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EUR surges higher on technical break. USDCAD supported by cross buying. Big day for AUD ahead.


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Summary
  • ECONOMIC DATA:Australian Wage Price Index comes in weaker than expected (+2.0% YoY vs +2.2%). UK employment figures were a mixed bag: weaker on the headline (14k jobs lost) but slightly higher wage growth (+2.2% vs +2.1% expected). US CPI and Retail Sales will be released at 8:30amET today. Markets expecting +2.0% YoY for CPI and a flat reading for Retail Sales. Cdn Existing Home Sales at 9am. Bank of Canadas Wilkens gives a speech in New York after the close today.

  • CME OPEN INTEREST CHANGES 11/14:AUD +2509, GBP +37, CAD -3573, EUR +13136, JPY +687.

  • AUDUSD:The Aussie resumed its short term trend lower overnight, with the weak Australian wage data giving traders another reason to sell. The market dipped as low as 0.7576 (the July lows) but has since recovered a bit to hold key weekly support just below 0.7600. Its a big day for data with US CPI, Retail Sales ahead and the Aussie employment report tonight at 7pmET. Near term resistance 0.7620. Not much support on the daily chart below the European low, next stop 0.7510-20 (the 76.4% Fibo retrace of the May-Sep move).

  • USDCAD:Buyers are stepping up to the plate in USDCAD, encouraged by CAD selling on the crosses. Weve managed to hold key support in the 1.2660s, rally back above the 1.2720s (near term resistance) and successfully test it from the upside twice in the last 12hrs. While the 1.2770s capped yesterday, we expect it to be tested again today as technicals improve. EURCAD flows have been extremely supportive since the EURUSD broke higher yesterday. The EURCAD chart, dare we say it, looks poised now to repair the weekly breakout pattern that fell apart completely earlier this month. GBPCAD, too, has seen steady demand on dips this week, which is USDCAD supportive. Crude oil came off sharply yesterday, but it didnt have too much effect on USDCAD at all. Traders will be focused on US data today and resumption of NAFTA talks. Were calling this market range-bound to higher now as technicals have improved in the last 24hrs and cross buying continues to support.

  • EURUSD:The trend has clearly shifted higher in EURUSD with the market smashing through 1.1750, and then 1.1810 overnight. A lot of this move has been technically driven, with the break of key resistance in the 1.1660-70s. Weve now completely erased the move lower from the ECB dovish taper. Support now 1.1780-90. Resistance 1.1860s. Were not hearing much with regard to the fundamental reasons why behind this move, but we cannot ignore the change in technicals/market sentiment (which often shifts first). Futures traders added a whopping 13k contracts yesterday (likely fresh long positions) in another vote of confidence. Were starting to see a little selling in EURGBP as it tests the 90 level, and EURJPY has been offered since London trading got underway, so EURUSD has a bit of a crosswind as it enters NY trading.

  • USDJPY:Dollar/yen has predictably fallen apart here. Another weak overnight session for global equities and US yields is contributing to the risk off mood, an environment in which JPY historically benefits. Market technicals also continue to deteriorate with the 113s giving way. Support now comes in at 112.50. Resistance 113.10-15. We feel the market will be prone to further selling near term as recent USD longs are forced to trim losses.

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Erik Bregar - Trader
Exchange Bank of Canada
Toronto, Ontario
Phone:647-728-4918

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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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