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Monday, June 10, 2019

Mexico tariffs averted as US & Mexican negotiators reach deal

Mexico tariffs averted as US & Mexican negotiators reach deal
Source: Powered by Exchange Bank of Canada – www.ebcfx.com/news

 

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SUMMARY

MXN surging 2%.  Global risk-off trade reverses.  Gold drops and bond yields bounce.
USDCAD still in the pits following double whammy of negative US/positive Canadian jobs data on Friday.
GBPUSD gives up post NFP gains following much weaker than expected UK GDP for April (-0.4% vs -0.1%)
AUDUSD reverses bullish breakout above 0.6990s following weak Chinese import growth for May.
EURUSD down too, but holding up relative to GBP and AUD.  Funds cover shorts into June 4.
USDJPY gaps higher to start week.  Fund longs continue to liquidate.
This week’s calendar features US CPI and Retail Sales reports for May.

 

ANALYSIS

USDCAD

Dollar/CAD is seeing the slightest of bounces this morning as the Trump administration announced late Friday that it will indefinitely suspend plans to impose tariffs on Mexico after US and Mexican negotiators were able to reach a deal on immigration enforcement.  This is leading to a reversal of some of the risk-off flows we saw last week (MXN surging 2%; bonds, gold and Eurodollar interest rate futures all lower, USD higher), but USDCAD fund longs still appear to be reeling from Friday’s double-whammy of very poor US and better than expected Canadian employment data for the month of May.  The market has taken no prisoners since the bearish reversal we noted on May 31, falling swiftly through support level after support level with the “Fed rate cut frenzy trade” of last week, and Friday’s very bearish data was the straw that broke the camel’s back (from a technical perspective we feel).  The leveraged funds at CME actually added to long positions during the week ending June 4, and so we surmise that some of Thursday and Friday’s price action was due to this crowd getting out.  What is interesting however is the massive jump in Canadian dollar futures open interest for Friday’s session, which would suggest new short positions coming into the market.  We now sit just above horizontal chart support at the 1.3270 level after having touched and held trend-line support in the 1.3240s last night.  Canada just reported its May Housing Starts, and the data came in below expectations (202.3k vs 210k).  This week’s calendar will feature the US CPI report for May (Wednesday) and the US Retail Sales report for May (Friday).  The Fed now enters its blackout period ahead of the FOMC meeting next Wednesday (June 19).  We think USDCAD will attempt a bounce early this week, but we may need to see another test of the 1.3240s first to shake out a few more weak hands.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

JUL CRUDE OIL DAILY

JUL CRUDE OIL DAILY

 


 

EURUSD

Euro/dollar is retreating with the improvement in global risk sentiment this morning, but it’s not down all that much considering some of the weak data that came out of China and the UK overnight.  European stocks are extending gains from last week, German bund yields are bouncing, and gold prices are falling 1% while EURUSD toys with trend-line chart support in the 1.1310s.  We think another wave of selling could come in here should we stay below the level, but we think the chart can quickly repair itself with a move back above it.  The funds liquidated shorts and added to long positions during the week ending June 4 (which is not all that surprising given the market’s rush to price in Fed rate cuts last week).  This week’s European calendar is a rather quiet one, with just a speech from Mario Draghi on Wednesday morning, and the May German CPI and April Eurozone Industrial Production figures out on Thursday.

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

AUG GOLD DAILY

AUG GOLD DAILY

 


 

GBPUSD

Sterling is falling back more than anything else this morning after the UK reported dismal Industrial Production data for May (-2.7% vs +0.1% expected) and a shocker for April GDP (-0.4% vs -0.1% expected).  The progress that GBPUSD made on Friday following the weak US payrolls data has been completely reversed and then some.  Chart support in the 1.2680-1.2700 level has fallen (and now becomes resistance).  Support at 1.2670 gave way earlier, but traders have just reclaimed it, and so we think the market could drift higher here over NY trade.  Tory front-runner Boris Johnson has kicked off the UK leadership race with a pledge to cut income taxes.  More here.  The BOE’s Haldene said over the weekend “the time is nearing when a small rise in rates would be prudent to nip any inflationary risks in the bud”  The BOE’s Saunders will be speaking at 1pmET today.  The UK reports it May Employment Report tomorrow morning at 4:30amET.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

 


 

AUDUSD

The Australian dollar is declining with global bonds and gold this morning, but last night’s weak Chinese import data for the month of May (-2.5% vs +15.9%) seems to hitting the China-sensitive currency especially hard.  The AUDUSD chart has now completely reversed Friday’s bullish break above the 0.6990s, and we’re staring at the familiar trend-line support level that held prices on Thursday (0.6960s).   This week’s Australian calendar features the NAB Survey for May (out tonight at 9:30pmET), a speech from the RBA’s Kent, the Westpac Consumer Confidence report for June, and China’s May CPI data (out tomorrow night ET), the Australian Employment Report for May (Wednesday night ET), and China’s Retail Sales/Industrial Production data (Thursday night ET).  The funds trimmed their net short position in AUDUSD to -63k contracts during the week ending June 4.

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY

 


 

USDJPY

Dollar/yen gapped up with global interest rates at the Sunday open yesterday, following the news that the US will not be proceeding with tariffs on Mexico.  MNI News is also reporting that the BOJ is becoming more and more concerned with Japan’s outlook, citing increased global downside risks since the April policy meeting.  The leveraged funds at CME continued to liquidate long positions during the week ending June 4, and we bet those that remain are breathing a sigh of relief following the market’s inability to seriously challenge chart support in the 107.70s post weak US payrolls on Friday.  Trend-line resistance in the 108.50s appears to be the pivot for price action as we head into NY trade.  We think it’s likely the Sunday opening gap fills (108.20-35) should we stay below 108.50.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

DEC 3-MONTH EURODOLLARS DAILY

DEC 3-MONTH EURODOLLARS DAILY

Charts: TWS Workspace


About the Author

Erik Bregar

Erik Bregar - Director, Head of FX Strategy

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

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Posted By Mandee Myers at 08:15 AM
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