Broader $USD resumes rally after mixed message from Yellen. $CAD traders eyeing Poloz speech.

Summary

• Mixed messages from Yellen’s speech yesterday sees the USD whipsaw, then trade lower in NY trading, but the broader USD has resumed its trend higher overnight.  The Fed’s credibility took another blow as Yellen ‘s comments show the Fed has no idea what is driving inflation dynamics.  

• Technical selling re-emerges in EURUSD during European trading.  Sterling pierces 1.3400 on the Bombardier tariff headlines (would affect 4k UK jobs).  Yen, treasuries, gold and silver completely unwind Monday’s North Korea move, and then some.  US stocks also upbeat about tax reform.

• Aussie tracks the EUR lower, testing the 0.7850s.  The kiwi and CAD are better bid though with headline risk for these currencies ahead in today’s NY session.

• Tape bombs for today:  US durable goods at 8:30amET.  BOC Governor Poloz speaks at noon. Topic: The Meaning of “Data Dependence”: An Economic Progress Report.  New Zealand interest rate decision at 4pmET (no change expected).

• CME open interest changes 9/26: AUD -617, GBP -4412, CAD +47, EUR -1746, JPY +3583

Currency Calendar

Bank holidays and impactful report releases for select countries.

By The Numbers: Daily FX Snapshot

USD/CAD - Canadian Dollar

The market is holding up quite well this morning, despite post-Yellen USD sales yesterday and Finance minister Bill Morneau’s comment about the Canadian economy being just fine with CAD at these levels.  Broader USD demand overnight against EUR and GBP is helping, but the market hasn’t been able to breach the NY high just yet.  Traders are now awaiting Stephen Poloz and his speech at noon today.  Will he tone down the rate hike hawkishness like his deputy Timothy Lane did last week?  Key resistance continues to be the 1.2410-20 area.  Support now 1.2310-30 (Bill Morneau lows).

EUR/USD - European Central Bank Euro

The Euro was a difficult trade during the NY session yesterday because we didn’t really learn anything new from Yellen but the confusing headlines made the bots go crazy and made intra-day shorts cover out of frustration.  When the dust settled though, traders went back to their charts and sold hourly resistance just above the 1.18 level.  We’re now lower by 50-60 pts, which is not surprising given the negative technicals we’ve been highlighting for a few days now.  Watch EURGBP today.  Despite the bearish news for the pound overnight, it continues to attack the 0.8750 level.  This level does not look strong technically and we still have a gap on the charts at the 87 the figure (from June 9^th).  If EURGBP breaks lower, it will likely drag EURUSD as well.

GBP/USD - British Pound

Sterling appears to have flushed some traders out with yesterday’s drip lower and this morning’s plunge below 1.34.  Funny enough, we now sit in a slightly better position technically than this time yesterday as the market has regained the 1.34 handle with strength and we’re slightly above the NY lows from yesterday.  On the weekly chart, this looks like a healthy pullback of the 1 month, 900pt rally.  Continue to watch for headlines from Theresa May.  A reminder too that we’ll see UK GDP early tomorrow and BOE Governor Carney is expected to speak twice before the week is out.    

Market Analysis Charts

USD/CAD Chart

EUR/USD Chart

GBP/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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