USD mixed ahead of data heavy US session. Option traders predict no excitement.
Summary
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USD mixed to higher as markets await data-heavy morning ahead. AUD softer on weaker than expected Australian retail sales. EUR and JPY stuck at familiar levels with large option expiries today. USDCAD recovering a bit from yesterday’s cross sales. GBP steady after yesterday’s plunge lower. USDCNH trending higher overnight. Option traders do not see considerable volatility ahead for today’s session.
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US and Cdn trade and employment figures at 8:30amET. Markets expecting -295bln for the Cdn trade balance, and -43.3bln for the US. Cdn employment is expected to come in at +15k, while US non-farm payrolls are expected at +312k. US Services ISM at 10am (markets expecting 58.5).
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CME open interest changes 11/2: AUD -1533, GBP +11663, CAD -599, EUR +5385, JPY +1499
Currency Calendar
Date | Releases / Holiday | Entity |
---|---|---|
November 3, 2017 | Unemployement Rate (Oct) | USD |
November 3, 2017 | Unemployement Rate (Oct) | CAD |
November 3, 2017 | Labor Force Participation Rate (Oct) | USD |
Bank holidays and impactful report releases for select countries.
By The Numbers: Daily FX Snapshot
USD/CAD - Canadian Dollar
Cross sales continue to take the wind out the USDCAD rally. First it was EURCAD last week and now GBPCAD this week. Market now sits below our downward trend line extensions from the spring once again (black lines on chart). Resistance 1.2840-50. Support 1.2790, then 1.2760-70. Hearing talk of a $500mln option expiry at the 1.2800 level this morning, which could weigh on prices. With a December rate hike from the Fed now pretty much priced in, traders are expecting a stronger, post-hurricane print from US payrolls to validate that narrative.
GBP/USD - British Pound
A surprising reaction to yesterday’s dovish 25bp rate hike from the Bank of England (which many could argue was expected) has hurt sterling technically across the board. GBPUSD is now trading below the October range and has momentum to threaten support at the 1.2980-1.3000 level. EURGBP rallied violently yesterday, validating Wednesday’s inverted hammer bottom. GBPJPY looks poised for a weekly bearish reversal, should there be no repair to the chart today. The follow-through from the inverted H&S bottom on GBPCAD now looks to be over as the 1.68 level has given way. Note the massive increase in open interest yesterday as the market fell (suggests new short positions). Bulls need to clear resistance at 1.31, and then 1.3140-50 before any positive momentum can return.
EUR/USD - European Union Euro
For a week that has been full of event risk, the Euro has done very little. One could make the argument that the FOMC standing pat on monetary policy and Trump picking Powell for the next Fed Chair were not surprises, but we are a little surprised by the lack of volatility, position adjustment and technical follow-through after last week’s bearish turn lower. The net long EUR position is clearly hanging in there and shorts have not been willing to add. The neckline of the daily head & shoulders topping pattern (1.1660-70) has been talked about all week and it continues to cap to the upside. If that level breaks to the upside, expect a test of the mid to high 1.17s. Weekly support is still holding too, 1.1610-20. If this level breaks to the downside, expect a test of option barriers at 1.15. Overnight at-the-money straddles are trading just 50pts going into the NY session, suggesting the NFP numbers will be unexciting. Market also has 1.6bln EUR in option expiries between 1.1670-1.1700 to deal with today.
USD/JPY - Japanese Yen
Dollar-yen has held up amazing well this week despite a strong pullback in US yields. The market bounced strongly off technical support in the 113 area and it continues to hold its bid as the market remains optimistic for US tax reform. Today we have more option expiries to deal with, about $5bln between 113.80-114.50. Combine that with cheap overnight at-the-money straddles and the markets here are not expecting much either from the NFPs ahead.
Market Analysis Charts
USD/CAD Chart
GBP/USD Chart
EUR/USD Chart
USD/JPY Chart
Charts: TWS Workspace
About the Author
Exchange Bank of Canada (EBC) is a Schedule 1 bank based in Toronto, Canada. EBC specializes in foreign exchange services and international payments providing a wide range of services to financial institutions and corporations, including banknote foreign currency exchange, travelers' cheques, foreign currency cheque clearing, foreign currency bank drafts, Global EFT and international wire transfers through the use of EBC's innovative EBCFX web-based FX software www.ebcfx.com.