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BoC and The USD Grinds Higher

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FX Rundown

Euro (December)

Session close: Lost 43 ticks on the session

Fundamentals: The Euro began working lower this morning after Retail Sales data fell well short of expectations. However, the day was not driven by data as the U.S trade deficit widened and ISM Non-Manufacturing missed expectations, but the Dollar edged higher on the session. Ultimately, progress on tax-reform and the lack of a Brexit deal has characterized a slightly lower Euro on the week. German Factory Orders are due tomorrow at 1:00 am CT and we have U.S ADP Payrolls at 7:15 am CT. As we discussed with Gold and have hammered home with the Treasuries, although we are long term bearish the U.S Dollar our thesis truly comes into play once we get through the Fed rate hike next week.

Technicals: We remain long term bullish as the Euro goes through a consolidation phase. Todays settlement was right into first support, but price action did recover before the electronic close. If the U.S Dollar continues to elevate slightly due to tax-reform and ahead of Nonfarm Payroll Friday, we will see the Euro testing squarely into major three-star support at 1.1728-1.1730 and right now we feel confident that this level will hold in the long run. We are concerned that the door is open for the bears in the very near-term as today did take out trend line support that came in on the top side of the 1.1824-1.1837 level.


Resistance 1.18875-1.1903**, 1.1942**, 1.19975-1.2019***, 1.2154-1.2180****

Pivot - 1.1824-1.1837

Support 1.1728-1.1730***, 1.1672**, 1.15785*, 1.1481-1.15***

Yen (December)

Session close: Settled at .8885 up 1 tick

Fundamentals: Today was a quiet inside session for the Yen that saw a tug-of-war from a strengthening Dollar despite poor data and a downward pressure in the equity market. We maintain a Bullish stance and believe the long-term picture that combines a less dovish Bank of Japan and a less hawkish Fed will spark a tremendous rally in the Yen. Now, just imagine a stock market with growing pains adding to support.

Technicals: We are Bullish the Yen and price action over the last two sessions is beginning to bottom out and has consolidated around the 20-day moving average. Support is building at the .8845-.88475 level and todays settlement held the pivot. It will be a huge win for the bull camp to achieve a move and settlement out above .8912-.8917.


Resistance - .8913-.8917**, .8930-.8939**, .8960**, .8982**, .9018-.9045***, .9119**, .9321-.9359****

Pivot - .8884

Support - .8845-.88475**, .8801**, .8730***

Aussie (December)

Session close: Settled at .7605, up 12 ticks

Fundamentals: The RBA left rates unchanged last night for the 16th month in a row citing slow growth, lagging inflation and high household debt levels. However, Retail Sales last night came in much better than expected along with China Caixin Services PMI and the Aussie gained more than half a penny overnight sending it to resistance. A stronger U.S Dollar today encourage the Aussie to fall back near unchanged. Tonight, we have GDP data due out of Australia at 6:30 pm CT and this will be a big number for traders to watch with expectations coming in at .7% QoQ and 3% YoY.

Technicals: Price action ran into a freight train of major three-star resistance at .7645-.7677 overnight. However, the technicals are becoming very constructive with the 9-day moving average building for a cross through on the 21-day moving average. Right now, we think a slightly higher U.S Dollar on the week should keep the Aussie in check at major three-star resistance, however, this will be critical to watch as immediate term technicals are very constructive but if they fade out we might have an ascending wedge, a bearish pattern, on our hands.

Bias: Neutral/Bullish

Resistance - .7645-.7677***, .7726-.7755**, .7824**, .7891-.7893***

Pivot - .7605-.7607

Support - .7530-.7550***, .7390****

Canadian (December)

Session close: Settled unchanged at .7876

Fundamentals: The Canadian Dollar traded to the highest point since October 24th after Trade Balance data came in better than expected on rising exports. However, much of these gains dissipated ahead of tomorrows Bank of Canada meeting as the U.S Dollar edged up. Though the BoC is expected to sit tight, traders should be ready for tomorrows meeting as this comes with a light at the end of the tunnel after a period of very slow growth on the heels of two rate hikes through September.

Technicals: Price action traded to a high of .79225 and took out the November 10th swing highs. Major three-star resistance comes in at .7950-.7960 and we feel similar here as we do with the Aussie; the chart is very constructive but a U.S Dollar that is edging high should keep price action in check. Because of this and our wait and see approach on the BoC meeting we are Neutralizing our Bullish stance for the near-term.

Bias: Neutral/Bullish

Resistance .7897-7902*, 7922**, .7950-.7960***, .8019-.8035**, .8293****

Support - .7858**, .7803**,.7730-.7745***, .7671**, 7550***

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Bill Baruch is President and founder of Blue Line Futures a leading futures and commodities brokerage firm located at the Chicago Board of Trade. Blue Line’s mission is to put the customer first and bring YOU the best customer service, consistent and reliable research and state of the art technology. Bill has more than a decade of trading experience. Working with clients he focuses on developing trading strategies that present a clear objective for both long and short-term trading approaches. He believes that in order to properly execute a trading strategy, there must be a well-balanced approach to risk and reward.

Prior to Blue Line, Bill was the Chief Market Strategist at iiTRADER which followed running a trade desk at Lind Waldock and MF Global.

Bill is a featured expert on CNBC, Bloomberg and the Wall Street Journal as well as other top tier publications.

Contributing author since 10/6/17 

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