$USD trading mixed with month-end flows & option expiries. Cdn GDP in focus for $CAD.

Summary

• Broader USD tone mixed to round out the week.  Month-end flows and options expiries likely to dominate today’s NY session.

• AUDUSD trying to bottom with a strong bounce off 0.7800.  RBA rate decision now in focus for next week.  

• GBP weaker yet again in London trading as UK GDP missed estimates and Carney rate hike comments failed to excite.  EURGBP makes a strong push back above the 88 handle on reported month end flows.

• EURUSD and USDJPY expected to be pinned down with option expiries: $4bln again in EUR from 1.1800-75 and $3.5bln USD from 111.50-112.75.

• BofA reiterates bearish call on EURUSD. 

• Notable increase in the premium for 1-month JPY calls relative to puts, with confirmation of October 22 as the snap election date in Japan.  (USDJPY bearish)

• Technical resistance proved formidable for USDCAD yesterday.  Market now awaits Canadian July GDP at 8:30amET.  +3.9% expected.

• US PCE, Chicago PMI, UofM survey on deck as well.

• CME open interest changes 9/28: AUD -2382, GBP -4925, CAD -4345, EUR +2562, JPY +6609.  Note four days in a row of continued Sterling position liquidation.

• USDCNH has failed twice now at the 6.6750 level in the last 48hrs (Aug support, now resistance).  September’s spike low correlated well with EURUSD spike high.  Perhaps another confirmation broader USD rally to stall for now?

Currency Calendar

Bank holidays and impactful report releases for select countries.

By The Numbers: Daily FX Snapshot

USD/CAD - Canadian Dollar

Market now sits dazed and confused at the support level we noted yesterday (1.2430-50).  With the broader USD trading mixed this morning and the overall market dealing with option expiries and potentially messy month-end flows, CAD will likely take its cue from the GDP figures coming out at 8:30amET.  A rally above the 1.2480s would reignite the bull trend for the week.  Selling below this level would invite losses back into the 1.23s and would confirm the market is not yet ready to break out of its longer term downward trend.

EUR/USD - European Central Bank Euro

The Euro is currently trading back above the 1.18 handle.  Expect a range bound to moderately higher session as most of the week’s news flow is out of the way and the market deals with option expiries and month end flows.  Buying on the crosses (EURGBP and EURJPY) has been supportive.  Support 1.1760s.  Resistance 1.1820, the 1.1860s.  Some traders are talking about the Catalonia referendum on Sunday, but markets don’t appear to be worried (EUR option vol is lower).

AUD/USD - Australian Dollar

We’re watching the Aussie this morning as yesterday’s action carved out a bull hammer on the charts with a strong bounce off the 0.7800 support level.  The monthly reversal (confirmed first on Sep 8^th, then again post FOMC) still looms as a bearish negative, but there is potential for volatility with the RBA rate decision next week (Oct 3^rd).

Market Analysis Charts

USD/CAD Chart

EUR/USD Chart

AUD/USD Chart

Charts: TWS Workstation

About the Author

Erik Bregar - Trader

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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