General Inquiries: 1-888-223-3934 | Trading Desk: 1-888-729-9716
Privacy Policy Contact us User Login

2017-12-06 08:15

Bank of Canada in focus for CAD traders. EUR traders marking time ahead of US payrolls. Brexit uncertaintly hurting GBP.

Source: EBC Trading Desk


  • CME OPEN INTEREST CHANGES 12/5: AUD +4988, GBP -1760, CAD -110, EUR +6461, JPY +1871

  • USDCAD: It’s all about the Bank of Canada today for USDCAD traders.  The market managed to regain the 1.2660s in yesterday’s trade, which was technically positive.  The 1.2700 capped gains overnight and we’re now testing the 1.2660s from the upside.  Markets are expecting no change on interest rates today but the focus will be on the Bank of Canada’s tone, especially in light of the strong Canadian employment figures reported last Friday.  US/CAD 2s are steady at 27bp.  The CAD put bias in risk reversals has eased since Friday.  Cross flows from EURCAD and GBPCAD are dragging USDCAD lower again today, with the former now testing important support at 1.4950 and the latter now breaking below trend-line support in the 1.6960-70.  The Bank of Canada announcement is at 10amET.  The 1.2660s is the key level to watch again today.  Next support 1.2590s.  There are a series of resistance levels today, clumped together between 1.2740 and 1.2770.

  • AUDUSD: It’s been nothing but bad luck for Aussie traders since our commentary yesterday.  The large option expiry at 0.7645 had its magnetic effect early yesterday and then copper and iron ore prices started to plunge.  AUDUSD traders made no concerted attempt to challenge resistance at 0.7650 once again and instead tracked copper lower for the rest of the day.  Not even the weaker than expected read from the US non-manufacturing ISM helped.  In overnight trade, Australian Q3 GDP came in lighter than expected (+2.8% YoY vs. +3.0%), and that further dampened the mood.  AUDUSD now sits back below key resistance (0.7610-0.7620), which is negative but it has found some support at the 0.7570s (trend-line support).  The AU/US 2yr yield spread has gone negative, now at -3bp, and that continues to be a drag on AUDUSD.  It will more than likely be a range trade today unless base metals continue falling or the US ADP figures give us a surprise (out at 8:15amET).

  • EURUSD: Euro/dollar eased lower yesterday, but it was nothing to write home about.  It’s been a quiet week for market moving data and so a lot of the movement has been influenced by EURGBP and EURJPY flows.  The fact that the US/GE 10yr yield spread still sits comfortably above 200bp continues to be a drag.  Reuters is also reporting sizable option expiries today (1.75bln EUR between 1.1800-1.1825), which seem to be having their usual magnetic effect.  Technically speaking, EURUSD is trading at key support right now (1.1810).  Next support 1.1780s, then 1.1750s.  Resistance today comes in at 1.1850.  Note the Sunday opening gap (1.1880-1.1900) is still unfilled.  Traders will be focused on the US ADP jobs figures at 8:15amET today, as a potential preview of what US payrolls will be on Friday.

  • GBPUSD: All the Brexit resolution excitement that we saw leading into Monday’s UK/EU meeting seems to be going up in smoke for GBPUSD traders.  With every hour that passes now without positive headlines and an agreement on the Brexit divorce cost, traders are starting to grow more and more weary of a negative outcome.  GBPUSD is weak again as we enter NY trading on headlines that Ireland will be not rushed on the Brexit border text (and may want to add to it).  We also heard talk that Theresa May and the Irish PM talked over the phone.  Some traders are asking when the deadline for negotiations with the EU “actually” is.  Add to this more rumors of a cabinet revolt for Theresa May and GBP traders are understandably not in the mood to buy.  Technically speaking, GBPUSD is now testing trend-line support in the 1.3360-70 region.  There’s not much support below here until the low 1.33s.  Resistance today lies at 1.3400.  We’re also hearing talk that option traders continue to hedge next week’s event risk (EU summit Dec 14-15), and we can also see this through the uptick in 1-2week vols.

  • USDJPY: Dollar/yen continues to track US stocks and US yields lower, but it has found support now.  The market has finally filled its Sunday opening gap as we enter NY trading so that magnetic effect is over.  Support today 111.90-112.  Resistance 112.40-50.  We would not be surprised to see a bit of an uptick in USDJPY today, but continue to watch US stocks.  

Market Analysis Charts






Charts: TWS Workspace

About the Author

Erik Bregar

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.

Interested in creating a custom foreign exchange trading plan?

About Exchange Bank of Canada
Exchange Bank of Canada (EBC) is a Schedule 1 bank based in Toronto, Canada. EBC specializes in foreign exchange services and international payments providing a wide range of services to financial institutions and corporations, including banknote foreign currency exchange, travelers' cheques, foreign currency cheque clearing, foreign currency bank drafts, Global EFT and international wire transfers through the use of EBC's innovative EBCFX web-based FX software

Disclaimer: All product names, logos, and brands are property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, logos, and brands does not imply endorsement.

This publication has been prepared by Exchange Bank of Canada for informational and marketing purposes only. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Exchange Bank of Canada, its affiliates or any of their employees incur any responsibility. Neither Exchange Bank of Canada nor its affiliates accept any liability whatsoever for any loss arising from any use of this information. This publication is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any of the currencies referred to herein, nor shall this publication be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The general transaction, financial, educational and market information contained herein is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a "call to action" or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. You should note that the manner in which you implement any of the strategies set out in this publication may expose you to significant risk and you should carefully consider your ability to bear such risks through consultation with your own independent financial, legal, accounting, tax and other professional advisors. All Exchange Bank of Canada products and services are subject to the terms of applicable agreements and local regulations. This publication and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced in whole or in part, or referred to in any manner whatsoever nor may the information, opinions and conclusions contained in it be referred to without the prior express written consent of Exchange Bank of Canada.
Posted By Rachel Butler at 08:15 AM