USD trading broadly mixed to weaker following negative political developments for Trump
Summary
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USDCAD: Dollar/CAD managed to hold chart support in the 1.3010s yesterday and while we got a bounce in prices, the move higher was tepid. CAD cross buying was prevalent and this countered out the negative influences of a higher EURUSD. Yesterday’s negative political developments for Trump (Michael Cohen’s plea deal + Paul Manafort’s guilty verdicts) put a dent in US stocks and the broader USD towards the end of the session. We’re seeing a little more of this as NY trading gets going this morning with Cohen’s lawyer saying “no dispute that Trump committed a crime”. Canadian Retail Sales for June were just released and the numbers at first glance were a disappointment, coming in at -0.2% MoM vs +0.1% expected on the headline and -0.1% MoM ex Autos (in-line), but the May figures were revised higher from +2.0% MoM to +2.2%...so overall a mixed report. Today calendar also features the weekly EIA oil inventory data at 10:30amET (expectations for a draw of 1.497M barrels), followed by the FOMC Minutes from the Aug 1st Fed meeting at 2pmET. October crude oil is trading up strongly this morning after the API inventory report showed a surprise 5.17M barrel draw over the last week, however with USDCAD seemingly taking this in stride and crude oil running into some resistance here at 67.10-67.20, we think USDCAD could very well bounce here again. Headlines are just crossing now from the USTR saying there is no deal yet on NAFTA and that major issues remain.
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EURUSD: Euro/dollar rallied strongly during NY trading yesterday, closing the session above trend-line resistance in the 1.1460s. This technically bullish pattern along with Trump’s negative comments on the Fed was the fuel for further buying, which we saw overnight in Asian trade predominately. The BTP/Bund spread has narrowed back into the +260s, but European traders appear to be wrestling with the next trend-line resistance level in the 1.1530s. USDCNH also found a bid after three rough days of selling, and so EURUSD has stalled here a bit. The PBOC reiterated overnight that they’re not weaponizing the Yuan: https://www.bloomberg.com/news/videos/2018-08-21/pboc-reiterates-china-won-t-use-yuan-rate-as-trade-war-tool-video. We think EURUSD cools off a bit here after a 4-day run higher.
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GBPUSD: Sterling is trading back to flat on the day, after receding earlier on a bounce in EURGBP. The Cohen lawyer headlines this morning have allowed the market to regain the 1.2900-1.2910 level that capped the market late yesterday and for most of overnight trading. We think longs remain in charge here near term so long as this level holds.
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AUDUSD: There’s not much going on Aussie at the moment, with yesterday’s cooling off extending further a little bit after the EURUSD break higher. Downward sloping trend-line resistance in the 0.7380s capped prices though and we’ve been on the backfoot since then. Copper saw a wave of selling in early European trade, but found buyers on the dip. Ditto for the Aussie. We think the longs remain in charge so long as we trade above the 0.7320s.
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USDJPY: Dollar/yen is struggling around the breakeven mark today as weak technicals, the US equity sell-off late yesterday, and another large option expiry today (1blnUSD) around the 110.40-50 level weigh on the market, despite broader JPY selling noted elsewhere. We still think USDJPY remains on the defensive sub 110.60.
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Market Analysis Charts
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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.