USDCAD traders eyeing Canadian CPI report out shortly. Broader USD choppy. Turkish Lira has resumed decline.

Summary

• USDCAD: Dollar/CAD sits directionless this morning as range bound chart technicals and the looming Canadian July CPI report keep traders on the sidelines.  There is a slight bid tone to the broader USD at this hour, with USDTRY and USDCNH leading.  Consensus for today’s CPI print are for +2.5% YoY and +0.1% MoM on the headline, then +1.3% YoY and -0.1% MoM on core.  Expect selling into chart support at 1.3100 should the numbers exceed expectations, an upward break of the 1.3170s (this week’s high) should they disappoint, and range bound volatility around the 1.3125-1.3160s should the results come in mixed or on the mark.  Some sizable option expiries are in play today (1.1blnUSD at 1.3145, 700M at 1.3150 and 500M at 1.3170).  The funds remain net long USDCAD going into these numbers.  September crude oil is trading above resistance in the 65.70s, opening up the door to the 66 handle.  Next week features some BoC and Fed speak (Monday), Canadian June Retail Sales, FOMC Minutes and the annual Jackson Hole Symposium (Wed), Markit PMIs (Thursday), and US July Durable Goods (Friday).

• EURUSD: Euro/dollar is bid this morning, but off its highs as the market failed at trend-line resistance in the 1.1420s (the next key upside level we mentioned yesterday).  A wave of broad USD selling in the 4am hour, led by USDTRY and USDCNH, took us higher but then this report (https://www.middleeasteye.net/news/turkey-us-pastor-brunson-coup-erdgoan-663345979) made the rounds and caused a broad “risk-on” tone to emerge.  We’re seeing some retracement now as the report is not so positive when you read more into it.  Today’s North American session is relatively quiet on the data front, with just the US Michigan Consumer Sentiment Index.  Next week’s European calendar is light, with just the German and Eurozone Markit PMIs (Thursday) and German Q2 GDP (Friday).  The 10yr BTP/Bund yield spread sits at +285bp at this hour, and this partly explains EURUSD struggle to gain upward momentum.

• GBPUSD: Sterling rallied into yesterday’s large option expiry, but the gains fizzled quickly when the USD bounced broadly on Mnuchin’s comments (https://www.politico.com/story/2018/08/16/us-sanctions-turkey-andrew-brunson-steven-mnuchin-779820), and so GBPUSD continued to hug the familiar trend-line we’ve been talking about.  Today that level sits at 1.2710.  We’ve traded above and below it in the overnight session as the broader USD chops around, but we are currently back above it.  Perhaps longs take another crack at the can here.  The fund net short position is starting to feel a bit crowded.  We’ll get an update on that later today from the CFTC.  Next week is very quiet on the UK data front.

• AUDUSD: The Aussie is trading marginally higher today, but the price action over the last 24hrs has been very choppy.  Trend-line resistance in the 0.7280-90 area has proven formidable on three occasions, and so we now sit range bound with 0.7250-60 supporting.  Copper and gold prices are barely moving this morning.  The RBA’s Governor Low spoke before a parliamentary economics committee overnight, but his tone was dovish as usual and so markets yawned.  https://www.reuters.com/article/us-australia-economy-rba/australia-central-bank-governor-signals-lower-for-longer-rates-idUSKBN1L12P1.  Expect a quiet end to the week should the broader USD continue its range bound tone for a summer Friday.  Next week features more comments from Lowe on Monday night ET, followed by the RBA Minutes.  We’ll get an updated read on the fund short position later today.

• USDJPY: We’re seeing broad demand for JPY today since support broke in the 110.80s on the USDJPY chart.  One could argue this move is a bit of risk aversion making the rounds, given the weaker tone to TRY and the broader EM space today.  We also have a large option expiry at the 110.50 strike (2.2blnUSD) which seems to be having a magnetic effect.  We’re just getting reports that a Turkish court has rejected US Pastor Brunson’s appeal for release, and with that we’re seeing some more selling here.  Wednesday’s reversal back below the 111.10 trend-line level has now proven ominous for the fund net long position.  We think USDJPY remains on the defensive sub 110.60.  Next weak features Japanese CPI on Thursday night ET.

Tune in @EBCTradeDesk for more real-time market coverage.

Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

September Crude Oil Chart

EUR/USD Daily Chart

EUR/USD Hourly Chart

USD/TRY Daily Chart

GBP/USD Daily Chart

GBP/USD Hourly Chart

AUD/USD Daily Chart

AUD/USD Hourly Chart

USD/JPY Daily Chart

USD/JPY Hourly Chart

EUR/JPY Daily Chart

Charts: TWS Workspace

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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