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US yields higher again, helps #USDJPY. $EUR sagging. $GBP mixed. #USDCAD weak on technicals.

CXI October 18th, 2017

Summary

  • Rising US yields are the feature again overnight, leading to a broad USD bid.  USDJPY breaks out higher.

  • Sterling all over the place after the UK releases employment figures.

  • USDCAD weaker on technicals.  Option expiry in play too.

  • Quiet calendar today: Fed’s Beige book at 2pmET.

  • CME open interest changes 10/17: AUD -1944, GBP +4299, CAD +2086, EUR -868, JPY +482

Currency Calendar

Date Releases / Holiday Entity
October 18, 2017 ECB President Draghi speaks in Frankfurt EUR

Bank holidays and impactful report releases for select countries.

By The Numbers: Daily FX Snapshot

USD/CAD - Canadian Dollar

Negative NAFTA headlines turned out to be the talk of the trade yesterday, but USDCAD failed again on the charts as it approached the 1.26 level.  Talk of a $900mln option expiry at the 1.2595 level (for today) made the rounds as well, so perhaps we saw some selling as option traders (call sellers) defended their positions.  Either way, market looks weaker now technically as we enter NY trading today.  CAD futures traders added over 2k contracts yesterday (likely new long CAD/short USD positions).  Market is trying to trade back into the rising hourly channel but it is failing as we go to press.  We’re calling it range bound today with cross flows (EURCAD and GBPCAD) a neutral to slightly negative factor.  All bets are off if spot loses the 1.2490s.

 

EUR/USD - European Central Bank Euro

The Euro continues to be pressured lower by rising US yields and weak technicals.  US 10s over German 10s now +195bp (last time we were this wide, EURUSD was in the 1.12s).  Market chatter is that longs continue to hang in there (remember too they didn’t liquidate even as we dipped below 1.17 earlier this month).  Negligible changes in CME open interest over the last 2 days confirm the theory.  Reuters out with an interesting piece yesterday about Citiabank’s corporate clients buying EUR heavily over the last week.  Support today lies in the 1.1720-30 area (bottom of hourly channel and 76.4% Fibo of the recent rally to 1.1880).  Watch out below.  Trend is lower near term unless the market can trade back above the 1.1790s.  The EURJPY rally is mildly supporting, but it’s been JPY driven.

 

GBP/USD - British Pound

There was something for both the bulls and bears in the UK’s employment report released early this morning (headline job creation lower than expected, headline wages higher than expected, real wages lower because of inflation).  Market has been a mess, tripping stops above 1.32 and below 1.3150.  GBPUSD now back to where it was before the number hit, trading with a slightly positive bias but a range trade is likely for NY trading today given the shakeout on both ends earlier.  Support rests at the hourly channel low and the 61.8% Fibo of last week’s rally (1.3140s).  Resistance 1.3190-1.3210. UK Retail sales early tomorrow morning (+2.2%  expected).  Watch also for potential Brexit headlines from Theresa May as the European Commission Summit kicks off tomorrow.

 

USD/JPY - Japanese Yen

Dollar/yen is the star performer overnight as US yields resume their trend higher.  Continued selling in precious metals (given strong correlations) is a supportive factor too.  Market chatter is that near-term shorts are covering but our view is that traders are continuing to add to JPY short positions (USD longs) on any dips they can get.  The 113 level is now back on the radar.  Support in the 112.60s.  EURJPY trading back above the 132.40s is also helping.  

Market Analysis Charts

USD/CAD Chart

EUR/USD Chart

GBP/USD Chart

USD/JPY Chart


About the Author

Erik Bregar

Erik Bregar - Trader


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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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