US Retail Sales and Canadian Manufacturing Shipments disappoint by a wide margin

Summary

• USDCAD: The overnight session has been a bit of a whipsaw for USDCAD.  Sellers faded the late NY move higher into chart resistance at 1.3250-60 during early Asian trade.  USDCNH and the broader USD then went offered after China reported strong export growth in its January Trade Balance figures.  EURUSD got smacked lower after what appeared to be knee jerk stop hunt higher following Germany’s poor GDP result for Q4 2018.  This led to broad USD buying in early European trade, which in turn helped USDCAD recover back into chart resistance.  March crude oil appears to be rejecting the 54.50s yet again this morning, following yesterday’s larger than expected build in weekly EIA oil inventories.  However, more importantly, a few economic headlines have just crossed:

   

  US Retail Sales (December) : -1.2% MoM vs +0.1% exp.  BIG MISS.

  US PPI (January) : -0.1% MoM vs +0.1% exp AND +2.0% YoY vs +2.1% exp.  SLIGHT MISS.

  Canadian Manufacturing Shipments (December) : -1.3% MoM vs +0.4% exp.  BIG MISS.

   

  While we’re now seeing broad USD selling as a result of the horrible US Retail Sales number, the negative reaction from the S&P and crude oil futures along with the equally disappointing Canadian Manufacturing Shipments data is seeing USDCAD surge higher into 1.3310s chart resistance.  EURCAD is rallying impressively back above the 1.4950s at this hour.  We think a close above the 1.5020s could usher in a bullish reversal higher for the cross.  We think a close above the 1.3310s in USDCAD will prompt an end to the downward trend we’ve been observing since the start of January.

• EURUSD: Euro/dollar had an up and down overnight session as well.  The strong Chinese export figures came to the rescue in Asian trade and helped the market recover back above trend-line support in the 1.1270s.  The knee jerk reaction to the flat German GDP read was to bid the market higher, but the swiftness of the move and quick retrace lower suggests buy stop orders were hit.  The sellers then pounced again (possibly re-entered) and pushed the market back below support.  The awful US Retail Sales figures have now flipped the momentum around and EURUSD has surged 30-40pts higher.  Further upward momentum here could very easily see us test chart resistance in the 1.1330-40s before the day is out.

• GBPUSD: Sterling is having a rough session this morning as pessimism leading into some Brexit voting today compounds yesterday’s bearish reversal candle close on the daily chart.  Support in the 1.2850s gave way in early European trade today, and that has now opened up a search for buyers, which is so far proving difficult.  Brexit debate has begun once again in the UK House of Commons, and there is some concern making the rounds this morning that Theresa May will not win enough votes to continue negotiating changes to the Irish backstop.  More here on the technicalities of today’s votes, which are expected to occur around 12pmET.  The poor US Retail Sales figures led to a pop higher in GBPUSD as well, but sellers have been quick to pounce as the market remains below chart support.

• AUDUSD: The Aussie followed the broader USD tone in overnight trade; trading higher throughout Asia but then getting sold in Europe.  The trend-line level at 0.7110 looks like it will be the pivot for price action yet again today, and so far the release of the US Retail Sales figures is keeping the market above it.  Near term resistance resides in the 0.7030s while near term support rests in the 0.7070s.

• USDJPY: Dollar/yen had a fairly uneventful overnight session; inching higher with the Nikkei and the S&P futures throughout Asian and early European trade.  Some sellers started to appear at Fibonacci chart resistance in the 111.10-20 area during early European trade, but the overall mood to global equities was upbeat following a Bloomberg report that said Trump is considering extending the March 1st China tariff deadline by 60 days.  More here.  All this has changed now following a horrible US Retail Sales print for December.  The S&P futures have fallen 25pts and USDJPY now looks poised to give back all of yesterday’s gains.  Near term support lies in the 110.50s, then the 110.30-40s.  

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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