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Barnier knocking around $GBP traders. $EUR looking heavy. US CPI/Retail Sales 8:30am.

CXI October 13th, 2017

Summary

  • A spectacular finish for sterling yesterday sees GBP buying spill over into European trading overnight.  The EU’s Barnier, after telling the markets Brexit talks were at an impasse, tells a German newspaper that the EU may offer the UK a two-year transition period.  

  • GBP looking better on the charts across the board.  German government spokesman Siebert is dampening the mood just now with comments about it being too early to discuss Brexit transition ideas.

  • JPY sees some demand overnight, but it’s likely stop-loss related.  USDJPY and EURJPY gave up some support levels on the charts.  Remember too we have a market that is increasingly positioned short and has not seen any follow through this week because of option expiries.

  • Not much to talk about in Euro over the last 24hrs but chart technicals are starting to weigh.  Watch EURJPY and EURGBP.

  • AUD continues to enjoy a bit of a bid for a change.  Higher iron ore and copper prices being talked about as supportive factors.  Technicals continue to improve.  NZD bid helping too.

  • CAD is steady after lackluster trade yesterday.  Hearing talk of another $900mln in expiries today between 1.2450 and 1.2465, so we could be going nowhere fast.  GBPCAD technicals much better.  EURCAD fighting to hold 1.4750 again today.  BOC Business Outlook survey out Monday.

  • Traders hoping today’s release of US CPI and Sep Retail Sales can shake things up a bit.  Aside from Brexit headlines knocking around the GBP, it’s been an otherwise quiet week.  Markets expecting +2.3% YOY for CPI and+1.7% for Retail Sales.

  • CME open interest changes 10/12: AUD +309, GBP +394, CAD -2010, EUR -806, JPY +2489.

Currency Calendar

Date Releases / Holiday Entity
October 13, 2017 Retail Sales (Sep) USA
October 13, 2017 Consumer Price Index (YoY) (Sep) USA
October 13, 2017 Consumer Price Index Ex Food & Energy (Sep) USA
October 13, 2017 Consumer Price Index (MoM) (Sep) USA

Bank holidays and impactful report releases for select countries.

By The Numbers: Daily FX Snapshot

USD/CAD - Canadian Dollar

Dollar/CAD continues to wonder around with a weak undertone.  Last week’s technical failure after the dual employment reports and the broad weakness in USD across the board this week are the only factors we can point to.  We enter NY trading today slightly better with the 1.2450-60 level holding and cross flows helping.  Some traders are giving up (note over 2k in position liquidation yesterday in futures).  Option expiries today (noted above) could make this market a little sticky.  A rally above the 1.2490s invites the low 1.25s again, near-term resistance 1.2530s.  A break of yesterday’s low could mean a test of the low 1.24s and a resumption of the longer-term USD downtrend.  We are very much at a crossroad in USDCAD and need a catalyst to break out of the 1.2450-1.2550 range.  Bank of Canada meets again Oct 25.

 

EUR/USD - European Central Bank Euro

The Euro struggled yesterday in quiet trade, and it continues to trade lower as we enter NY trading.  The bearish reversal on the EURGBP is not helping, nor is EURJPY (since the 132.70s level gave way) .  US/GE yield spreads are wider today (doesn’t help EUR) and there’s talk of a larger and more ominous “head & shoulders” top formation making the rounds (see chart).  Remember, longs called it right adding to positions over the last week and half.  US CPI and Retail sales next up.  Long positions have a lot more to think about this morning.  Perhaps some profit taking ahead of the weekend?    

 

GBP/USD - British Pound

Sterling enters NY trading today back within the hourly rising channel that started to form earlier this week on the intraday charts.  The Barnier volatility from yesterday now looks like a shake out of recent long positions (open interest up 8k during this week’s rally).  All the crosses scored daily reversals bullish the GBP yesterday as well (GBPJPY, EURGBP, GBPCAD).  Shorts need to be on guard now as the market tests weekly resistance in the low 1.3320s (a strong break above would repair the weekly chart as we mentioned earlier this week).  Reuters reporting stops getting hit on the move through 1.33 earlier but we’re easing off now on the Sibert comments.  Dealing with Brexit headlines continue to make trading sterling challenging at the moment.  Tell that to all the short positions that covered in September only to see the market fall apart into October.  We’ll get an updated read later today from the CFTC as to positioning going into October 10th.   

Market Analysis Charts

USD/CAD Chart

EUR/USD Chart

GBP/USD Chart

 

Charts: TWS Workstation


About the Author

Erik Bregar

Erik Bregar - Trader


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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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