Canadian CPI meets expectations for January

Summary

• USDCAD: Dollar/CAD is slipping all the way back down to Monday’s lows as crude oil prices rally 2% this morning.  A NY close for the April contract above chart support in the 55.50s, last night’s bullish API inventory report, and comments from Saudi energy minister Khalid al-Falih about potentially extending oil production cuts in the second half of 2019 all appear to be helping the commodity regain its upward trajectory after President Trump’s tweet knocked $2 off the price on Monday.  USDCAD had a rather unimpressive NY close yesterday; closing below chart support in the 1.3170s, and we think this is also not helping the market here this morning.  The Canadian CPI figures for January were just released and they met expectations of +1.4% YoY and +0.1% MoM.  Next up will be Fed chairman Powell’s testimony before the US House of Representatives at 9:45amET.  This tone of today’s discussion is expected to be similar to yesterday’s before the US Senate, where the Fed chair reiterated the FOMC’s patient stance to the US monetary policy outlook.  Finally we’ll get the weekly EIA oil inventory report at 10:30amET this morning, with traders expecting a 2.842M build to inventories.  We think the 1.3120-30s is now’s today’s pivot point for price.  Trade below and we’ll likely see continued selling, but trade above and we could see some short covering.

• EURUSD: Euro/dollar finally broke out yesterday, but we felt the gains were led more from the explosive rally in GBPUSD as opposed to the Fed’s reiteration of patient US monetary policy.  The market surpassed familiar chart resistance in the 1.1360s around the London fix, and then made a bee line for the next resistance level at 1.1400.  However, buyers have since failed twice to break above this new level, and so the market sits slightly below yesterday’s closing levels at this hour.  USDCNH appears to be defending the 6.6750-6.6800 support level this morning, which is also a mild EURUSD negative.  We think EURUSD has another shot at the upside so long as the 1.1370s hold today.

• GBPUSD: Sterling continues to rip higher this morning after some massive buy orders were rumored to have been executed at the London fix yesterday (11amET).  It appears yesterday’s concession from Theresa May to allow parliament to vote on a Brexit delay was enough to finally attract some big corporate flow back into the pound.  Chart resistance in the 1.3240s gave way after a violent snapback off the 1.3150s.  The market then pulled back overnight to test the 1.3240s as new support and found more buyers.  GBPUSD is now trading above the 1.3300 level with very little overhead resistance in sight.  Markets are now pretty much expecting the UK parliament to delay Article 50 when it votes on the matter on March 14th.  Futures traders added 7,933 contracts in new positions yesterday.  We think the rally in GBPUSD could pause today should EURGBP hold support in the 0.8550s.

• AUDUSD: The Aussie put in a positive NY close yesterday; riding on the coat-tails of the GBP-led, USD sell-off and closing above the 0.7170s.  However, it seems traders were reluctant to push the market any further overnight as EURUSD struggled with its own chart resistance.  The market now sits stuck between 0.7140 and 0.7170 awaiting the next catalyst for price movement.

• USDJPY: Dollar/yen continued its sell-off yesterday after support in the 110.60s gave way.  The market found buyers at the next support level in the 110.30s overnight and is now quickly trying to regain the level it lost yesterday.  EURJPY buying appears to be the influence for today’s bounce because the S&Ps are trading down 6pts at the moment.  Futures traders liquidated 1,024 contracts in yesterday’s trade.

Tune in @EBCTradeDesk for more real-time market coverage.

Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

April Crude Oil Daily Chart

EUR/USD Daily Chart

EUR/USD Hourly Chart

USD/CNH Daily Chart

GBP/USD Daily Chart

GBP/USD Hourly Chart

EUR/GBP Daily Chart

AUD/USD Daily Chart

AUD/USD Hourly Chart

March Copper Daily Chart

USD/JPY Daily Chart

USD/JPY Hourly Chart

March S&P Daily Chart

Charts: TWS Workspace

About the Author

Erik Bregar - Director, FX Trading

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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