USDCAD uptrend at risk of unraveling

Summary

• USDCAD: Dollar/CAD is slipping lower this morning after May crude oil prices continue their march higher.  Talk of rising demand and increased compliance with OPEC supply cuts are underpinning the commodity, and with the May contract breaching the 58.80s yesterday, we have all in elements in place now for a sustained rally higher.  Traders are trying to buy trend-line support at the 1.3305 level in USDCAD as NY trading gets underway this morning, but the momentum is not in their favor at this hour.  Watch oil prices again today and USDCAD’s ability to hold support, as there continues to be nothing major on the economic calendar until the FOMC meeting tomorrow afternoon.  Failure to hold the 1.3305 level would risk unravelling all the progress USDCAD longs have made since the market broke higher on March 1st.  Canada releases its 2019 budget later today at 4pmET, but nothing market moving is expected.  More on this here from the CBC.

• EURUSD: Euro/dollar traders are trying the upside again today after some negative Brexit headlines saw the market follow GBPUSD lower during NY trade yesterday.  Buyers stepped in at chart support in the 1.1320s and it’s been a slow drift higher to familiar chart resistance in the 1.1360s ever since.  The German ZEW survey for March came in mixed this morning (weaker than expected on the headline “current situation” figure, but not so bad as expected on the “economic sentiment” gauge), and so traders largely ignored this.  The Chinese yuan continues to trade in tight range so far this week.  The BTP/Bund spread trades at a new 7-month low this morning in the +230s, which we think is notably helpful for EURUSD here.  More dovish than expected rhetoric out of the Fed tomorrow would keep this momentum going.  A break above chart resistance in the 1.1360s would open up the possibility of further buying into the 1.14s.

• GBPUSD: Sterling traders appear to be covering short positions again this week after yesterday’s negative Brexit headlines couldn’t take out chart support in the 1.3190-1.3200 area.  Theresa May’s attempt to sway the DUP party to her side is still not working.  The speaker of the House of Commons, John Bercow, said yesterday that a 3rd meaningful vote on Theresa May’s Brexit plan cannot occur unless the deal has “substantial changes”.  Word on the street now is that, while tomorrow’s vote has been cancelled, Theresa May will try and push for another vote next week.  More here from the BBC.

• AUDUSD: The Aussie is trading steady today as the dovish-sounding RBA Minutes, released last night, didn’t offer any new surprises for market participants.  More here.  May copper prices have broken above chart resistance in the 2.9300-2.9350 area this morning, which we think is worthy of attention.  Expect AUDUSD to continue to follow the ebbs of flows of EURUSD predominantly though, as traders now position for tomorrow’s Fed meeting.  Expect weakness down to the 0.7070s should EURUSD recede and chart support in the 0.7090s give way.  The RBA’s Bullock will be speaking at 8pmET tonight.

• USDJPY: Dollar/yen continued its hunt for buyers yesterday after an attempt to regain the 111.60s into the London close failed.  They were found at trend-line chart support in the 111.30s and then the 111.10s overnight once the S&P futures broke above the 2845 mark.  Expect the market to pivot around current levels this morning as over 1.7blnUSD in options are slated to expire between the 111.35 and 111.50 strikes.

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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