Poor German and Eurozone Manufacturing PMIs sees broad demand for USD today.

Summary

• USDCAD: Dollar/CAD teased traders with a downside break of the triangular consolidation we noted on the daily chart yesterday.  This downside move came after the release of the Canadian CPI figures for March, which beat expectations when it come to the core, ex food and energy, measure.  The market blew through support at 1.3310 and looked on course to test the 1.3260s, but then a swift sell off in the stock market turned things around.  May crude oil prices fell in sympathy and this, in our opinion, allowed USDCAD to scream back to close the day above the 1.3310-1.3330 support zone.  The upward momentum has continued in overnight trade, with EURUSD selling leading the way following bleak manufacturing PMI data for March.  The Retail Sales reports out of the US and Canada are up next at 8:30amET.  Traders are looking for +0.9% MoM out of the US for the month of March, and +0.7% ex Autos.  For Canada, the expectation is +0.4% MoM for February and +0.2% ex. Autos.  We think strong US and weak Canadian numbers could be the catalyst for a surge to the upside in USDCAD, while the opposite (or even mixed results) would muddy the technical outlook heading into next week’s Bank of Canada rate decision.  Chart resistance today is 1.3380-1.3400, then not much else until the 1.3450s.  Chart support today is 1.3310-1.3330.

• EURUSD: Euro/dollar is taking in on the chin to close out the week after the April Markit Manufacturing PMIs for Germany and the Eurozone both missed expectations.  The German number came out at 44.5 vs 45.0, and the Eurozone number came in at 47.8 vs 47.9.  While the figures didn’t miss be a huge margin, we think this is drawing further attention to a slowing European economy and an ECB that will be forced to keep monetary policy accommodative for the foreseeable future.  With chart support in the 1.1270-80s now having given way, we think we could see the market slip further to the 1.1230s.  Market liquidity might evaporate quickly later this morning as European traders leave early for the four day Easter long weekend.

• GBPUSD: Sterling is following EURUSD lower so far today, and while the UK Retail Sales print for March beat expectations earlier this morning (+1.1% MoM vs -0.3%), a swift bounce higher in the EURGBP cross around 5amET saw GBPUSD swoosh back lower.  We think the horizontal support level lying in the 1.3010s will be the pivot for price action today.  Staying below will likely keep the pressure on, whereas a move back above it may lead to some short covering ahead of the Easter long weekend.  The Brexit saga will resume on Tuesday, when UK politicians return to work.

• AUDUSD: The Australian dollar has had a volatile 24hrs of trade.  A swift pullback in the stock market yesterday pulled AUDUSD back below chart support in the 0.7190s.  A better than expected March employment report out of Australia last night then saw the market surge higher and attempt to regain the 0.7190s (+25.7k jobs vs +12k expected).  However, the German and Eurozone PMIs out this morning ruined the recovery attempt, and we now sit just below yesterday’s NY lows, with the next chart support at the 0.7140s now in the cross hairs.  We think AUDUSD has a choppy end of the week as the current downward momentum competes with over 1blnAUD of options expiring at the 0.7175 strike this morning.

• USDJPY: Dollar/yen is on the hunt for buyers today after two failed attempts to break above the low 112s yesterday.  The poor PMI data out of Germany and Eurozone is knocking the EURJPY cross lower this morning and we’re also seeing some “risk-off” flows go through the broader market (ie. global equities and bond yields weaker), which typically benefits the JPY.  Over 1.5blnUSD in options expire at the 112.00 strike this morning, and so we think the market could have a sleepy end to the week here.  We still think the bulls remain in charge so long as the market can hold chart support in the 111.50-80s.

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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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