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


2019-11-15 08:15

Kudlow's comments rescue risk into overnight session.

Source: EBC Trading Desk

 

Interested in creating a custom foreign exchange trading plan? Contact us or call EBC's trading desk directly at 1-888-729-9716.

Get real-time market coverage on twitter at @EBCTradeDesk or sign up here.


 

SUMMARY

  • NEC Director says deal with China is “close” and that “we are coming down to the short strokes.”
  • US yields and USDJPY bounce.  Broad USD selling continued in Asia, dialed down in Europe, now back again.
  • EURJPY buying helps EURUSD break above 1.1020s, extend yesterday’s gold-driven technical bounce.
  • New UK election drama: talk of Brexit Party candidates being offered jobs to stand down in certain ridings.
  • BREAKING: Brexit Party confirms they have already stood down from 40 non-Tory seats.  GBPUSD shoots higher.
  • US Retail Sales (Oct) comes in mixed.  Narrow beat on the headline, but narrow miss ex-Autos)
  • US Industrial Production (Oct) misses estimates: -0.8% MoM vs -0.4%.

ANALYSIS

USDCAD

Our fears regarding the tepid nature this week’s USDCAD upside breakout above 1.3250 came to fruition yesterday.  The market hesitated too much at Wednesday’s highs in the 1.3270s in early NY trade yesterday, didn’t find its catalyst to continue breaking higher and then ultimately collapsed lower amid plenty of USD-negative headlines which crossed into the London close.  See here for what tweeted at that hour.  To make matters worse for USDCAD, EURUSD rebounded back above the 1.1000 level, GBPUSD broke above the 1.2870s, and even the beleaguered AUDUSD was able to bottom out. 

 

This broad USD selling continued into the Asia session overnight and morphed into a “risk-on” move after NEC Director Larry Kudlow said that a deal with China was “close” and that “we are coming down to the short strokes”.  More here from Bloomberg.  US Commerce Secretary Wilber Ross is now adding a little more “hopium” to the markets this morning by saying the “US-China trade deal will be done in all likelihood”.  We say “take these US/China trade headlines literally at face value at this point”.  Don’t read too much into them, but understand that trading algorithms will react to their tone, and for the time being the overall tone of the US/China narrative has shifted slightly more positive. 

 

The US reported its Retail Sales numbers for the month of October over the last hour and they came in mixed (+0.3% MoM vs +0.2% exp but +0.2% MoM ex Autos vs +0.4% exp).  The US Industrial Production figures for October have also just been reported and they missed estimates more profoundly (-0.8% MoM vs -0.4%).  Bank of Canada governor Stephen Poloz didn’t shed any additional light on Canadian monetary policy during his speech at the San Francisco Fed last night.  The wave of broad USD selling currently underway in NY could see USDCAD fall further here.  The USDCAD breakout hold-outs will desperately want to see a NY close above the 1.3240s today.  We think new shorts (those who want to put on new USDCAD short positions) will start licking their chops with a move below the 1.3220s.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

DEC CRUDE OIL DAILY

DEC CRUDE OIL DAILY

EURUSD

Euro/dollar continues to enjoy what we’ve been calling a “technical bounce” over the last 24hrs.  We talked yesterday morning about the sellers potentially losing control of the market if we saw prices move back above 1.1005 and that a further rise in December gold prices could be the catalyst given their move back above 1468.  Sure enough, we saw this occur towards the London close yesterday as US yields started to drop at a frightening pace.  EURUSD toyed with both sides of near-term chart resistance in the 1.1020s since late NY trade yesterday, and is now trying to break above this but we’re not so sure how long this upside momentum can last as “risk aversion” flows have abated in the overnight session (positive US/China headlines), US yields have bounced 4bp and December gold is now trading back below 1468.  EURJPY buying seems to be driver for now.

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

DEC GOLD DAILY

DEC GOLD DAILY

 

GBPUSD

A new drama is unfolding in the UK election race and it seems to be coming from rampant talk of Brexit Party candidates being offered jobs to stand down in certain ridings (beyond the 317 Tory seats that Nigel Farage pledged his party would not contest).  More here from the BBC.  Nigel Farage is upset as usual, but at the end of the day, we think anything that hurts his party will help the Tories secure the majority they need to pass Brexit legislation in the UK and we think sterling traders are content to celebrate this for the time being.  BREAKING: The UK Telegraph has just reported that the Brexit Party has confirmed stepping down from 40+ non-Tory seats already, and with that GBPUSD has shot higher once again.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

 


 

AUDUSD

The Aussie shouldn’t be bouncing today, but traders are finding solace from yesterday’s hold of the 0.6770s, the gold-driven USD selloff into the London close, and some positive US/China trade headlines from Larry Kudlow and Wilber Ross in the overnight/early NY session.  We think this morning’s US Retail Sales report was nothing to get excited about and so we think some AUD shorts could lighten up further here into the 0.6810s.  Yesterday's upside reject of the 7.0300 handle in USDCNH during NY was another clue that AUDUSD would trade higher today.  Off-shore dollar/yuan now looks poised to re-test the 6.9900 level it broke above early this week.

 

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY

 


 

USDJPY

Things were looking a little scary for the net long USDJPY fund position yesterday, after the US yield decline picked up steam into the London close.  The US 10yr bond yield dropped quickly to the 1.80% handle after falling below 1.84%.  Gold spiked higher by $10 and the broader USD was getting slammed.  It wasn’t your classic “risk-off” type scenario because the stock market barely moved, but it was enough to knock USDJPY below its own chart support at 108.50.  Kudlow’s “we are close” US/China comments at the start of the Asian session seemed to come to the rescue believe it or not.  We then saw a wave of EURJPY buying come in during London trade today, which seems to be helping EURUSD oddly enough as well this morning.  The US Retail Sales report has knocked US yields back a tad, which is why we think USDJPY continues to flounder here in the 108.60s.  We think the funds will breathe a sigh of relief if USDJPY finishes the day still above the 108.50s.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BOND YIELD DAILY

US 10YR BOND YIELD DAILY

Charts: Reuters Eikon


About the Author

Erik Bregar

Erik Bregar - Director, Head of FX Strategy

linkedin twitter

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? Contact us or call EBC's trading desk directly at 1-888-729-9716.

 

 

About Exchange Bank of Canada
Exchange Bank of Canada, EBC – Canada’s Foreign Exchange Bank, is the only Schedule 1 Canadian bank specializing in foreign currency exchange and international payments for financial institutions and corporations. EBC provides innovative foreign exchange management and integrated international payment solutions tailored to meet business needs on a global scale. Leveraging industry leading technology and a client-focused team of experts EBC delivers comprehensive, cost-effective and trusted payment processes and foreign exchange currency solutions to create financial and operational efficiencies. To learn more, visit: www.ebcfx.com.

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 Ben Tidwell at 08:15 AM