Month end GBP flows, EURUSD and USDCNH technicals driving overnight USDCAD trade. EURCAD & GBPCAD showing technical weakness. Another quiet session ahead.

Summary

• USDCAD: It turned out to be a pretty lackluster day for USDCAD yesterday as the early move higher through 1.2890 fizzled out when the market reached resistance at 1.2925.  Broad USD selling then picked up steam for rest of the North American session, pressuring USDCAD to close right back at support in the 1.2870s.  This wasn’t a great closing pattern and so this gave traders an excuse to push the market lower in the Asian session overnight.  Trend-line support in the 1.2820s was tested and held as, conveniently, EURUSD hit resistance and USDCNH found support.  We then saw a big wave of GBP selling that some are attributing to month-end EURGBP demand from German sources.  USDCNH made one more attempt lower, immediately spiked higher (bullish intra-day pattern) and then took off from there, and EURUSD did the exact opposite.  With that, Europe has been buying the USD broadly since 4am and USDCAD has been benefitting.  The market is now back above 1.2870 as the North American session begins, which is better from a technical perspective, but we’re back at familiar levels with 1.2890 and 1.2925 as near-term resistance.  If we look at the CAD crosses, both charts are struggling today after negative closing patterns yesterday  (EURCAD rejects mid-channel resistance at 1.6020 and GBPCAD dramatically reverses after retesting recent highs at 1.8375).  These cross flows do not seem to be affecting USDCAD just yet as the broad USD buying theme at this hour is dominating, but we’d be mindful of the technical development.  Today’s North American session will be another quiet one with just US Consumer Confidence at 9am and the Fed’s Bostic speaking at 10am in Atlanta.  There’s a large option expiry (1.3bln) at 1.2850 for tomorrow that might keep the market heavy should the broad USD buying abate.  Canadian dollar futures traders added just 196 contracts in new positions yesterday.

   

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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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