• Financial Institutions
  • Corporations
  • Travelers
  • SOLUTIONS
  • Foreign Bank Note Exchange
  • International Drafts
  • International Wire Transfers
  • Global EFT
  • Foreign Check Clearing
  • Foreign Draft Issuance
  • INDUSTRIES
  • Travel
  • Technology Companies
  • Payroll
  • Healthcare
  • Nonprofit
  • Partnerships

Markets await historic Brexit "Super Saturday"

Ryan October 18th, 2019
Markets await historic Brexit "Super Saturday"

 

 

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 House of Commons votes on Boris Johnson’s new, EU-approved, Brexit deal tomorrow.
Markets settle into nervous lull.  GBPUSD overnight options straddle trading over 200 pts.
EURUSD and AUDUSD pressing fund short positions.  Hawkish comments from the RBA’s Lowe helping.
USDCAD threatening break below 1.3100-1.3300 range from the end of summer.
USDJPY stalled with US yields, as global markets also await Brexit outcome.
More Fed-speak on deck for today.  Canadian elections on Monday.  The ECB meets next Thursday.

ANALYSIS

USDCAD

Dollar/CAD sits just below chart support in the 1.3140-50s this morning as global markets go into a nervous lull ahead of this Saturday’s historic Brexit vote in the UK House of Commons.  Today’s North American calendar won’t feature any notable economic headlines, but we will have a bunch of Fed members taking to the mic again:

 

9am – Kaplan

10am – George

10:30am – Kashkari

11:30am – Clarida

 

Canadians go the polls on Monday, but we don’t think global markets continue to care about Canadian politics right now.  We think relative monetary policy continues to be the overarching negative fundamental driver for USDCAD since the end of the summer.  We have a Federal Reserve that is losing credibility by the day in our opinion and will be forced to cut interest rates yet again later this month (all because bonds market don’t believe they have a grip on the deteriorating US economic and banking liquidity situation), yet we have a Bank of Canada that is not in a rush to do anything because of decent Canadian economic data.  The proposed 1.3100-1.3300 range for the market we talked about on Sep 5th has largely proven accurate over the last couple months, but we’re now coming to a point where the chart technicals are starting to hint at a major downside move for USDCAD below 1.3100.  So what could be some fundamentals narratives to watch out for to support such a move?  Continued divergence in US vs Canada monetary policy.  Passage of the USMCA through Congress.  Positive news on the US/China trade front.  A resolution of the Brexit nightmare.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

NOV CRUDE OIL DAILY

NOV CRUDE OIL DAILY

EURUSD

Euro/dollar is inching higher past yesterday’s post Brexit-deal highs this morning, in what appears to be a cruel test of resolve for the fund net-short EURUSD position ahead of tomorrow’s big Brexit vote.  We think a positive outcome is entirely possible (how much further can UK politicians realistically tolerate delaying Brexit?).  We also think next week’s ECB meeting is starting to play into the minds of traders as well (does the European central bank stand pat while it continues to deal with the growing distaste for QE within its ranks?).  The market technicals on the weekly chart for EURUSD are looking increasingly positive, especially should the we get a NY close above the 1.1160s.  One to 6 month risk reversals in the options market have all leaned higher with the spot market over the last week (suggesting a slight preference for calls over puts).  We think how the market responds to topside resistance next week will be quite pivotal for EURUSD’s prospects heading into the Fed meeting the week after

 

 

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

DEC GOLD DAILY

DEC GOLD DAILY

 

GBPUSD

Sterling’s fate hangs in the balance this morning, as traders confine the market to a tight range ahead of what the media is now calling “Super Saturday” in Britain.  More here from the UK’s Telegraph.  Expect GBPUSD to gap higher at the Sunday market open should Boris Johnson’s new, EU-approved, Brexit deal get approved by UK parliament and conversely expect perhaps an even more serious gap down should it fail.  The widely followed overnight options straddle (buying both a call and a put) is trading north of 200pts this morning versus 50pts at most on an ordinary day.  The 1-month 25delta risk reversal is still showing a huge recovery in the premium to own GBP puts over calls since Wednesday.  We think it will be the Labour party that tips the balance (if at all) as it doesn’t look like the 10 Northern Irish DUP MPs are going to budge.  Boris Johnson has one heck of a sales pitch ahead of him for the next day and Labour party members have some soul searching to do.  The Benn Act requires Boris Johnson to request a Brexit extension from the EU by end of day tomorrow should the vote fail.

 

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

 


 

AUDUSD

The Australian dollar is toying with the fund net-short AUDUSD position as well this morning ahead of tomorrow’s key Brexit vote.  The RBA’s Lowe spoke at the IMF’s annual meeting in Washington late yesterday and we think his relatively hawkish comments are providing a lift to the market as well.  More here from the Sydney Morning Herald.  Yesterday’s NY close was bullish in our opinion, as it confirmed a break above a strong, downward sloping trend-line that has resisted prices for most of 2019.  Do the AUD shorts now through in the towel and allow the market to run to the 69 handle?  The charts are suggesting this is increasingly likely.

 

 

 

AUDUSD DAILY

 

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY

 


 

USDJPY

Dollar/yen continues to stall as US 10yr yields struggle with the 1.77% level once again this morning.  We feel the global stock and bond markets are anxiously awaiting tomorrow’s Brexit vote as well, and we think USDJPY’s Sunday opening will correlate as usual with the broader risk tone.  Expect a gap higher in USDJPY should the vote pass the House of Commons and a gap down should it not.  The funds remain net short the market and so the we’d argue the pain trade (the more swifter move) would definitely be higher for USDJPY here.  A firm NY close above the 108.80s would add further credence to the bullish breakout we’ve witnessed in the market since last Friday’s move above the 108.00 level.

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.

 

Archive