Fed rate cut trade now looking for soft US May CPI figures to support
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SUMMARY
ANALYSIS
USDCAD
Dollar/CAD sits smack between chart support in the 1.3270s and chart resistance just above 1.3300 this morning as traders await the much anticipated US May CPI report at 8:30amET. The expectation is for +0.1% MoM / +0.2% ex food and energy, and +1.9% YoY / +2.1% ex food and energy. This upcoming report comes after the US reported slightly softer than expected producer price inflation yesterday, and will likely need to match/fall short of the consensus estimate in order to re-fuel the Fed rate cut trade heading into next week. July crude oil prices are falling 2.8% this morning after the API reported another build in weekly oil inventories versus expectations for a draw, and we would say this is helping USDCAD at the margins as we head into NY trade. The EIA will report its weekly inventory number at 10:30amET, with traders now looking for a build of 0.1M barrels. Over 1.1blnUSD in options expire at the 1.3275 strike at 10amET this morning, which could keep USDCAD anchored to current levels.
USDCAD DAILY
USDCAD HOURLY
JUL CRUDE OIL DAILY
EURUSD
There’s not a whole lot going on in the Euro this morning as traders await the US CPI figures. The market crawled above trend-line resistance in the 1.1320s yesterday afternoon, but slipped back below it in early European trade today. There’s much talk this morning about the Euro 5y5y inflation swap and how it has now fallen to a record low of 1.1950%. This will not help the ECB's credibility with regard to their inflation forecasts we feel. Mario Draghi’s opening remarks at an ECB event in Frankfurt this morning didn’t produce any monetary policy-related headlines. Dollar/yuan is trading steady above chart support in the 6.9220s after losing and regaining the level earlier. According to the latest from Chinese Global Times editor Hu Xijin (now deemed as a mouthpiece for the Chinese state), “From information I have access to, there is no sign that China is relaxing its countermeasures against US trade war. Chinese basically have no trust in the mild signals the US side sent occasionally. Will there be a breakthrough at G20? I dare not be optimistic at this moment.” Over 1.2blnEUR in options expire at the 1.1350 strike this morning.
EURUSD DAILY
EURUSD HOURLY
USDCNH DAILY
GBPUSD
Sterling is trading higher this morning after the market put in a decent NY close above chart support at the 1.2700 level yesterday. We think the continued inability for EURGBP to hold the 0.8900 level has proven beneficial and we think Boris Johnson’s comment about not aiming for a no-deal Brexit, as he officially launched his leadership campaign today, is helping broad GBP sentiment. Chart resistance comes in at the 1.2750s, then the 1.2770s today. All eyes on now are the US CPI figures.
GBPUSD DAILY
GBPUSD HOURLY
EURGBP DAILY
AUDUSD
The Aussie continues to drip lower as traders await key US inflation data at 8:30amET. Last night’s weak Westpac Consumer Confidence figures are not helping with regard to AUD sentiment. More here. July copper is losing 0.9% this morning amid a broad absence in risk appetite. Australia will report its May Employment report tonight and the expectation is for 17.5k new jobs and 5.1% on the unemployment rate. We think Monday’s swift reversal of Friday’s bullish breakout attempt has hurt the chart technicals for AUDUSD here.
AUDUSD DAILY
AUDUSD HOURLY
JULY COPPER DAILY
USDJPY
USDJPY DAILY
USDJPY HOURLY
AUG GOLD DAILY
Charts: TWS Workspace
About the Author
Erik Bregar - Director, Head of FX Strategy
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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