Markets settle into range ahead of the Fed tomorrow

Summary

• USDCAD: Dollar/CAD is inching higher this morning after the market closed NY trading yesterday slightly above trend-line resistance at the 1.2950 level, but there’s not much momentum in the market at this hour.  The broader USD has seen some selling in Europe today, but it’s nothing to write home about either.  November crude oil is bid once again.  We think how the market deals with yesterday’s highs in the 71.50s will be key for momentum today.  The North American calendar is light today with the only real feature being Trump’s speech at the UN today at 10:15amET, followed by a speech from Iran’s Rouhani at 11amET.  Apparently, Trump will have no time for Trudeau.  More here. We think USDCAD struggles for direction here ahead of the Fed meeting tomorrow.

• EURUSD: The gains in euro/dollar evaporated yesterday after traders concluded that Draghi’s inflation comments weren’t all that different from his recent monetary policy rhetoric.  The ECBs chief economist Peter Praet affirmed this today when he spoke earlier.  More here.  EURUSD rallied above the key 1.1760 support level ahead of Praet, saw a swift wave of selling when he spoke, but then quickly recovered back above the level.  This technical strength has allowed the market to tick higher into a NY session that features more speeches: another speech from Praet, one from the ECB’s Coeure, and of course Trump’s speech before the UN.  Italian bonds continue to show enthusiasm for Thursday’s Italian budget announcement, with the BTP/Bund spread trading back down to +234bp.  Tomorrow’s features a plethora of option expiries before the Fed announcement, with over 4blnEUR in options expiring between 1.1700 and 1.1800.  We think EURUSD may now very well coast here until tomorrow afternoon, barring any surprise headlines from the speeches today.

• GBPUSD: Sterling is bid this morning, regaining lost ground after the market rejected chart resistance in the 1.3150s yesterday.  There hasn’t been much in the way of headlines overnight to explain the GBP bounce other than some broad USD selling in London.  Chart resistance (now 1.3160s due to upward sloping nature of the trend-line) is being tested again at this hour.  We think GBPUSD can see further strength on a close above the 1.3160s, but we could also very well go quiet here like EURUSD ahead of the Fed tomorrow.  Futures traders liquidated another 632 contracts during yesterday’s bounce.

• AUDUSD: The Aussie has had a quiet overnight session, ebbing and flowing with copper prices and EURUSD for the most part.  Copper resisted Friday’s highs yesterday, pulled back to support at the 2.80 level early this morning, briefly gave it up, but then quickly regained it during the USD sell wave we saw in Europe.  AUDUSD lost the 0.7250 level amidst all this, but regained it as well and this is giving the market some positive momentum going into NY trade today.  We think AUDUSD could drift higher today.  Next resistance is 0.7280-90.

• USDJPY: Dollar/yen is trading with a muted tone this morning as an overnight attempt to breach the 112.80s has failed so far.  US stock futures are bid though and US 10s have hit 3.11%.  More option expiries loom at the 112.50 strike (almost a daily occurrence lately), with 500mlnUSD going off today and another 1.8blnUSD tomorrow ahead of the Fed.  The BOJ’s Kuroda didn’t offer much of substance for markets when he spoke to business leaders overnight.

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

Market Analysis Charts

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USD/JPY Hourly Chart

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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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