May Saves The Day. GBP Bid Returns, EUR and CAD Follow Suit.

Summary

• UK’s Theresa May saves the pound yesterday with her comment that the UK would be willing to pay 20bln Euro (Brexit negotiations with Europe).  She speaks in Florence today at 9:15amET.

• The continued incivility between Trump and Kim Jung Ung and the comment from North Korea’s foreign minister about threatening another nuclear test finally gives the JPY and precious metals a bid.  We also have a weekend ahead with plenty of event risk.

• Politics center stage this weekend as Germany and New Zealand head to the polls.  No upsets to the ruling parties expected.  Abe from Japan expected to announce upcoming election for Oct 22.

• Oil market is watching for any developments today from OPEC’s Joint Monitoring Committee (compliance).  Remember it’s not a ministerial meeting where a decision is made about extending output cuts.

• Canadian CPI on deck for 8:30amET.  Market expecting +1.5% yoy.

Currency Calendar

Bank holidays and impactful report releases for select countries.

By The Numbers: Daily FX Snapshot

USD/CAD - Canadian Dollar

After a range bound session yesterday, the market has broken hourly support on broad based USD weakness in European trading.  Canadian CPI very much the focus this morning.  Traders watching crude oil too with the potential OPEC headlines, but the correlation between the two has been very low lately.  Not much in the way of support here intra-day.  The post FOMC low is 1.2196.  Market would need to regain 1.2325 to see upward momentum.  CAD futures traders add over 2300 contracts to their positions yesterday.

EUR/USD - European Central Bank Euro

The Euro has erased its post FOMC losses as well in the wake of the GBP rally in the last 24hrs, completely killing the negative momentum we entered NY trading with yesterday.  We now sit in the all too familiar two week range of the 1.1930s-1.2080s ahead of the German elections this weekend. 

GBP/CAD - British Pound

It was all about the pound yesterday and May’s comment.  After testing hourly support in the 1.3460s during early NY trading yesterday, the market roared higher and practically erased the technical damage from the FOMC announcement.  We now sit off the European highs, but in a technically better position as we’re still above the 1.3540s.  A strong daily close above 1.3600 would be the recipe for a resumption of the trend higher.  GBP futures traders add 1300+ contracts yesterday.  Remember, Theresa May speaks again at 9:15amET.

USD/JPY - Japanese Yen

After holding the highs yesterday in NY trading, the market caved in European trading on North Korea headlines, but it has held the 111.70s, an important now post-FOMC support level.  Buyers still firmly in control here on the charts.   JPY futures traders add a whopping 8700 contracts yesterday, probably further extending their short position.

Market Analysis Charts

USD/CAD Chart

GBP/USD Chart

USD/JPY 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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