candle is not shaping up to be a good one as it currently stands (grave-stone doji).  The pattern suggests a near term reversal lower and further weakness as the week wraps up.

• USDJPY: Dollar/yen is weaker from NY closing levels, taking its cue overnight from some selling in the Nikkei.  The German DAX, S&P futures and US yields are holding up very well though after yesterday’s gains and so we think USDJPY has correlative support here as we enter NY trading.  Market technicals, however, have deteriorated further on this overnight move.  We’re now testing key support in the 112.50s again and this level needs to hold to stem further selling.  JPY future traders have been liquidating positions for the last two days.  Resistance today 112.90-113.

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About the Author

Erik Bregar - Trader

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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