USDJPY off on Trump/NK headlines. GBPUSD bid post UK Retail Sales. USDCAD recovers on crude oil selling.

Summary

• USDCAD: Dollar/CAD is shaking off yesterday’s poor NY close that resulted from a late day, TRY driven, recovery in risk assets and a dovish FOMC Minutes.  The market’s ability to regain trend-line support in the 1.2840-50s overnight, crude oil selling, and CAD cross buying is helping the cause here.  The broader USD traded broadly lower in European trade this morning but that momentum is waning as NY trading gets underway.  USDTRY has resumed its upward surge after a drop lower following an emergency 3% rate hike from the Turkish central bank yesterday, but today’s move is not driving broad USD strength like it did yesterday (yesterday’s highs have not been taken out).  The North American calendar is light today, with 2^nd tier data out of the US (Existing Home Sales, weekly Jobless Claims), which will leave the focus on crude oil and the broader USD as usual.  We think USDCAD trades with a range bound to higher tone today.  Chart resistance lies at 1.2910 (the same upward sloping trend-line that capped trade yesterday).

• EURUSD: Euro/dollar is bid this morning, after managing to hold the lower bound of chart support zone 1.1690-1.1720 going in the NY close.  Some headlines out of Italy this morning appear to be helping Italian bonds (Five Star considering the moderate Zingales for Finance Minister as opposed to Savona who was originally slated, but who was anti-euro).  We had some confusing but slightly hawkish comments from the ECB’s Visiliauskas (“...DOESN’T DISAGREE WITH FORECASTS FOR ECB RATE HIKE IN SIX MONTHS”).  We also had a pop higher in GBPUSD following UK retail sales, which seemed to help EURUSD in the 4am hour.   Some of these gains unravelled ahead of the ECB Minutes (released at 7:30amET), but the tone of the minutes were the same as what we heard in Draghi’s last press conference.  We think EURUSD can attract some longs here so long as it stays above the 1.2720s.  A move above trend-line resistance in the 1.1740s would be more positive.

• GBPUSD: Sterling is enjoying a rare bid this morning following better than expected UK Retail Sales reported earlier (+1.5% in April vs. +0.1% expected).  GBPUSD popped higher after the release, regaining trend-line support in the 1.3370s, but the 1.3420s are currently capping (another trend-line resistance level).  EURGBP rejected the 0.8790 level in style yesterday, failing to form the bullish outside day pattern we alluded to, and now we’re seeing some downward follow-through, which is helping GBP here more broadly.  We think GBPUSD can build upon gains here and put in a short term bottom, should the market close above the 1.3420s.  Note the BoE’s Mark Carney will be speaking in London today at 1pmET.

• USDJPY: Dollar/yen continues to feel the pinch today despite a broad recovery in risk assets that allowed the market to rally back above 110 into the NY close.  Not even the dovish FOMC Minutes impacted USDJPY much.  Asian trade got off to bad start however, with new comments out of Trump regarding possible tariffs on auto imports and negative comments from North Korea where they threatened to call off the June summit meeting when reacting to Mike Pence.  This created a “risk off” mood that hit the Nikkei again and USDJPY in turn.  Buyers in Europe have stepped in at Fibo and trend-line support in the 109.30-40 area.  We think USDJPY recovers here today, led by cross buying in EURJPY, but US 10yr yields are opening up NY trading below 3%, which may drag things a bit.

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Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

EUR/USD Daily Chart

EUR/USD Hourly Chart

GBP/USD Daily Chart

GBP/USD Hourly Chart

USD/JPY Daily Chart

USD/JPY Hourly 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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