Trump announces $11bln in new tariffs against the EU

Summary

• USDCAD: Dollar/CAD is trading with a heavy tone this morning as traders gun for trend-line support in the 1.3280s.  Yesterday’s expected pull back in the market intensified into a price collapse when a rebel attack on Tripoli’s only airport in Libya sent fears through the oil markets.   May crude shot up 2% and USDCAD lost chart support in the 1.3330-50s as a result, which left the market with somewhat of a precarious setup heading in the NY close.  Broad USD sales have weighed in European trade so far today, and it now looks like some buyers are appearing at the 1.3280s as oil prices back up a bit.  Today’s economic calendar doesn’t feature anything notable for market participants, and so we think USDCAD attempts a rebound here.  We’ll be focused on crude oil again today, and it looks like the May contract is struggling to get over the 64.60s at the moment.

• EURUSD: Euro/dollar has moved above trend-line chart resistance in the 1.1270s this morning as the USD trades broadly lower.  President Trump just announced $11blnUSD in new tariffs against the EU, in retaliation for Europe’s subsidies to aircraft carrier Airbus.  Traders appear to be taking all of this in stride however, with EURUSD still trading near the highs of the session.  Talk is making the rounds this morning that the ECB will now be forced to strike a dovish tone yet again when Mario Draghi speaks about the monetary policy outlook for Europe tomorrow.  We think EURUSD chops around today ahead the ECB tomorrow, and we think the over $5bln EUR in options expiring between the 1.1245 and 1.1275 strikes today will add to the directionless tone.

• GBPUSD: Sterling traders had to deal with the Brexit rumor mill again this morning, after UK based tweets and reports circulated about Germany willing to accept a 5 year limit to the Irish backstop.  This saw GBPUSD shoot up above trend-line resistance at the 1.3100 level, but this move was quickly reversed when a German government spokesperson denied the reports.  The market now trades back below the 1.3070s, or yesterday’s chart resistance.  The EURGBP cross is making another attempt to rally to chart resistance at the 0.8650 level today, however it looks like that move might fizzle out now (which is mildly GBPUSD supportive).  Theresa May is now in Germany meeting Angela Merkel, and is trying to win her support for another short Brexit extension when the EU decides on the matter at an emergency summit tomorrow.

• AUDUSD: The Australian dollar has broken out to the upside, and this all began when the market broke above the 0.7105 level we spoke about yesterday.  The rallies in EURUSD and May copper prices appear to be the lead correlative factors, and we would also note the lack of meaningful AUDUSD chart resistance until the 0.7170s as another factor.  All that being said however, we think the market may struggle a bit here today as EURUSD traders deal with massive option expiries and May copper traders deal with chart resistance in the high 2.95s.

• USDJPY: Dollar/yen traders managed to stick save the market back above trend-line support in the 111.40s yesterday, but Japanese equity traders sold the Nikkei yet again in overnight trade.  This dragged the S&P futures off their closing highs and caused a swift reversal lower in USDJPY around 8pmET last night.  The S&P futures are now taking a dip lower heading in the cash open as traders digest Trump’s new trade spat with the EU.  USDJPY has now broken below chart support in the 111.20s.  A Fibonacci level comes in at 111.15.  We think the market might find support here as over 2blnUSD in options roll off between 111.20 and 111.25 this morning at 10amET, but after that we think the pressure could be on again as there’s not much support on the charts until the 110.60s.

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

Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

May Crude Oil Daily Chart

EUR/USD Daily Chart

EUR/USD Hourly Chart

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GBP/USD Daily Chart

GBP/USD Hourly Chart

EUR/GBP Daily Chart

AUD/USD Daily Chart

AUD/USD Hourly Chart

May Copper Daily Chart

USD/JPY Daily Chart

USD/JPY Hourly Chart

June S&P 500 Daily

Charts: TWS Workspace

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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