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SUMMARY
• USDCAD back near 1.3070s pivot. EURCAD back above 1.4640s.
• Canada reports mildly weaker CPI report for June. May Manufacturing Sales miss expectations.
• US reports weaker than expected June Housing Start and Building Permit data.
• GBP looks the victim of sell stop hunting in Europe. UK reports in-line CPI data for June.
• Weak base metal prices sees AUDUSD slump back to 0.7000 ahead of Australian jobs report tonight.
• Weekly EIA oil inventory report up next at 10:30amET. APIs come in bearish last night. Fed Beige Book at 2pmET.
ANALYSIS
USDCAD
Dollar/CAD rebounded strongly off trend-line chart support in the 1.3020s yesterday and while the move got started following Trump’s “long way to go with China” comment, it really picked up steam when Secretary of State Pompeo said the Iranians are ready to negotiate on their missile program. This took the floor out from underneath crude oil prices and sent the August contract swiftly 4% lower below $58/barrel. USDCAD charged higher above chart resistance at 1.3070 and EURCAD (which fell to new 2yr lows earlier in the session) managed to scream back above the 1.4640 support level. An Iranian spokesperson came out later in the NY afternoon denying that its missiles are up for negotiation and with that we saw oil prices and CAD recover somewhat. The Canadian CPI report for June has just been released and the numbers slightly missed expectations (in-line reads of +2.0% YoY on the headline and +1.8% YoY on the core measure) but 0% vs +0.1% exp on the MoM core read. Canada also reported its Manufacturing Sales report for the month of May and those numbers more sizably missed expectations (+1.6% MoM vs +2.0%). USDCAD has edged back above the 1.3070 level in response, but there’s not much momentum behind this move right now (perhaps because of the weak US housing data just reported as well…more below). Next up is the weekly EIA oil inventory report at 10:30amET, where traders are expecting a draw of 2.694M barrels after last night’s bearish API report (-1.4M barrels vs -3M exp). Much damage was done to the August crude oil chart yesterday and so that market’s rebound this morning (+1%) is now struggling at trend-line resistance in the 58.30s (which is mildly supportive USDCAD).
USDCAD DAILY
USDCAD HOURLY
AUG CRUDE OIL DAILY
EURUSD
Euro/dollar is struggling to make any headway this morning as sellers have pounced on three attempts to regain the 1.1210s support level which was lost in yesterday’s trade. The German bund yield is leaking lower again after opening 3bp higher, the Eurozone CPI figures for June came in slightly better than expected (+0.2% MoM vs +0.1%) and the EURJPY cross has regained crucial chart support in the 121.20s (when should stem further risk-off flows for the time being in our opinion). The US just reported its Housing Start and Building Permit figures for the month of June and both data points missed expectations (-0.9% MoM and -6.1% MoM respectively). The Fed will releasing its latest Beige Book report at 2pmET.
EURUSD DAILY
EURUSD HOURLY
AUG GOLD DAILY
GBPUSD
The British pound had a rough open in Europe this morning as traders appeared to gun for GBP sell stops below 1.2390 in GBPUSD and above 0.9045 in EURGBP. We have since reversed course in both pairs as more negative Brexit developments have been sparse so far today, and with that we think GBP selling might take a breather here. The UK reported its June CPI data in line with expectations earlier this morning (+2.0% YoY) and so it wasn’t a market mover.
GBPUSD DAILY
GBPUSD HOURLY
EURGBP DAILY
AUDUSD
The Aussie is slipping all the way back to chart support at the 0.7000 level this morning and it appears slumping base metal prices seem to leading the charge today (Chinese Dalian iron ore and copper prices both trading lower). We also think this could be trader position squaring ahead of Australia’s June Employment Report, which will be released at 9:30pmET tonight. The consensus expectation is for a gain of 10k jobs last month and an unemployment rate of 5.2%.
AUDUSD DAILY
AUDUSD HOURLY
SEP COPPER DAILY
USDJPY
Dollar/yen reached the 108.30s fairly easily yesterday after the market regained the 108.10s in the early goings, but it has been struggling there ever since. A slip back lower in global bond yields hasn’t helped, nor has this morning’s weak US housing data and a slew of option expiries centered around the 108.30 strike (1.3blnUSD). BOJ governor Kuroda spoke earlier today but his comments were not market moving. More here from Reuters.
USDJPY DAILY
USDJPY HOURLY
US 10YR BOND YIELD 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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