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2018-09-06 08:15

USD trading softer into NY open

Source: EBC Trading Desk

Summary

  • USDCAD: Dollar/CAD continues to hover in a tight range just shy of chart resistance at the 1.3200.  Yesterday’s hawkish hold to interest rates from the Bank of Canada was largely expected and so markets didn’t react much.  NAFTA negotiations resumed but there weren’t any notable headlines for markets.  EURUSD saw some Brexit related buying but crude oil remained offered, and so USDCAD chopped around for most of the session.  The US ADP employment report just missed expectations, coming in at +163k jobs for August vs +200k.  Canadian Building Permits just missed expectations as well, coming in at -0.1% MoM for July vs +1.0%, but the June figures were revised higher.  Next up are the US Services ISM figures and a speech from the Fed’s Williams at 10amET, followed by the weekly EIA oil inventory report at 10:30amET (markets expecting a draw of 1.29M barrels).  We’ll also get the BoC’s Wilkens speaking before the Saskatchewan Trade and Export Partnership at 2:30pmET.   We’d be on the lookout for anything monetary policy related considering there wasn’t a press conference following yesterday’s rate decision.  We think USDCAD continues to trade with a neutral tone here.  Support 1.3140-50.  Resistance 1.3200-1.3210.  Tomorrow is a big day for data, featuring both the Canadian and US employment reports for August.

  • EURUSD: Euro/dollar shorts covered yesterday, following GBPUSD higher in the aftermath of the surprise Brexit headlines from Germany.  An option expiry at 1.1625 also helped the cause we felt.  The NY close was quite positive (above resistance in the 1.1620s), allowing the market to extend further into Asian trade, but the gains evaporated following some swift selling in AUDUSD.  The selling took the market back below the 1.1620s, but the market is attempting to regain it now going into NY trade.  We think this will be the key level to watch today, with upward momentum returning should we trade above it and downward momentum taking over should we trade back below it.  The BTP/Bund spread is trading tighter again, just under +250bp and USDCNH continues to reject the 6.86 handle (both EURUSD supportive).  Over 2blnEUR in options expire between 1.1600 and 1.1630 this morning.

  • GBPUSD: Sterling stole the show in trading yesterday, rallying 150pts higher following a headline that suggested the German and UK governments have dropped some key Brexit demands in an effort to ease the path towards a Brexit deal.  More here.  This saw the market quickly fill Sunday’s opening gap in the 1.2950s.  Two hours later however, a German spokesperson said the German position hadn’t changed and with that GBP selling came back in, allowing trapped shorts to get out.  The market was bought at new trend-line support in the 1.2870-80s, and we’ve been drifting higher ever since.  We have some decently sized option expiries in EURGBP above 0.9000 today, which could drag on the GBP should the cross rally into those strikes.

  • AUDUSD: The Aussie continues to hang in there, but the market continues to struggle with upside momentum whenever upside resistance levels break.  Case in point again today, with yesterday’s EURUSD and option driven rally above the 0.7190s paving the way for gains, only to be met with another wave of selling after two more Australian banks raised mortgage rates (following Westpac from last week).  More here.  A big rally in copper in Europe however (+2%) has helped to completely reverse the overnight selling, and with that AUDUSD has regained the 0.7190s and some upward momentum.  Next resistance is 0.7230.

  • USDJPY: Dollar/yen continued to struggle with overhead chart resistance yesterday, extending a little higher to the trend-line level in the 111.70s; but when US yields stalled and EURUSD popped higher the market gave up and starting moving lower.  Asian trade then saw the 111.40 support level give way, and with that we’ve seen a negative tone ever since.  Today features over 1blnUSD in options expiring at the 111.00 strike, which after the weaker than expected US ADP report, might attract some offers.  The 111.00-111.10 level is also the next trend-line support zone.

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

 

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About the Author

Erik Bregar

Erik Bregar - Director, FX Trading

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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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Posted By Isabella Guevara at 08:15 AM