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Strong Chinese data propels yuan to new 16-month highs


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ANALYSIS

USDCAD

Some less dovish RBA Minutes, a new 16-month low for the USDCNY fix, and Chinas stronger than expected August data set for Industrial Output and Retail Sales propelled the USD lower in Asia last night, but it unfortunately did little to drive USDCAD lower and out of its recent 1.3130s to 1.3190-1.3200 price range. European traders played catch-up to Asia's risk-on tone earlier this morning by bidding up equities and bond yields but EURUSDs continued struggle with 1.1880s is keeping USDCAD supported once again. Broader risk sentiment has not really taken a hit following this morning's release of weaker than expected US Industrial Production for August.

China Aug Industrial Output YY 5.6%, 5.1% f'cast, 4.8% prev;

China Aug Retail Sales YY 0.5%, 0.0% f'cast, -1.1% prev

U.S. AUG INDUSTRIAL OUTPUT +0.4 PCT (CONSENSUS +1.0 PCT) VS JULY +3.5 PCT (PREVIOUS +3.0 PCT)

USDCAD DAILY

USDCADD_9.11

USDCAD HOURLY

USDCADH_9.11

OCT CRUDE OIL DAILY

OCTCRUDEOILD_9.11


EURUSD

Last nights rallies for the Australian dollar and the Chinese yuan very much helped the Euro drift higher into European trade today, but weve noticed the markets continued struggle to surpass the familiar 1.1880s chart resistance level. A wave of EURGBP selling knocked EURUSD back below this level during the 2amET hour and the euro buyers now appear to be losing the battle of two-way hedging flows going into this mornings 2.4BLN worth of option expiries between 1.1875 and 1.1900. Germanys September ZEW survey beat expectations today, but this had very little impact on the marketplace.

German Sep ZEW Economic Sentiment, 77.4, 69.8 f'cast, 71.5 prev
German Sep ZEW Current Conditions, -66.2, -72.0 f'cast, -81.3 prev

EURUSD DAILY

EURUSDD_9.11

EURUSD HOURLY

EURUSDH_9.11

SPOT GOLD DAILY

SPOTGOLDD_9.11


GBPUSD

Sterling inched lower in Asia last night (against the broadly weaker USD theme) as traders digested the Torys successful second reading of their Internal Market Bill (IMB), but it has recovered those losses as we head into NY trade today. Market chatter is chalking up this mornings bounce to the upbeat overall risk tone, the UKs better than expected August Employment Report, and the thought that the IMB will face more serious scrutiny from Tory rebels in next weeks amendment vote. Wed agree with all of this, but we think the UK's now almost certain collision course with Brussels at the end of the month should invite GBPUSD sellers on strength.

UK Aug Claimant Count Unem Chng, 73.7k, 100.0k f'cast, 94.4k prev, 69.9k rvsd
UK Jul ILO Unemployment Rate, 4.1%, 4.1% f'cast, 3.9% prev
UK Jul Employment Change, -12k, -125k f'cast, -220k prev
UK Jul Avg Wk Earnings 3M YY, -1.0%, -1.3% f'cast, -1.2% prev
UK Jul Avg Earnings (Ex-Bonus), 0.2%, -0.2% f'cast, -0.2% prev

GBPUSD DAILY

GBPUSDD_9.11

GBPUSD HOURLY

GBPUSDH_9.11

EURGBP DAILY

EURGBPD_9.11

AUDUSD

The Australian dollar confidently regained the 0.7280s last night after the RBA reported, what was deemed by the financial media to be, less dovish than expected Minutes from its latest policy meeting. We wouldn't agree with this analysis, but we feel the better than expected Chinese data released shortly thereafter justified the move higher for AUDUSD. The market has since been tracking EURUSD however, and so that has meant more two-way flows over the course of the European morning.


AUDUSD DAILY

AUDUSDD_9.11

AUDUSD HOURLY

AUDUSDH_9.11

USDCNH DAILY

USDCNHD_9.11


USDJPY

Dollar/yen is dumbfounding traders this morning as it de-couples from US yields and instead takes out yesterdays chart support level in the 105.50s. The fact that this selling emerged just before the NY open, when the USDs overnight tone was arguably the most mixed, has us thinking that this is a flow-driven move more than anything else. A closing print below the 105.40s could invite a quick retest of the 105.00-105.25 level, where over 4BLN in options will be expiring over the next 48hrs.

USDJPY DAILY

USDJPYD_9.11


USDJPY HOURLY

USDJPYH_9.11


US 10YR BOND YIELD DAILY

US10YRBONDYIELDD_9.11

Charts: Reuters Eikon

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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.

Interested in creating a custom foreign exchange trading plan?  

Email: erik.bregar@ebcfx.com

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Contributing author since 09/25/17 

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