1-888-998-3948


Friday, January 17, 2020

Bank of England rate cut odds shoot up to 66% after more weak UK data

Bank of England rate cut odds shoot up to 66% after more weak UK data
SOURCE: Powered by Exchange Bank of Canada – www.ebcfx.com/news

 

Take control of your international payments with CXI FX Now.

• Zero transfer fees & great rates
• Fast international payments
• Safety and security
• Unparalleled customer service
• Consultative approach

Learn more about CXI's international payment services for businesses or call our trading desk directly at 1-833-572-8933.

Get real-time market coverage on twitter at @EBCTradeDesk or sign up here.

SUMMARY

 
  • UK Retail Sales fall 0.6% MoM in December versus expectations for a 0.5% gain.
  • OIS market now sees 66% chance of 25bp rate cut from the BOE on Jan 30th.
  • GBPUSD rejects last week’s 1.3080s chart support (turned resistance) with a vengeance.
  • EURUSD weighed down by weak NY close, GBP selling and huge downside option expiries.
  • Bearish “head & shoulders” pattern developing in EURUSD.  Taking shape in AUDUSD too.
  • USDJPY needs to break out further fast, or else reversal risks increase.
  • USDCAD still range-bound, now 1.3110-1.3170, with mildly positive underpinnings.

ANALYSIS

USDCAD

Dollar/CAD is tracking the broader USD moderately higher this morning.  Weakness in sterling appeared to lead the way in the early goings, after the UK reported a much weaker than expected Retail Sales number for December, and massive downside option expiries in EURUSD appear to be driving USD strength now as we head into NY trade.  The US just reported some mixed housing data for the month of December...1.416M vs 1.468M expected (-3.9% MoM) on Housing Starts but 1.608M vs 1.375M (+16.9% MoM) on Building Permits.  US Industrial Production for December (-0.2% exp) and the Michigan Sentiment Survey for January (99.3 exp) are up next at 9:15amET and 10amET respectively. 

 

We think USDCAD could end up inching higher towards the top end of its most recent range if broad USD buying persists and February crude oil prices struggle at the $59 handle.  The chart technicals still point to a range trade for USDCAD right now unfortunately and, given the downward sloping nature of the trend-lines we’re currently plotting, we see this range as being between the 1.3110s to the 1.3170s.

 

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

FEB CRUDE OIL DAILY

FEB CRUDE OIL DAILY

 


 

EURUSD

Euro/dollar is not looking in good shape this morning.  Yesterday’s poor NY close back below the 1.1150s, on the back of good US economic data, set us up for negative price momentum heading into the overnight session.  A swift 50pt fall in GBPUSD following some weak UK data then unleashed some broad USD buying, which in turn saw EURUSD lose chart support in the 1.1130s.  Finally, we have the weight of hedging flows on over 4.6blnEUR of options expiring between the 1.1090 and 1.1125 strikes this morning at 10amET.  We pointed out the potential development of a bearish “head & shoulders” pattern on the daily AUDUSD chart yesterday, and we can now see one on the daily EURUSD chart as well!

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

FEB GOLD DAILY

FEB GOLD DAILY

 


 

GBPUSD

Sterling indeed went on the hunt for more sellers by rallying off chart support in the 1.2960-80s over the last 72hrs, and it has found them again this morning following the release of some more bad UK data.  Retail Sales for the month of December were reported a whopping -0.6% MoM vs expectations for +0.5%, and just +0.9% YoY vs +2.6% expected.  This is now the worst 5-month stretch for UK retail sales growth since record keeping began in the 1970s!   

 

To add insult to injury for the market, last week’s defining chart support level in the 1.3080s (the break below which gave way to this week’s early GBPUSD weakness) has now acted as fierce resistance on the charts.  If we combine all this with Jan 30th Bank of England rate cut odds increasing again to 66% this morning and bearish chart patterns developing for EURUSD and AUDUSD, we think we have a GBPUSD market that is looking increasingly vulnerable to further weakness.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

 


 

AUDUSD

The bearish “head & shoulders” pattern we pointed out yesterday, as potentially developing on the daily chart, appears to be taking a step in the right direction this morning.  The broad USD buying we’ve seen today in Europe is now putting pressure back on familiar chart support in the 0.6880s and we would see a confirmation of this negative price pattern with a NY close below the 0.6860s.  We think the market’s inability to benefit from last night’s better than expected December Industrial Production and Retail Sales data out of China is rather telling of how traders feel about the Aussie here.

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY

 


 

USDJPY

Dollar/yen continues to hold the bulk of its gains from last week’s US/Iran de-escalation and this week’s US/China “phase one” trade deal optimism, but we’d make the argument that the market should be demonstrably higher than this by now, given Monday’s break above key weekly chart resistance in the 109.60s.  We think the longer the market meanders just above the 110 figure without another push higher will make it vulnerable to reversing lower.  Over 1.5blnUSD in options will be expiring between the 110.00 and 110.15 strikes this morning, which should keep the market steady for the moment, but it will be interesting to see what happens after that.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BOND YIELD DAILY

US 10YR BOND YIELD DAILY

Charts: Reuters Eikon


About the Author

Erik Bregar

Erik Bregar - Director, Head of FX Strategy

linkedin twitter

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? Contact us or call CXI's trading desk directly at 1-833-572-8933.

 

About Currency Exchange International
Currency Exchange International, CXI, is the leading provider of comprehensive foreign exchange services, risk management solutions and integrated international payments processing technology in North America. CXI’s relationship-driven approach ensures clients receive tailored solutions and world-class customer service. Through innovative and trusted FX software platforms, CXI delivers versatile foreign exchange services to our clients, so that they can efficiently manage and streamline their foreign currency and global payment needs. CXI is a trusted partner among financial institutions, corporations and retail markets around the world. To learn more, visit: www.ceifx.com

Disclaimer: All product names, logos, and brands are property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, logos, and brands does not imply endorsement.

This publication has been prepared by Currency Exchange International for informational and marketing purposes only. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Currency Exchange International, its affiliates or any of their employees incur any responsibility. Neither Currency Exchange International nor its affiliates accept any liability whatsoever for any loss arising from any use of this information. This publication is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any of the currencies referred to herein, nor shall this publication be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The general transaction, financial, educational and market information contained herein is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a "call to action" or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. You should note that the manner in which you implement any of the strategies set out in this publication may expose you to significant risk and you should carefully consider your ability to bear such risks through consultation with your own independent financial, legal, accounting, tax and other professional advisors. All Currency Exchange International products and services are subject to the terms of applicable agreements and local regulations. This publication and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced in whole or in part, or referred to in any manner whatsoever nor may the information, opinions and conclusions contained in it be referred to without the prior express written consent of Currency Exchange International.

 

POSTED_BY Mandee Myers at 08:15 AM
comments powered by Disqus

Platinum Passport

Travelers: Never miss a thing and be the first to know about CXI branch promotions, travel tips and hot trends.

Currency Insider

Corporations & Financial Institutions: Want to get ahead of the curve for the upcoming week? Get CXI's currency market trend analysis sent directly to your inbox weekly.