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2018-01-25 08:15

Rumored mystery USD buyer overnight. Mnuchin talking down USD again. ECB holds with Draghi press conference underway.

Source: EBC Trading Desk

Summary

  • USDCAD: The broader USD is experiencing more pain again overnight, as US Treasury secretary Mnuchin was on the wires again (but this time at the request of the IMF’s Lagarde it seems).  She asked Mnuchin to clarify his dollar comments yesterday, but he came out again saying he thought he was clear, and reiterated much the same rhetoric as yesterday (that he’s not concerned about where the dollar is in the short-term and that a lower dollar has benefits for US trade in the short-term).  Naturally, this did nothing to help the USD.  Nor is the ongoing tough talk from US Commerce Secretary Wilbur Ross on trade.  China fired back a bit last night saying it would “take appropriate measures against unilateral moves”.  All this has markets now nervous about a trade wars and “America First” policy, and while Mnuchin will try to deny it, a weaker USD fits nicely into that agenda.  Trump has arrived in Davos, and his comments will be the highlight for markets tomorrow.  USDCAD is clinging desperately to trend-line extension support, which today remains in the 1.2330s.  The market hugged the level for most of yesterday’s NY session, lost it slightly overnight amid another wave of broad USD selling and is making an attempt to regain it now.  The focus for USDCAD traders today will be ECB press conference and its effect on the broader USD.  We also have Nov Canadian Retail Sales at 8:30am (same time as Mario Draghi press conference) with markets expecting +0.8% MoM.  EURCAD had a nice turn around yesterday, now comfortably back above trend-line support.  GBPCAD has surged above 1.75, touching 1.76 overnight, but again this has all been GBP driven.  Trend-line support at 1.2330 and the market’s ability to hold it remain key in our opinion for today.  Given that USDCAD is already off its lows for the session, a firm close above the 1.2330s would create an inverted hammer candle pattern, which would signal a short term bottom.

  • AUDUSD: The Aussie continues to trade off the broader USD theme.  After another stellar performance yesterday, AUDUSD pulled back a bit overnight to test the top end of the support range we mentioned yesterday (0.8030-0.8040).  The market held and then resumed its rally as the broader USD sold off again.  Reuters reported trader talk of a “mystery bid” from a large name in USDJPY just before the 2am hour, and this coinciding with a quick pop higher in USDCNH  and drops lower in EURUSD and GBPUSD.  The AUDUSD followed suit as we’d expect and then we had the Mnuchin comments again towards 3am.  So it’s a little hard to say what turned the broader USD around here, but all currency pairs are now working on intra-day reversals as we write.  Copper exploded higher yesterday along with many other commodities amidst the broad USD weakness.  The fact that it has regained the 3.21s in such short order is positive for AUDUSD, but the broader USD theme should still dominate today’s AUD trade.  A firm close below 0.8030-0.8040 would cement a near term top.  Buyers are still in control for the time being however.

  • EURUSD: The ECB just announced no change to interest rates and its asset purchase program that’s scheduled to run until September 2018.  Traders are calling it a “copy/paste” of the last ECB meeting.  The EURUSD has barely moved, because the main focus will be what Mario Draghi has to say at his press conference at 8:30amET.  We expect him to be berated with questions about the level of the dollar and the EUR, and we would not be surprised to see him talk down the EUR and inflation.  If he says anything hawkish, we feel that opens the flood gates for EUR buying.  If he comes off more dovish than expected, we could see EURUSD come off bit more here.  There’s light support in the 1.2370s, better support at 1.2320-1.2330.  After plunging below 6.35 in Asian trade, USDCNH is holding slightly above 6.32 as the 2am ramp up has been short lived (this is supportive EURUSD).  The German IFO survey, reported at 4am, beat expectations on the headline current assessment, but the expectations sub-index came in light.

  • GBPUSD: Sterling continues to make headlines with a mind-numbing 250 point rally yesterday.  Like EURUSD and AUDUSD, it’s working on a little reversal here too, with 1.4328 now a defined intra-day resistance level (the highs).  EURGBP is doing well so far today, holding trend-line support right around the 0.7700 figure (see chart).  A bounce on the cross here post ECB press conference would pressure GBPUSD, but let’s see what happens here.

  • USDJPY: Dollar/yen is hanging on for dear life here as it can’t escape broad USD selling pressure.  EURJPY and GBPJPY are off a bit too as EURUSD and GBPUSD top out.  Prices are clinging to trend-line extension support, which today checks in at the 108.90s.  The Reuters story about rumors of a large USD buyer stepping in overnight is certainly interesting.  USDJPY traders will be watching the EURJPY cross as Mario Draghi speaks shortly here.

Market Analysis Charts

USD/CAD Chart

AUD/USD Chart

EUR/USD Chart

GBP/USD Chart

USD/JPY Chart

USD/CNH Chart

EUR/GBP Chart

Charts: TWS Workspace


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.

Interested in creating a custom foreign exchange trading plan? Contact Us or call EBC's trading desk directly at 1-888-728-4918.


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Posted By Rachel Butler at 08:15 AM