US to end Iran sanction waivers for oil importers. Markets otherwise quiet on this Easter Monday.

Summary

• USDCAD: Dollar/CAD is trading with a defensive tone this morning after the Washington Post reported that the US “will announce to the media that, as of May 2, the State Department will no longer grant sanction waivers to any country that is currently importing Iranian crude”.  June crude oil futures have galloped 2% higher to start the week, but the CAD market impact has been relatively subdued as Australian and European traders remain on the Easter holiday for one more day (Easter Monday).  There’s also talk that Saudi Arabia will make up the shortfall from Iran.  USDCAD now sits just shy of chart resistance in the 1.3370-90s, but well above the next support level in the 1.3330s.  The leveraged funds at CME added to their net USDCAD long position during the week ending April 16 as shorts covered for the first time in over a month.  Canada will report Wholesale Sales data for the month of February tomorrow, but the key event for the market this week will be Bank of Canada’s interest rate decision on Wednesday morning.  While we think Stephen Poloz will keep interest rates on hold and acknowledge some of the positives that have occurred since the March meeting (two better employment reports, higher oil prices, higher than expected core CPI), we think there is a risk he sounds more cautious than expected (considering the weak Business Outlook survey reported last week and his comments about the worsening global economy on April 1st).  From a technical perspective, we continue to watch the triangular consolidation of prices on the daily USDCAD chart, and the market’s inability to probe lower following upbeat Canadian CPI and Retail Sales data last week.  A break above the 1.3400 level on a cautious Bank of Canada outlook this week could be the catalyst for a new rally higher in USDCAD.

• EURUSD: Euro/dollar is trading in a very tight range to start the week as the European markets remain shut for the Easter holidays.  The market has drifted about 20pts higher since basing at trend-line support in the 1.1220s late Thursday.  Chart resistance now resides in the 1.1260s, then the 1.1280s.  The funds added marginally to long positions during the week ending April 16th, in turn reducing their net short EURUSD position to 98k contracts, but this is still close to 2 ½ year highs.  This week’s European calendar will be very quiet, with just the German IFO survey for April out tomorrow morning.  We think EURUSD traders may have to wait until the end of the week to see the next catalysts for price action, as the US will report March Durable Goods on Thursday and its preliminary read on Q1 2019 GDP on Friday.  Dollar/yuan is starting the week bid, after China’s Politburo issued concerns about real estate speculation late Friday.  More here.

• GBPUSD: Sterling is also having a very quiet start to the week as the UK observes Easter Monday.  The funds flipped to marginally net long GBPUSD for the first time in almost a year during the week ending April 16, as more long positions were put on.  This occurred just prior to the market breaking chart support in the 1.3060s last week and so we think the timing of this inflection point in positioning is poor and could lead to further GBP weakness here.  There isn’t anything notable on the UK economic calendar this week, and so we think traders will refocus on Brexit headlines once the UK parliament returns from its Easter break tomorrow.  It looks like it’s going to be a rough week for Theresa May as the Conservative party is now ratcheted up the pressure for her to resign.  More here.

• AUDUSD: The Aussie is slipping lower on this holiday Monday after Thursday’s chart support in the 0.7140s has once again given way.  May copper prices don’t seem to be taking today's Chinese Politburo headlines too well and are extending Thursday’s swift downward reversal to the tune of 0.8% today.  We think AUDUSD could slip further to the 0.7120s ahead of Australia’s Q1 CPI numbers, which will be reported tonight at 9:30pmET.  Australian markets will be closed once again on Wednesday for the ANZAC Day holiday.  The leveraged funds at CME reduced their net short AUDUSD position by about 7,500 contracts during the week ending April 16.

• USDJPY: Dollar/yen is trading in an extremely tight range as many major market centers remain closed for the Easter holidays.  The leveraged funds at CME added a whopping amount of new USDJPY long positions during the week ending April 16 (this was as the USDJPY market found support just below the 111.00 level).  While we think these positions still look good above 111.60-80, we’re growing increasingly concerned about the market’s inability to follow-through to the upside.  Today’s Chinese stock market selloff seems to be weighing on the S&P futures a little bit.  This week will be a big one for US corporate earnings.  The Bank of Japan will be announcing its latest monetary policy statement on Wednesday night, and while no changes are expected for the central bank’s ultra-accommodative policy outlook, we’ll be watching to see if any special measures are going to announced ahead of this year’s unprecedented, 10-day, Golden Week holiday coming up in Japan next week.  More here.

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

Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

June Crude Oil Daily Chart

EUR/USD Daily Chart

EUR/USD Hourly Chart

USD/CNH Daily Chart

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

S&P 500 Daily Chart

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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