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GBP traders sell the Brexit resolution hype. USDCAD struggling to find support. AUD bid.


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Summary
  • CME OPEN INTEREST CHANGES 12/5: AUD -1805, GBP +2511, CAD -864, EUR +491, JPY -2947


  • USDCAD:It was a discouraging day for USDCAD bulls yesterday as the market couldnt muster any sort of a bounce. EURCAD and GBPCAD continue to lead the way here with both crosses probing new weekly lows as we write. USDCAD is now trading below key support in the 1.2660s, which is bearish. A firm close below this level today invites lower prices, while a snap back above would be a near-term relief for bulls. GBPCAD technicals suggest some support here while EURCAD looks vulnerable for at least another 50pts (see charts). The US/CAD 2yr yield spread is softer again this morning, now at +26bp. We continue to call USDCAD range bound to lower today, but will be watching if the market can regain the 1.2660s. The Bank of Canada meets tomorrow at 10amET.

  • AUDUSD:The Aussie was one the best performers overnight, rallying on better than expected Australian retail sales data (which came out before the RBA rate announcement). The RBA kept rates unchanged at 1.5% and the tone of the outlook remained dovish as expected, and so traders largely ignored it. AUDUSD enters NY trading today in better shape technically. Were now trading above key resistance in the 0.7620s, which is positive. Expect range-bound action ahead of the large option expiry at 10am (600mln+ AUD at 0.7645). Well be watching how traders respond to resistance in the 0.7650-60 area post expiry (a break above would be another positive). We also get the US non-manufacturing ISM at 10am, which should make things interesting for the broader USD and potentially AUD.

  • EURUSD:Theres a whole lot of nothing going on in EURUSD as traders await the key event risk of the week (US Payrolls on Friday). The market continues to hug the 1.1860 level (the 61.8% Fibo of the Sep to Nov down move), moving above and below multiples times in the last 24hrs. The hourly range is now 1.1840-1.1880. Sundays opening gap remains unfilled, which is interesting. Gaps can have a magnetic effect, so be on the lookout for a quick pop that stalls at 1.1900 even. Traders will get something to chew on at the 10am hour with US non-manufacturing ISM. We continue to call EURUSD range-bound with key resistance now at 1.1910 and key support still at 1.1810.

  • GBPUSD:It was a very disappointing day for GBP bulls yesterday as none of the hype, leading up to the days events between Theresa May and her EU counterparts, came true. There was still no confirmation of the Brexit divorce bill and still no confirmed resolution on the Ireland border issue, and so GBP traders sold. The first wave of sales took GBPUSD back below 1.35 and back within our rising trend-line extension channel. A second wave of sales commenced overnight as London traders came in, and that got exacerbated as stops got hit. The UK Services PMI came in slightly below expectations around the 4:30am hour, but it wasnt market moving. Support at 1.3375 was tested and the market successfully bounced. Were calling GBPUSD range-bound to slightly higher today as GBP traders come to their senses and regroup. Near term support 1.3390-1.3400. Near term resistance 1.3440-50.

  • USDJPY:Dollar/yen tracked US stocks and US yields again yesterday, and it faded late in the day as both those markets worked on filling their Sunday opening gaps. USDJPY has yet to fill its Sundays opening gap completely, meaning there is still scope for downside here, but were running into some support here at 112.40-112.50 (also coincides with trend-line extension support see orange diagonal line on chart). Cross flows have been a bit of a drag on USDJPY so far today. A firm daily close back above 113 would be technically positive. Strong support now lies at the bottom of the Sunday gap (112.10-112.20) and at 111.90-112.00 (trend-line extension support).

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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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