Currency Market Trend Analysis: September 19, 2017

Headlines

• Not a worry in the world as we head into the Fed meeting tomorrow with stocks at yet another record.  Bonds, precious metals and JPY weaker.

• CAD and GBP nursing wounds after the BOC and BOE get cold feet about rate hike trajectory.

• EUR bid in otherwise quiet trade.  ZEW beats expectations.  Market still very long.  Reuters with dovish piece on the ECB just hitting the wires.

• AUD coping with selling in metals and technical damage to its chart from last week.

• Quiet calendar today with US Housing Starts, Import/Export prices.  Traditionally not big movers.

Currency Calendar

Upcoming bank holidays and impactful report releases for select countries.

By The Numbers: Daily FX Snapshot

USD/CAD - Canadian Dollar

We finally got our catalyst for some CAD price movement after a week of range-bound action and position accumulation; and it came from the BOC’s deputy governor Timothy Lane in the form of concerns about the rising CAD and upcoming trade negotiations (think NAFTA).  Spot spiked a full figure higher, tested the Sep 5^th lows in the 1.2330s but has since backed off in Asian and European trading.  See USD/CAD.  Key support level to watch intraday is the European low so far, 1.2262.  EURCAD and GBPCAD, after three day runs higher, are looking heavy as we go to print.  Futures traders liquidated 2500 contracts yesterday.

AUD/USD - Australian Dollar

After waffling around the 80 handle for four sessions, Aussie traders finally picked a direction and they sold steadily throughout the NY session yesterday as metals and crude oil were getting slammed lower.  Futures traders unloaded 952 contracts.  The market regained the 0.7950 level (last week’s low) going into Asia last night and is currently fighting to get back to the 0.8000 level, but the technical damage from last week’s inverted hammer reversal remains.  AUDCAD, while still in a downtrend, looks better technically today but it’s all been CAD weakness since the comments yesterday from BOC’s Lane.

USD/JPY - Japanese Yen

The yen continued to trade like a US treasury bond yesterday; down for the 6^th straight day as US stocks continued to set records and the VIX (fear gauge) continued to get trashed.  Futures traders unloaded 1766 contracts after liquidating over 18k on Friday’s sell-off.  It’s been much the same trend in Asia and Europe overnight.  To say there are happy USD longs (JPY short) positions out there is an understatement.  After stomaching a painful move below 108 leading up to Irma and the North Korean missile launch, these positions are now 350 pts higher and the charts show no formidable resistance until 112.20.

GBP/CAD - British Pound

After rallying over 400 pts last week on imminent rate hike expectations, the BOE’s Mark Carney threw cold ice on the GBP party yesterday by commenting that rates may have to rise in the UK because rates are starting to rise elsewhere in the world.  Market chatter making the rounds was that Carney sounded reluctant to hike and perhaps the expected hike might be a one-off move.  Spot sold off swiftly, found support half way through Friday’s wide range out of simple exhaustion, and after a brief rally during Asia, the market has tested that level again in Europe.  Futures traders unloaded 1535 contracts yesterday.  Longer term, the GBPUSD has broken out to the upside on the weekly chart.  See GBP/USD Chart.  Expect heightened volatility here however because there is very little in terms of key levels to trade against, both below and above the market.

EUR/USD - European Central Bank Euro

The Euro did practically nothing yesterday despite all that was going on around it as it was an otherwise quiet day on the data front from both the US and mainland Europe.  While futures traders liquidated 1800 contracts yesterday, the market remains net long at least 90k contracts as we head into the Fed Wednesday (the longest the market has been in years).  Spot touched the 1.2000 level a few times amidst a higher than expected reading from the German ZEW survey but it’s struggling to surpass it.  Market dropped 40 pts just now on a Reuters headline that ECB policy makers disagree on setting a firm bond buying end-date in October.   See EUR/USD Chart.

Market Analysis Charts

USD/CAD Chart

GBP/USD Chart

EUR/USD Chart

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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