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2018-05-07 08:15

USD broadly bid to start week. CAD traders eyeing NAFTA talk early this week + jobs numbers at end of week. No hike now expected from BoE when it meets on Thursday.

Source: EBC Trading Desk

Summary

  • USDCAD: Dollar/CAD is starting the week with a bid tone as EURUSD continues lower.  Friday’s reaction to the US payroll numbers, while volatile, was confined to converging support and resistance trend-lines that kept the market range-bound last week, and this morning action has been much the same so far.  Markets will be watching the resumption of NAFTA negotiations in Washington today, and the economic calendar picks up tomorrow and Wednesday with some Canadian data (Housing Starts and Building Permits).  We get a big US data item on Thursday (US CPI), followed by the Canadian employment report on Friday.  Canadian dollar futures traders added marginally to their net short position (USD long) position in the week ended May 1st.  We think USDCAD continues to consolidate here until support in the 1.2840s or resistance in the 1.2910s gives way in a meaningful way.  Interestingly, the crude oil rally above $70 this morning is not bothering USDCAD longs at the moment.

  • EURUSD: Euro/dollar is starting the week offered yet again after a tumultuous plunge last week that took prices well below key weekly and Fibonacci support levels (1.2080 and 1.2045).  Friday’s move lower post NFPs attacked the 61.8% Fibonacci retracement of the Nov-Feb rally and a trend-line extension support level in the low 1.19s, and the market was able to bounce higher but the end of the day (which was positive technically).  However, all that unravelled overnight as we got more disappointing data out of Europe (weaker than expected German Factory Orders and Eurozone Retail PMI).  The net EUR long position at CME dropped for the second week in a row going into May 1st (which is not surprising given recent price action) however the change was mainly driven by new short positions.  The European calendar is very quiet this week, with just German Trade and Industrial Production on Tuesday, which will leave the focus on US CPI and possibly the Fed’s Powell when he speaks tomorrow in Zurich, and the ECBs Draghi when he speaks Friday morning.  We think EURUSD retains its downward trajectory today so long as the market stays below the 1.1940s.  Next support is 1.1900-1.1905.

  • GBPUSD: Sterling is starting the week with a neutral tone after an awful week last week that saw prices plunge through chart level after chart level.  A UK banking holiday today is keeping flows quieter than normal and downdraft in EURGBP is keeping the GBPUSD chart a little more constructive than EURUSD at this hour.  With the release of the weaker than expected UK PMI number on May 1st (another bad number in a string of weak UK data items recently), markets are now effectively pricing no change in interest rates from the Bank of England when it meets on Thursday.  This contrasts with 80%+ odds of a 25bp hike in early April.  Pound future traders reduced their net long position for the second week in a row ending May 1st as longs trimmed and shorts added.  We think GBPUSD remains in a downtrend as well so long as downward sloping trend-line resistance in the 1.3555 and 1.3585 continue to cap.

  • AUDUSD: The Aussie is starting the week with an offered tone as EURUSD continues lower.  Friday’s late day rally back above 0.7540 (a level that it lost early Friday and again over US payrolls) was a positive development but all that is unravelling now as AUDUSD trades back at the 75 figure.  The data calendar is light for Aussie traders this week, with just Australian retail sales tonight (9:30pmET), and so the focus will be on the broader USD and copper prices as usual, and potentially the Chinese and US CPI numbers on Thursday.

  • USDJPY: Dollar/yen is starting the week with a bid tone as Friday’s action, while volatile around the US payrolls data, saw the market close above trend-line support in the 109.05 area.  Broad USD buying, led by EURUSD selling this morning, is also helping.  Futures traders flipped to a tiny net short USD (long JPY) position in the week ending May 1st after a month of maintaining a tiny net long position.  With S&P futures and US yields bid, we think USDJPY drifts higher today to test resistance in the 109.40-50 area.

Tune in @EBCTradeDesk for more real-time market coverage.

 

Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

EUR/CAD Daily Chart

GBP/CAD Daily Chart

EUR/USD Daily Chart

GBP/USD Daily Chart

AUD/USD Daily Chart

USD/JPY Daily 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 1-888-729-9716.


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Posted By Jennifer Danuff at 08:15 AM