Upbeat Chinese data boosts copper and commodity currencies. Canadian CPI for March up next.

Summary

• USDCAD: Dollar/CAD is trading with a soft tone again this morning as upbeat Chinese economic data overnight boosts the yuan and commodity currencies higher.  China reported Industrial Production for March at 8.5% MoM vs expectations of +5.9%.  Chinese Retail Sales for March were +8.7% MoM vs 8.4%.  Finally, the Chinese Q1 GDP figure came in at +6.4% YoY, which surpassed the consensus estimate of +6.3%.  The Yuan shot up after these numbers were reported.  So too did the Aussie and the Canadian dollar.  May crude oil is trading bid this morning following yesterday’s surprise API draw of 3.1M barrels vs expectations for a 1.7M build.   USDCAD is now attempting to find support in the 1.3310-1.3330 area as traders await the Canadian CPI report for March at 8:30amET.  The market is expecting +1.9% YoY on the headline and +1.3% YoY on the core measure.  We’ll also get the Trade Balance figures out of both the US and Canada at the same time.  The weekly EIA oil inventory report comes out at 10:30amET today as usual, and the consensus there is for a build of 1.7M barrels.  The Fed’s latest Beige Book report gets published at 2pmET today.  We’re watching a triangular consolidation on the daily USDCAD chart which is about to reach its apex, and we think a breakout above 1.3400 or below 1.3300 will determine the next discernable trend.

• EURUSD: Euro/dollar was lifted back above trend-line support in the 1.1290s overnight following the better than expected Chinese data, but the move has since faded as (we think) traders prepare for over 1.5blnEUR in options expiring at the 1.1300 strike this morning (10amET).  Germany officially cut its 2019 GDP growth forecast from +1.0% to +0.5% this morning, and this comes after they cut it from +1.8% to +1.0% back in January.  While one could argue this development was somewhat expected given recent headlines out of Europe, we don’t think it’s helping the EUR mood today.   

• GBPUSD: Sterling is trying to forge a bit of a bottom this morning as traders try to reclaim trend-line support in the 1.3050s.  This level was attacked to the downside in NY trade yesterday after the Guardian reported that negotiations with Jeremy Corbyn on a customs union had stalled.  This morning’s weaker than expected UK CPI print for March (+1.9% YoY vs +2.0%) added to the selling pressure.  However, we’re see GBPUSD buyers come back here as NY trading gets underway.  We would note that the potential EURGBP breakout, that we alluded to yesterday on Twitter, occurred earlier today but it has now completely failed (which we think is helping the GBP here).  Bank of England Governor Carney will be speaking at 9amET. 

• AUDUSD: The Aussie has benefiting handsomely from the better Chinese data reported overnight, but traders are now running into the same, upward sloping, trend-line resistance that capped the market last week (now in the 0.7190-0.7200 area).  Over 1.5blnAUD in options expire around these levels at the 10amET NY cut.  May copper futures are trading up 1% so far today, but like AUDUSD, it could face some chart resistance into NY trade today (2.9650s).  Australia reports its March employment report tonight at 9:30pmET and the expectation is for a gain of 12k jobs.

• USDJPY: Dollar/yen continues to struggle with the 112.00 handle today as risk-on flows compete with broad USD weakness.  We think the market may need to drop lower here to attract more buyers.  Japan’s Manufacturing PMI for April will be reported tonight at 8:30pmET.

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

Market Analysis Charts

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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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