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2017-09-28 08:15

Dovish Poloz slams $CAD. $GBP finding support. $EUR bid amid option expiries.

Source: EBC Trading Desk

Summary

  • CAD craters on dovish comments from BOC Poloz, USD/CAD rally to the 1.25s puts the weekly downtrend in jeopardy.  BOC “won’t be mechanical on rates, will proceed cautiously”.  OIS swaps now pricing in 31% chance of hike on Oct 25 vs. 40% pre-Poloz.  CIBC now says no hikes until 2018.

  • RBNZ keeps rates on hold at 1.75% with a dovish tone to comments (as expected).  NZDUSD holds 0.7150 for the third time this week.  AUD/NZD sales weighing on AUD in past 48hrs.

  • S&Ps trade to new record on Trump tax plan, USDJPY surges to 113 but met with reported offers from Japanese exporters.  US yields find a bid in European trading.  Reports of a massive option expiry at 112 today.  ANZ bank likes buying JPY crosses.

  • EURUSD tests NY lows (1.1720s) overnight and holds.  Now getting a lift on higher Bund yields.  Option expiries likely a focus this morning as $4bln EUR notional rolls off between 1.2725-1.1800 this morning at the NY cut.

  • GBPUSD gives up the NY low again overnight but is rallying strongly again above 1.34 heading into today’s session.  Carney not saying much during his speech this morning.  EURGBP rally above 0.8800 earlier met with selling (GBPUSD supportive)

  • CME open interest changes 9/27: AUD -682, GBP -4150, CAD +180, EUR +2348, JPY +10124

  • US GDP (Final Q2) on deck 8:30amET.

Currency Calendar

Date Releases / Holiday Entity
September 28, 2017 Bank of Japan Governor Kuroda Speech Japan
September 28, 2017 BoE Governor Carney Speech New Zealand
September 28, 2017 Core Personal Consumption Expenditures (Q2) USA
September 28, 2017 GBP Annualized (Q2) USA

Bank holidays and impactful report releases for select countries.

By The Numbers: Daily FX Snapshot

USD/CAD - Canadian Dollar

With CAD plunging yesterday and USDCAD breaking the 1.25 handle during London trading today, it’s now prudent to zoom out and look at the weekly chart.  We now sit above the July lows and right at the April/May 2016 lows.  The 23.6% Fibo retracement of the drop since April 2017 is 1.2460.  A strong weekly close above 1.2500 would invite a test of the 38.2 Fibo in the low 1.27s (also corresponds with the Aug highs).  Shorter term, the market needs to find buyers on dips.  Might be a bit of a struggle this morning as the USD is broadly bid.  London high is 1.2520.  Support 1.2430-50.

 

GBP/USD - British Pound

Sterling continues to try and carve out a low after two straight days of weaker prices and position liquidation.  London low 1.3340s.  Market needs to regain 1.3420s and hold for any chance of some buying momentum to return.  A bearish EURGBP chart continues to lend support to GBPUSD.  The technicals for GBJPY continue to look supportive as well.  GBPCAD on the verge of a cup-and-handle breakout on the daily chart (all bullish GBP).

 

USD/JPY - Japanese Yen

After a strong run over the last 48hrs, USDJPY is taking a break here.  Near-term resistance 113.20.  Support 112.25-50.  The large 112 option expiry could act as a magnet if we break through 112.25.  Bid in treasuries and gold continues as we go to press.  S&Ps off 5 in pre-market trading.  Longer term USDJPY chart still bullish above 111.  

Market Analysis Charts

USD/CAD Chart

GBP/CAD Chart

USD/JPY Chart

 

Charts: TWS Workstation


About the Author

Erik Bregar

Erik Bregar - Trader


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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 Rachel Butler at 08:15 AM