Weak Canadian Retail Sales data sees USDCAD trade to new highs on the year

Summary

• USDCAD: Dollar/CAD is trading with a bid tone this morning as crude oil prices continue to fall.  The 1.3490s were regained in short order yesterday and this has technically allowed for a move to the next trend-line resistance level in the 1.3530s.  A slew of economic data has just come out and this is helping USDCAD trade to new highs.

   

  Final read of US GDP for Q3: +3.4% QoQ vs +3.5% exp.  Prev +3.5%.

  US Durable Goods for November: +0.8% MoM vs +1.6% exp

  US Core PCE Q3: +1.6% QoQ vs +1.5% exp

  Canadian October GDP: +0.3% MoM vs +0.2% exp, and +2.2% YoY vs +2.2% exp

  Canadian October Retail Sales: +0.3% MoM vs +0.5% exp, and +0.0% vs +0.2% exp Ex Autos

   

  February crude oil prices are threatening to break below $45 this morning as global growth and supply fears are forcing leveraged funds to bail out of entrenched long positions.  While we wouldn’t be surprised to see a pullback today, we think the uptrend in USDCAD can continue so long as this oil market dynamic persists.   We don’t see any serious horizontal resistance on the weekly charts until the 1.3800 level and we think the thin trading conditions that now await markets for the holidays could exacerbate any moves to the upside.

• EURUSD: Euro/dollar is pulling back from yesterday’s highs this morning as a slew of option expiries between 1.1400 and 1.1450 (5blnEUR) glues spot prices into a slightly lower range.  Trend-line resistance in the 1.1480s continues to cap prices to the upside and support remains clustered around the 1.1370-80 area.  USDCNH is breaking swiftly back above the 6.90 mark today, and this comes out of a month-long triangular consolidation on the charts.  This technical weakness signal for the Chinese yuan doesn’t bode well for EURUSD here in our opinion, but we’d like to see more follow-through above the 6.92 level to confirm.  We think EURUSD traders also need to be on guard for any “risk-off” sentiment that could intensify because of the looming US government shutdown.

• GBPUSD: Sterling is doing a whole lot of nothing today as prices whip around within yesterday’s range.  The UK reported Q3 GDP in-line with expectations of +0.6% QoQ and +1.5% YoY.  Parliament is now on recess for the Christmas break.  We think GBPUSD follows EURUSD and the broader USD tone heading into the holidays, but we think the market’s inability to close above trend-line resistance in the 1.2660s this week is hurting the technical outlook here on the charts.

• AUDUSD: The Aussie is trying to recover overnight losses this morning after broad USD buying in early European trade saw the market trip sell stops below the 0.7080s.  The S&Ps are trading down 8pts and copper prices are trading flat, but both and well off yesterday’s lows.  While everything has been going wrong for AUDUSD lately, we think today’s massive option expiry at the 0.7100 strike (2.3blnAUD) could give the market enough momentum to close back above the level, and this would be somewhat positive for the short term chart technicals.

• USDJPY: Dollar/yen longs are trying to find their bearings this morning after yesterday’s break of chart support in the 111.60 saw a floodgate of selling emerge.  Traders are attempting to anchor prices around chart support in the 111.00-111.10 area this morning, where over 1.3blnUSD in options expire, but we think how the S&Ps trade on this “quadruple witching” option expiry Friday will set the tone going into week’s end.  The tumultuous US stock market decline has been the clear driver of USDJPY price action this week, and we think any hope of a USDJPY recovery here depends on whether the S&P futures can regain the 2490-2500 level.

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Market Analysis Charts

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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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