EUR and NZD Under Pressure Post Elections

Summary

• EUR and NZD weaker to start week as new governing coalitions must form in Germany and New Zealand after weekend elections.  Germany’s far right AFD scores 12%.  NZD process could take another 3 weeks.  German IFO comes in light as well.

• Friday’s COT report: GBP shorts covered big time post BOE, EUR shorts increased position as the market faded 1.21s, CAD longs built during the post BOC range trade and Lane’s dip last Monday, JPY shorts took profit as the market continued to make new lows.  Aggregate USD short position still largest since 2013.

Currency Calendar

Bank holidays and impactful report releases for select countries.

By The Numbers: Daily FX Snapshot

USD/CAD - Canadian Dollar

Not much to talk about with CAD this morning as it’s been a very quiet start to the week.  Barclays out with their trade of the week: Long USDCAD through options into Poloz speech on Wed, looking for the 1.25s.  They’re expecting a more restrained tone (less hawkish) like the Lane speech last week.  Technically, the market is looking stronger (with Wednesday’s FOMC blast through the 1.2340s and Thursday’s successful test of the 1.2260s).  EURCAD selling is a drag, but shouldn’t do much damage so long as the cross can hold support in the 1.4640s.  Path of least resistance with the bulls this morning as EUR selling is giving the broader USD a bid tone.

EUR/USD - European Central Bank Euro

The Euro is carving out new session lows as traders now have their excuse to continue selling EURs post FOMC reversal.  Crossing selling against GBP and JPY is not helping the cause this morning either, but both EURGBP and EURJPY seem to be finding a bid here.  Technically, the market is now searching for support, with 1.1861(FOMC low) and 1.1838 (Sep 14 low) in focus, but as we mentioned last Thursday, there’s not much in the way of strong support until the high 1.16s-low 1.17s.  Traders will also be watching the wires for anything from Draghi this morning.

GBP/CAD - British Pound

Sterling has had a bit of a volatile session so far but it’s still trading within Friday’s range.  EURGBP cross selling has been lending support.  Theresa’s May speech on Friday failed to excite markets (we gave back the gains made from her remarks on Thursday).  We now sit above the support level mentioned a couple times last week, the 1.3460s.  The pound has some headline risk later in the week with the BOE’s Carney expected to speak twice and UK GDP on Thursday.  GBPCAD has now failed numerous times to make ground in the 1.67s and is looking offered to start the week.  Remember it has rallied almost 700 pts in two weeks!

NZD/USD - New Zealand Dollar

Kiwi traders are selling today because this weekend’s election results came in weaker than expected for PM Bill English.  While he received the most votes, he did not win a majority and will need to get a coalition before a new government can be formed.  This new event risk has seen NZDUSD trade back into that all too familiar 0.7200-0.7300 range.  On the weekly chart, the news is a little more bearish now.  The spike we got on the election polls last week (up to 0.7350) has been completely reversed and we could be possibly be looking at lower prices here because, technically, the market has not followed through post-election.

Market Analysis Charts

EUR/USD Chart

GBP/USD Chart

NZD/USD Chart

Charts: TWS Workstation

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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