Risk off flows back in action. US Retail Sales and Canadian CPI figures for April up next.

SUMMARY

• Traders expecting +0.2% MoM and +0.7% MoM ex. Autos for US Retail Sales.
• Consensus looking for +0.4% MoM and +2.0% YoY for Canadian CPI.
• Australian May Consumer Confidence and Q1 Wage Price Index misses expectations.
• Chinese April Retail Sales and Industrial Production figures disappoint.
• Italian bonds see follow-through selling following Salvini’s budget comments yesterday.
• German bund yields at new lows, BTP/Bunds at new 3-month wides, risk-off flows benefiting USD broadly.

ANALYSIS

USDCAD

Dollar/CAD is trading with a bid tone again this morning as the broader USD continues higher, but EURCAD sales are taking the upward momentum out of the market as NY trading gets underway.  The USD is being led higher by weaker than expected economic numbers out of Australia and China overnight, tough talk out of the Chinese foreign ministry today and a falling EURUSD market, which is focused on German bund yields descending to new lows (-0.12bp) and the BTP/Bund spread blowing out to new 3 month wides (+287bp).  Next up are the US Retail Sales and Canadian CPI figures for the month of April at 8:30amET.  Traders are expecting +0.2% MoM and +0.7% MoM ex. Autos for the former, and +0.4% MoM and +2.0% YoY for the latter.  The US Industrial Production numbers for April come out at 9:15amET, and the expectation there is for a flat MoM read.  Finally, we’ll get the weekly EIA oil inventory data at 10:30amET this morning, where traders are now expecting a build of 11M barrels following last night surprise 8.6M barrel build in the API report.  We think USDCAD remains in good shape, technically speaking, so long as the 1.3460s continue to hold.

USDCAD DAILY

USDCAD HOURLY

JUN CRUDE OIL DAILY

EURUSD

Euro/dollar is falling swiftly lower this morning as bond traders continue to punish Italian debt following Salvini’s comments yesterday about exceeding the EU’s 3% budget deficit limit.  German bunds, on the other hand, appear to be the safe haven for global investors once again this morning as China says it will find others to fill the gap if the US doesn’t want to do business with them.  This sell Italy/buy Germany debt trade has been traditionally bearish EURUSD, and when we combine these developments with yesterday’s bearish NY close for EURUSD below the 1.1210s, it’s not surprisingly in our opinion to see the market lower here.  The next support level on the charts lies in the 1.1170s.  Dollar/yuan is trading steady today, and has so far not taken out this weeks highs in the 6.9190s.  The ECB’s Coeure will be speaking at 10:15amET this morning and the ECB’s Praet will be taking the mic at 12:30pmET.  

EURUSD DAILY

EURUSD HOURLY

USDCNH DAILY

GBPUSD

Sterling is following EURUSD lower today after succumbing to sellers below yesterday’s trend-line pivot in the 1.2930s.  Traders have quickly tested the next chart support level in the 1.2890s this morning and so far the level is failing to curb the selling, which means the 1.2850-60s are likely the next stop.  The EURGBP cross is treading steady today at yesterday’s pivotal resistance level in the 0.8680s as traders yawn at Theresa May's announcement for another parliament Brexit vote for sometime in June.

GBPUSD DAILY

GBPUSD HOURLY

EURGBP DAILY

AUDUSD

The Aussie is slipping lower this morning after the May Westpac Consumer Confidence, the Q1 Wage Price Index, and the Chinese Retail Sales/Industrial Production figures for April all missed expectations last night.  Yesterday's key trend-line support at the 0.6940 level gave way pretty easily and we’ve since seen follow-through selling as EURUSD moves swiftly lower.  The S&Ps are giving back 15pts this morning as China’s comments today don’t make it seem like any trade deal is around the corner.

AUDUSD DAILY

AUDUSD HOURLY

JUL COPPER DAILY

USDJPY

Dollar/yen is falling back this morning as a global risk-off wave sweeps over markets again, especially in EURJPY.  Most of yesterday’s S&P driven bounce has been reversed, but the market currently remains above key chart support at the 109.05-15 level.  Over 2blnUSD in options expire between the 109.20 and 109.50 strikes this morning at 10amET.

USDJPY DAILY

USDJPY HOURLY

S&P 500 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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