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2017-11-07 08:15

$USD broadly bid. $EUR and $AUD traders resume selling. $CAD traders watching Poloz today.

Source: EBC Trading Desk

Summary

  • AUDUSD: The Reserve Bank of Australia delivers a dovish hold on interest rates yet again overnight (as expected).  Market takes a look at the 50% Fibo of the May-Sep rally and then fizzles lower.  Broad USD rally in Europe helping.  Market still has weak technicals with a test of the 61.8% Fibo a possibility going into Friday’s Quarterly Statement on Monetary Policy.  A rally back above 0.7700 would do much to halt declines and repair the daily chart.  Futures traders liquidated 928 contracts yesterday.  

  • USDCAD: Market is trying to work off a negative NY close yesterday as big moves in crude oil start to make headlines again.  As we mentioned last week, CAD traders are starting to watch the oil market again as correlations slowly improve, but we note the correlation is really only kicking in on days when oil has a big move.  Today is all about Poloz.  The central bank governor will be speaking about inflation just before 1pm and then he’ll have a press conference with Q&A at 2pm.  The market dipped below the 38.2% Fibo in Asian trade but has since recovered on broad USD strength through the London session, with the 1.2770s now capping.  Notice that we’re now able to draw a parallel line to Sep-Oct upward trend-line that the market hugged for 2 months, thus creating an upward channel.  USDCAD is now technically below it with a lot of resistance above ahead, leaving us to believe we’re now stuck in a bit of a range with the path of least resistance lower.  Futures traders unwound 1254 contracts yesterday.

  • EURUSD: Technical selling pressure continues to weigh on the Euro with traders talking about the “measured move” for the head & shoulders top taking us all the way down to the 1.12s.  This pattern is still getting a lot of air time, but it’s been a hard trend to fight.  Hearing talk now of barrier options at the 1.1550 level, which could act as near-term support if option traders defend.  Bloomberg also out with a headline just before 7am saying some EBC policy makers challenged Draghi and the final decision not to put an end date on QE.  So EURUSD is holding steady a bit as we enter NY trading.  Market is still technically a sell on rallies so long as we trade below 1.1625.  Futures traders added 1910 contracts yesterday.

  • GBPUSD: Sterling roared back yesterday on reports Theresa May kick-started Brexit talks again by accepting a 53bln GBP bill, but don’t get too excited folks.  We’ve just erased some of the technical damage from the Bank of England move last week, and we’re now technically back in that 1.31-1.33 range we’ve been talking about.  EURGBP and GBPJPY flows have supportive so far this week.  Hearing talk this morning of a large option expiry today at 1.3150 that will likely contain activity going into 10am.  Nothing on the UK data front until Friday’s Industrial Production and Trade Balance figures.  There are a few BOE speakers on the calendar before then.  Futures traders liquidated 2028 contracts on the move up yesterday (post BOE shorts getting out?).

  • USDJPY: Dollar/yen is holding up surprisingly well despite yesterday’s daily reversal and the week long divergence against US treasury yields (US yields have back off 15bp from recent highs while USDJPY remains near its highs).  Some traders are chalking this up to the relentless rise in the Nikkei and persistent demand from Japanese investors on dips in USDJPY.  We feel USDJPY is at a key inflection point (113.75-114.50 area).  A lot needs to go right here to feed the JPY bears as positioning is starting to get a little crowded.  We also note the EURJPY chart which continues to look like it’s topping out.

  • USDCNH: We’re also watching the Dollar/Yuan this morning as it looks poised to break out to the upside (this would be a break of a downward channel going back to March and a break of a triangular consolidation which starting forming in October).  Given recent inverse correlations with EURUSD, we’ll be watching this pair very closely.  

Currency Calendar

Date Releases / Holiday Entity
November 7, 2017 ECB President Draghi's Speech EUR
November 7, 2017 BoC Governor Poloz Speech CAD
November 7, 2017 Fed's Yellen Speech USA

Bank holidays and impactful report releases for select countries.

Market Analysis Charts

AUD/USD Chart

USD/CAD Chart

EUR/USD Chart

GBP/USD Chart

USD/JPY Chart

USD/CNH Chart

Charts: TWS Workspace


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