US reports better than expected Retail Sales for January, but an already bad December number is revised lower

Summary

• USDCAD: Last week’s rally in USDCAD finally took a breather on Friday following weaker than expected US employment growth out of the US and stronger than expected job growth out of Canada.  This data saw the market pull back sharply into trend-line support at the low 1.34s, and some crude oil volatility saw traders play the 1.3405-1.3430 range for the remainder of the session.  Dollar/CAD is starting a new week of trade now in that very same price range, as the broader USD gyrates with a mixed tone so far today.  Jerome Powell didn’t offer anything noteworthy during his interview with 60 Minutes last night.  April crude is trading bid once again following Friday’s strong rebound back above the 55.20s and news today about Saudi Arabia planning to cut oil production further in April.  The US Retail Sales report for January was just released +0.2% MoM vs -0.1% expected, but with negative revisions to December.  We think USDCAD trades with a choppy tone today.  The net long USDCAD fund position at CME grew slightly during the week ending March 5th, and now stands at a little over 40k contracts (which is about 20% less than what it was in early January).  This week’s economic calendar features the US February CPI figures (tomorrow), US January Durable Goods (Wednesday), a speech from the Bank of Canada’s Wilkins on Thursday evening at the Vancouver School of Economics, and US February Industrial Production (Friday).

• EURUSD: Euro/dollar traders are trying to make some headway above trend-line resistance in the 1.1230s to start the week, but the gains are fading now as the BTP/Bund yield spread widens back up to +250bp into NY trade this morning.  This week’s European calendar features a speech from the ECB’s Lautneschlager tomorrow morning, Eurozone January Industrial Production on Wednesday, German February CPI on Thursday, and the Eurozone February CPI figures on Friday.  The funds at CME added to both long and short positions during the week ending March 5th, but their net short EURUSD position still managed to edge higher to a new high for the year so far (78,166 contracts).  We think the shorts remain in charge so long as the market stays below the 1.1270s

• GBPUSD: Sterling is starting the week with a bit of volatility.  The market opened offered after it was reported that Theresa May’s cabinet is quickly abandoning her ahead of tomorrow’s meaningful Brexit vote in UK parliament.  They want her to scrap the vote altogether, as she’s pretty much destined to lose it.  We’re also reading reports that the EU is considering slapping the UK with punitive measures should its parliament vote to extend Article 50 on Thursday.  What is worse, Brexit talks between the UK and Brussels are reportedly still stuck at a standstill.  GBPUSD couldn’t manage to break chart support in the 1.2960s amidst all this negativity however, as so it looks like we’re seeing some short covering now as we head into NY trade.  Resistance today comes in at 1.3050, then 1.3075.  The funds at CME were busy liquidating positions during the week ending March 5th, and the result was a reduction in their net short GBPUSD position back down to late January levels.  The UK reports its January figures for Trade, Industrial Production, and Manufacturing Production tomorrow morning, but these economic reports will likely take a back seat to some form of final vote on Theresa May’s Brexit plan tomorrow, the “no-deal” Brexit vote on Wednesday, and the “Article 50” extension vote on Thursday. 

• AUDUSD: The Aussie is trading quietly bid this morning as traders digest a mixed Retail Sales report out of the US.   The headline (at +0.2% MoM vs -0.1%) was better than expected, but the report also showed a downward revision to the December figures, which were already bad (now -1.6% MoM vs -1.2% originally reported).  Trend-line chart resistance at the 0.7050 is now being put to the test, and we think a rally above this level could spur on some quick gains back up to the 0.7100 mark.  Australia reports its February NAB Confidence Survey tonight at 8:30pmET.  The Westpac Consumer Confidence numbers will be out tomorrow night at 7:30pmET.

• USDJPY: Dollar/yen has had a very choppy start to the week.  The buyers continue the 111.00 level after managing to close the market above that level on Friday.  This came despite the disappointing US employment report on Friday, which is mild positive we might argue.  However, broad USD selling since the European open today and a mixed US Retail Sales report for January is not helping as NY trading gets underway for today.  The funds at CME added sizably to long positions during the week ending March 5th, which now brings their net long USDJPY back up to January levels (51,306 contracts).  With the S&P futures looking bid this morning, we think USDJPY holds its current level today.  The Bank of Japan will announce its latest decision on monetary policy this Thursday night.

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

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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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