1-888-998-3948


Monday, August 19, 2019

Risk bid in quiet start to the week. Powell speaks at Jackson Hole on Friday.

Risk bid in quiet start to the week. Powell speaks at Jackson Hole on Friday.
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

Markets continuing Friday’s “risk-on” move from Speigel report: German ready for deficit spending if recession hits.
Fed rate cut trade also dialing back bets ahead of speech from Jerome Powell at Jackson Hole.
Bundesbank sees risk of Germany entering a recession.
UK government confirms no-deal Brexit preparations have been “significantly stepped up”.
Funds cover shorts in USDCAD, GBPUSD.  Add to AUDUSD shorts and USDJPY shorts.
RBA reports Minutes from last policy meeting tonight at 9:30pmET.
Canadian data in focus this week: Manufacturing Shipments, CPI, Wholesale Sales, Retail Sales.
 

ANALYSIS

USDCAD

Dollar/CAD is dribbling lower to start the week as risk assets continue their “Germany is going to spend more during a recession” rally from Friday.  Bond traders also appear to be tempering their rate cutting bets a little bit ahead of the annual Jackson Hole Economic Policy Symposium, where Fed chairman Powell is expected to make a speech on Friday.  Traders will likely be focused on this week’s lineup of Canadian data items before that though, with June Manufacturing Shipments out tomorrow, July CPI on Wednesday, June Wholesale Sales on Thursday and June Retail Sales early on Friday.  We saw the funds cover USDCAD short positions during the week ending August 13.  We think the market continues with the directionless tone we talked about last Monday, and wouldn’t get too excited either way until we close above the 1.3330s or below the 1.3200 level.  Near term levels to watch within that range are 1.3270-80 on the upside and 1.3240-50 on the downside.  September crude oil continues to hold the $55 level this morning, despite an arguably bearish OPEC Oil Market Report on Friday.  We think a push back above the 55.70s could propel a move to the mid $56 level and put a drag on USDCAD, all else being equal.

 

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

SEP CRUDE OIL DAILY

SEP CRUDE OIL DAILY

 


 

EURUSD

The euro caught on bid during NY trade on Friday after Spiegel reported that Germany was “ready for deficit spending” should recession hit.  More here from Bloomberg.  Markets broadly celebrated this potential for further stimulus and it gave EURUSD, in particular, a chance to regain trend-line support at the 1.1100 level.  The NY close however (slightly below 1.1100) was far from convincing to scare EUR shorts in our opinion and when we combine this with comments out of the Bundesbank this morning about it seeing a risk that Germany entering a recession, it’s not surprising to still see EURUSD on the defensive here.  December gold prices are also slumping back below the mid-1520s this morning as the Fed rate cut trade prepares for Powell once again.  There was little change to EURUSD net short fund positioning during the week ending August 13, as about an equal amount of position liquidation by long and shorts was picked up by corporate hedgers.  This week’s European economic calendar started off with some weaker than expected Eurozone CPI growth for the month of July (-0.5% vs -0.4% expected).  The next major data item will be the preliminary August PMI prints out of Germany on Thursday.  The German bund yield also popped higher after Friday’s report from Speigel, and while it opened higher to start the week, it too is struggling with EURUSD as NY trade gets underway today.

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

DEC GOLD DAILY

DEC GOLD DAILY

 


 

GBPUSD

So it appears Friday’s roaring pound rally didn’t have any fundamental basis behind it, as this morning a spokesperson for Boris Johnson confirmed that “no-Brexit” efforts have been “significantly stepped up”.  Johnson himself confirmed this morning that the UK will be ready to leave the EU “with or without a deal”.  With that, we’ve seen GBPUSD give back half of its gains from Friday and we’ve seen EURGBP take another leg higher after the Speigel report bounce.  Fund position liquidation was the theme in the pound futures market during the week ending August 13, with shorts covering more than longs, and this now leaves the fund net short GBPUSD position off the extremes we saw the week before.  We think downward-sloping trend-line resistance (currently in the 1.2130-50s) will be the pivot for price action this week heading into Jerome Powell’s speech on Friday.  Staying below this level should keep the pressure on whereas a NY close above the level could give the extended fund short position something to think about.

 

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

 


 

AUDUSD

It’s been a very quiet start to the week for the Aussie as traders continue to battle it out at familiar trend-line resistance in the 0.6780s.  The off-shore Chinese yuan opened the week quietly and it continues to hover around the 7.05-7.06 mark as market participants await the next major US/China trade war headline.  Weekend reports suggest we’ll get something from President Trump today regarding Huawei, and we’re not sure yet whether Wilbur Ross’s announced 90-day delay on the Huawei ban is the extent of it all.  The broader USD isn’t moving all that much here as NY trade gets underway and so it appears AUDUSD is following suit.  The RBA will release the Minutes from its last policy meeting tonight at 9:30pmET.  Other than that, there’s not much on the Australian economic calendar this week.  September copper prices have finally broke above the 2.60 level this morning as the industrial metal follows the S&P futures higher, and we think this could help AUDUSD here should the broader USD develop an offered tone over the course of NY trade today.  The funds scurried into new short AUDUSD positions during the week ending August 13, extending their net short position to a 7-week high.

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

SEP COPPER DAILY

SEP COPPER DAILY

 


 

USDJPY

Dollar/yen is inching higher with the S&P futures and bond yields this morning, as it appears the German government is willing to spend more and everybody is thinking Jerome Powell might disappoint the markets again this Friday.  The funds extended their new net short position in USDJPY during the week ending August 13, which means they effectively sold the “US softening its stance on China” rally last week.  While we think the P&L on these new short positions could be back to break-even at this point, we don’t think they start asking questions until USDJPY breaks back above the 106.90-107.00 level.  Still nothing from the BOJ regarding JGB yields, which implies they’re obviously comfortable with this “new normal”.  The Japanese government benchmark reached a new low yield of -0.25% on Friday, but is now trading at -0.227 as global yields continue Friday’s bounce off the Speigel report.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BOND YIELD DAILY

US 10YR BOND YIELD DAILY

Charts: TWS Workspace


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.