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Tuesday, June 11, 2019

Quiet FX markets await fresh catalysts. US May PPI on deck.

Quiet FX markets await fresh catalysts.  US May PPI on deck.
Source: Powered by Exchange Bank of Canada – www.ebcfx.com/news

 

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SUMMARY

Traders expecting US PPI +2.0% YoY for May and +2.3% ex. Food and energy.
UK wage growth for May beats expectations, helps GBP mildly outperform.
PBOC fixes CNY higher last night.  USDCNH recedes off 6.94 handle.
Option expiries in play for EURUSD and USDJPY, likely contributing to quiet ranges.
Trump slams Federal Reserve again, saying interest rates are too high.
Australia reports Consumer Confidence tonight at 8:30pmET.  Chinese May CPI out at 9:30pmET.

 

ANALYSIS

USDCAD

Directionless range trading continues for USDCAD this morning after a very quiet session yesterday.  Selling volatility seems to be in order after last week’s swift move lower and odds are market conditions will remain this way until the US reports its May CPI numbers tomorrow.  The broader USD had an uneventful day yesterday as well and now trades mixed to slightly lower as NY trading gets underway today.  July crude oil prices are bouncing a tad this morning with the uptick in the S&P futures; gold prices have extended losses below key support at the 1333 level and the December Eurodollar interest rate futures have fallen back below the physiological 98.00 level.  There seems to be a nervous calm in the air on the US/China trade front as President Trump and China’s President Xi Jinping speak kindly about one another ahead of the G20 this month in Japan, where they’re both expected to meet.  We think USDCAD still remains in the pits technically and may need to fall lower still before bouncing.

 

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

JUL CRUDE OIL DAILY

JUL CRUDE OIL DAILY

 


 

EURUSD

Euro/dollar remains confined to a very tight 1.1310-1.1320s range this morning as traders await the next catalyst for price action.  The US will report its May PPI report shortly, and the market expectation is for +2.0% YoY and +2.3% ex. Food and energy.  The ECB’s Rehn was on the wires this morning saying the central bank could cut rates and relaunch QE if needed.  More here.  The BTP/Bund spread continues to trend lower today as the race to scoop up Italian yields post US NFPs continues, and the PBOC surprised some market participants by fixing the CNY higher last night.  Both these factors are mild supports for EURUSD at this hour, but market participants appear to be more focused on the 1.1blnEUR worth of options expiring at the 1.1300 strike at 10amET.

 

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

AUG GOLD DAILY

AUG GOLD DAILY

 


 

GBPUSD

Sterling is enjoying a slight out-performance compared to its G7 peers this morning as the UK reported healthy wage growth in its May employment report this morning.  While the unemployment claimant count rose slightly more than expected (23.2k vs 22.9k), wages rose +3.1% 3M/yr vs +3.0% expected, and when you combine this news with some hawkish commentary from the BOE’s Saunders, we have a small GBPUSD rally on our hands.  The upward momentum is lacking however as the broader USD remains quiet, but GBP bulls might find some comfort with the fact that EURGBP continues to struggle with the 0.8900 handle.  The final candidate list for the UK’s Tory leadership race has now been confirmed.  See here for a nice summary of the 10 individuals who are now running to replace Theresa May.

 

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

 


 

AUDUSD

It’s been a very quiet 24hrs of trade for the Australian dollar as the broader USD remains quiet since the start of NY trade yesterday.  The market has slipped below trend-line support in the high 0.6950s and EURUSD recedes from the 1.1320s.   July copper prices have shot up 1% today in sympathy with the supply concerns that are driving Dalian iron ore futures through the roof today.  More here.  Australia reported a mixed NAB Survey for May last night (7 vs 0 prior for Business Confidence but 1 vs 3 prior for Business Conditions, which is a six year low).  Tonight’s Asian session will feature a speech from the RBA’s Kent, followed by the Westpac Consumer Confidence numbers for June and China’s May CPI.  We think AUDUSD could find some upward momentum with a move back above the 0.6950s. 

 

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

JULY COPPER DAILY

JULY COPPER DAILY

 


 

USDJPY

Dollar/yen is inching higher again this morning as gold, bonds and the December Eurodollar futures recede.  The market has drifted back above the 108.50s, which should now pave the wave for gains into the 108.80s but a hefty option expiry (1.1blnUSD) at 108.50 this morning might make things sluggish.  President Trump is out again slamming the Federal Reserve via tweet this morning, saying US interest rates are way too high and that the EUR is devalued.
 

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

JUN S&P 500 DAILY

JUN S&P 500 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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