No change in monetary policy announced by the ECB. Press conference at 8:30amET. USDCAD soft after negative NY close.

Summary

• USDCAD:Dollar/CAD is entering NY trading this morning with a soft tone after a negative close yesterday.  A test of 1.2895 occurred (the lower bound of the 1.2895-1.2925 chart resistance zone) but ultimately failed as US yields stagnated around 3% and crude oil found its bearings after the DOE numbers.  USDCAD then pulled back further and closed well below the important 1.2840-1.2875 support zone we mentioned yesterday.  This, along with another failed attempt higher during early European trade today and US yields trading back below 3%, explains the soft tone this morning as NY trading gets underway.  The next support level is 1.2800-1.2810.

• EURUSD: All eyes are on the ECB this morning as the central bank announces its latest decision on monetary policy.  EURUSD is hanging in there, buoyed by softer US yields and a massive option expiry at the 1.2200 strike today (5bln EUR+) post ECB meeting.  Chart support lies at 1.2155-60, and then the next support level is all the way down in the 1.2080s.  Chart resistance is 1.2195-1.2200, then 1.2225, then the 1.2280s.  The ECB has just announced no change to interest rates and its asset purchase program of 30bln EUR per month until September 2018, and EURUSD is not reacting much at all because this is really not surprising.  The focus will now turn to Mario Draghi’s press conference at 8:30amET to see if the ECB President will say anything more dovish or hawkish than what’s in the press release.  It will be interesting to see how the ECB President talks about recent weakness in European economic data and trade tensions.  We think traders should also be prepared for a “sell the rumour, buy the fact” trading scenario in the event Draghi doesn’t deviate from the script.

• GBPUSD: Sterling looks like it had a bit of stop hunt in early European trade this morning, after a lackluster NY close.  The market saw a swift move lower around the 4am hour without any headlines, and traders then bought the market right back up once we tested trend-line support in the 1.3890s.  We have a feeling this could of been due to month end flows in EURGBP (which is not uncommon).  Some downward sloping trend-line resistance in the 1.3960s is capping trade now, and there is more resistance above: 1.3990, then 1.4010-15.  We think sterling has a chance to bottom today near-term if the market can close above the 1.3990.

• AUDUSD:The Aussie is trading with a neutral tone this morning; basically following EURUSD.  The chart technicals are still negative with the next meaningful support level more than 60pts lower from here.  Copper is off 1% this morning but continues to hold the 3.09s.  We think AUDUSD continues to follow EURUSD here in the absence of Australian specific headlines.  A rally back above the 0.7620s is needed to repair the daily chart.

• USDJPY:Dollar/yen has had a quiet overnight session and is selling off a bit more now as US 10yr yields trade back below 3%.  Chart support lies at 109.15-20, then 108.90, then the 108.70s.  The BOJ meets late tonight/early tomorrow morning and will announce its latest decision on Japanese monetary policy.

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Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

EUR/CAD Daily Chart

GBP/CAD Daily Chart

EUR/USD Daily Chart

GBP/USD Daily Chart

AUD/USD Daily Chart

USD/JPY Daily Chart

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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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