Better than expected German IFO survey calms some investors nerves

Summary

• USDCAD: Dollar/CAD is starting the week bid as crude oil traders struggle to get the market back above $59 this morning.  The broader USD is trading mixed, albeit with a quiet tone.  The S&P futures are clawing back some follow-through selling from Friday after Germany released a better than expected IFO survey for the month of March.  The leveraged funds at CME added to their net long USDCAD position as of March 19th, but it appears that a number of positions weren’t rolled from the March to the June futures contract last week (if we look at Friday’s open interest total of 142k contracts vs 167k on 3/19).  This week’s North American calendar is going be to be on the lighter side, with just the GDP figures out of the US on Wednesday, and Canada on Friday, being the stand out features in our opinion.  We think USDCAD wrestles for direction today around trend-line support in the 1.3420s.

• EURUSD: Euro/dollar is finding a bit of a relief bid this morning after the German IFO survey for March beat expectations on all three sub-indices (Business Climate, Current Assessment and Expectations).  This is seeing German bunds yield tick back up above zero today and it is also helping EURUSD regain the 1.13 handle.  This week’s European calendar features five ECB member speeches (Wednesday), German CPI for March and a 10yr bond auction out of Italy (Thursday), and finally Germany’s February Retail Sales, Germany’s March employment figures, and Italy’s March CPI data (all on Friday).   It looks like the leveraged funds at CME decided to stay short EURUSD when rolling contracts from the March to the June futures contract last week.  We think they remain in charge so long as the market stays below the 1.1400 level.

• GBPUSD: Euro/dollar is finding a bit of a relief bid this morning after the German IFO survey for March beat expectations on all three sub-indices (Business Climate, Current Assessment and Expectations).  This is seeing German bunds yield tick back up above zero today and it is also helping EURUSD regain the 1.13 handle.  This week’s European calendar features five ECB member speeches (Wednesday), German CPI for March and a 10yr bond auction out of Italy (Thursday), and finally Germany’s February Retail Sales, Germany’s March employment figures, and Italy’s March CPI data (all on Friday).   It looks like the leveraged funds at CME decided to stay short EURUSD when rolling contracts from the March to the June futures contract last week.  We think they remain in charge so long as the market stays below the 1.1400 level.

• AUDUSD: The Aussie is trading moderately higher this morning as EURUSD inches higher.  This week will be light on the Australian data front, with just a couple RBA member speeches on deck for tonight and tomorrow night.  With the market now regaining the 0.7080s support level it lost in late Friday trade, we think prices will now range here between 0.7090 and 0.7130.

• USDJPY: Dollar/yen continues to pivot around the 110.10 level this morning after Friday’s awful German manufacturing PMI put pressure on the key chart support level.  The better than expected German IFO numbers reported earlier today and some buying in the S&Ps is helping here, but some resistance in the 110.20-30s and almost 2blnUSD in option expiries at the 110.00 strike this morning is countering that out.  The leveraged funds at CME maintained their net long USDJPY position over the course of last week’s March/June futures roll, which has proven to be costly.  We think USDJPY risks falling lower still if traders cannot manage a NY close above the 110.10s today.  This week’s Japanese calendar features a bunch of economic data on Thursday night.  We’ll get the Tokyo CPI figures for March, plus Japan’s employment, industrial production and retail trade reports for February.

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

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About the Author

Erik Bregar - Director, FX Trading

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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