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EURUSD Lower Again on German Political Uncertainty. USDJPY & AUDUSD Recover. USDCAD Traders Watching Improving Techs, But Cross Sales Now Weighing.

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  • CENTRAL BANK SPEAK: RBA's Lowe says "there is not a strong case for a near term adjustment in monetary policy" and "if the economy continues to improve as expected, it is more likely that the next move in interest rates will be up"Fed's Yellen speaking at NYU Stern Business School at 6pmET.

  • CME OPEN INTEREST CHANGES 11/20: AUD -57, GBP +3044, CAD +1024, EUR -2021, JPY -8592

  • AUDUSD:The Aussie is enjoying a bit of pop this morning on the slightly hawkish comments from the RBA's Lowe at 4amET this morning. While the rally stalled at resistance in the 0.7580s, today's dailycandle is so far shaping up to be a bullish engulfing candle. Traders are also talking about a large option expiry at the0.7600 leveltomorrow ($500mln AUD), which could act as a near-term magnet. While the trend in AUDUSD is still lower, we will now watch how traders respond at chart resistance. A break above 0.7580 would be technically positive but there is still a lot of wood to chop between 0.7600-0.7630. AUDNZD flows have been supportive for the fourth day in a row.

  • USDCAD:Dollar/CAD continued to make progress yesterday, reaffirming our near-term view of a range-bound to higher market. Broad USD buying and weaker oil prices certainly helped. We now sit above the upper bound of our downward sloping, trend-line extension channel from the spring (which is positive). We also test the line itself early this morning (1.2792) and bounced off it, which is positive as well. The only thing a bit negative about today's action so far is how USDCAD swiftly pulled back when it looked above 1.2830 earlier. This coincided with heavy selling in EURCAD and GBPCAD. So today feels like it will be choppy. The 2yr US/CA yield spread, at 29bp, continues to support (it continues tosit close to its October wides whereas USDCAD does not). Traders are also talking about a massive option expiry today at 1.2750 ($1.5bln USD).

  • EURUSD:The political drama in Germany continues as Merkel says she prefers a new election while President Steinmeier says hedoes not. The uncertainty weighed on EUR for the rest of NY session yesterday and the offered tone has continued into today. With support in the 1.1750s now giving way, we look to see how the market responds to support in the 1.1720s. A break below there invites a test of 1.1690. EURGBP broke down through 0.8875 yesterday, tested the levelfrom below againearlier today, and failedagain (which is negative for EURUSD). Amazing how things change in just a few short days. Longs will argue this is a dip to be bought (and they continue to do this if we look at futures positioning and options activity), whereas shorts will argue relative monetary policy outlooks (Fed vs ECB )and the US/GE yield spread (at 200bp)favors the USD. We feel EURUSD continues to range trade here until the chart technicals become more clear.

  • USDJPY:Dollar/yen staged a pretty remarkable recovery yesterday, helped no less by yet anotherstrong rebound inUS stocks and US yields. We've regained the 112.50 level which is positive but strong resistance still lies in the 112.90-113.00 area. Futures open interest was down a sizable 8.5k contracts yesterday. We would not be surprised to see more of this (USDJPY selling) as recent longs look for an opportunity to get out.

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