USD trading mixed ahead of quiet start to holiday shortened week

Summary

• USDCAD: Dollar/CAD is trading moderately higher above trend-line support in the 1.3230-40s this morning as North American traders return from the long weekend.  The broader USD has a bid tone to it so far today, with USDJPY buying leading the way in Asia and EURUSD selling being the dominant theme in Europe.  This week’s calendar starts off pretty quietly, with nothing notable on the docket until the FOMC Minutes out tomorrow afternoon.  Thursday’s session will bring the US Philly Fed survey, US Durable Goods, and a speech from the Bank of Canada’s Stephen Poloz before the Montreal Chamber of Commerce.  Finally on Friday we’ll get the Canadian Retail Sales report and a slew of Federal Reserve member speeches.  We think last week’s inability for the market to breakout above the 1.3330s will cast a bit of a shadow over USDCAD price action to start this week, but we think any pullback in April crude oil (which appears to be struggling with the $56 level) will attract buyers.

• EURUSD: Euro/dollar is retracing half of its Friday/Monday bounce this morning as negative European data continues to plague rally attempts.  Italy reported its December Industrial Sales and Industrial Orders figures this morning, and they both missed expectations.  Germany then reported its widely followed ZEW Survey for February, and it came in lower than estimates as well.  Trend-line chart resistance in the 1.1310-20s continues to cap prices and support in the 1.1290s (which was regained on Friday) is now at risk of falling.  This week’s European calendar features Germany’s PPI data tomorrow, German and Italian CPI on Thursday, and finally Germany’s IFO survey and 2nd revision to Q4 GDP on Friday.  While we think the market’s ability to shake off the negative comments from the ECB’s Coeure on Friday was impressive, we think the sellers still remain in charge sub 1.1330s.

• GBPUSD: Broad USD selling since Friday morning has come to the rescue for sterling and, while we’re still getting nothing in the way of positive Brexit headlines, we’re now looking at a technical chart structure that is looking a whole lot better.  Buyers were evident on three pullbacks to the 1.2900 level since Friday’s very positive NY close, and trend-line resistance in the 1.2920s has now given way.  A spokesman for the European Commission reiterated this morning that the EU won’t reopen the UK’s withdrawal agreement and won’t accept a time limit of the Irish backstop.  Theresa May heads to Brussels tomorrow to speak with EC head Jean-Claude Juncker again.  The UK reported a decent January employment report this morning (slightly below expectations on wage growth and the unemployment claimant count, but the 3 month trend in wages continues to move higher).  We think traders might have to be on guard here for some potential positive Brexit news, given the market’s improving technical structure.  The next chart resistance levels are 1.2970-90, then 1.3050.

• AUDUSD: The Aussie is trading on the defensive this morning after its Friday/Monday rally stalled at chart resistance in the 0.7150-60s.  The minutes from the RBA’s Feb 5th  interest rate decision were released overnight (full text here) and the overall dovish tone is adding to the selling pressure in AUDUSD today.  We think the market will chop in the 0.7100-0.7130 range until another catalyst for price action emerges.  Australia reports its Q4 2018 Wage Price Index figures tonight at 7:30pmET.  Wednesday night ET features the Australian employment for January.  Finally on Thursday night traders will be watching a speech from RBA governor Lowe.

• USDJPY: Dollar/yen enjoyed a much needed bid to start the week, and it came after some dovish comments from the BOJ governor Kuroda in the overnight session today.  More here.  Some of this move is unravelling now as some broad USD selling enters the fray into the NY open, but traders continue to hold chart support in the 110.40-50s.  We think the market could take another shot at the upside should this support level hold and US equities continue to trend higher.

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

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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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