1-888-998-3948


Friday, May 31, 2019

Trump to slap Mexico with 5% tariff. China readies plan to restrict rare earths.

Trump to slap Mexico with 5% tariff.  China readies plan to restrict rare earths.
Source: Powered by Exchange Bank of Canada – www.ebcfx.com/news

 

Interested in creating a custom foreign exchange trading plan? Contact us or call CXI's trading desk directly at 1-833-572-8933.

Get real-time market coverage on twitter at @EBCTradeDesk or sign up here.


SUMMARY

Canadian GDP for March/Q1 comes in mixed.
S&Ps -30.  US 10s yielding < 2.20%.  German bund yield at new record low, -0.20%.  Crude oil -2%.
USDCAD struggling to benefit considerably from global risk aversion flows.  1.3510s pivotal for the current rally.
EURUSD follows gold prices higher, ignores weak German data.
GBPUSD selling resumes following failure to regain 1.2620s.
AUDUSD holding up again.  RBA expected to cut rates by 25bp next Tuesday.
USDJPY puts further pressure on the fund longs by collapsing below 109.20s support.

ANALYSIS

USDCAD

Dollar/CAD is galloping higher this morning after President Trump announced a new 5% tariff on all goods coming into the US from Mexico.  According to the President’s tweets and a communication from the White House, the tariff is in response to Mexico’s failure to curb illegal immigration through its border with the US.  The 5% is set to kick in on June 10, and would scale to as high as 25% by October should Mexico fail to act.  More here.  As one might expect, risk assets are getting crushed this morning.  The Mexican peso is plunging 3%, the S&Ps are down 1%, oil prices have lost 2% and traders are flocking to gold, the yen, and global bonds (US 10s are now yielding below 2.20% and German bunds are trading at a new record low yield of -0.20%).  We’re seeing broad demand for USD this morning, but these gains have been somewhat tempered by a $10 rise in gold prices, which is helping EURUSD.  Canada just reported some mixed GDP data: +0.5% growth for March vs estimates of +0.3%, but just +0.4% for Q1 2019 vs expectations of +0.7%.  We think USDCAD risks reversing lower here as the funds, who are still net long the market, grow tired of a market that is not showing them the gains they were expecting, considering all the risk off waves that have hit oil prices of late.  We think the 1.3510s is pivotal for price action right now.  Next week’s calendar will be a busy one, featuring the US ISM survey for May on Monday, followed by a speech from Fed chairman Powell on Tuesday and the US Services ISM on Wednesday.  Thursday will bring the April trade balance data for the US and Canada, and Friday will showcase the May job reports for both countries.

 

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

JUL CRUDE OIL DAILY

JUL CRUDE OIL DAILY

 


 

EURUSD

Euro/dollar is bouncing this morning traders follow gold prices higher into this latest wave of risk-off for global markets.  Trend-line chart support in the 1.1120 held this morning and trend-line resistance in the 1.1160s appears to be the next stop should August gold futures continue to march higher here.  Dollar/yuan spiked higher in the 6am hour after ex-PBOC governor Zhou said the 7.00 level is not necessarily a threshold for Chinese authorities (with regard to exchange rate management).  Germany reported weaker than expected Retail Sales this morning (-2.0% MoM for April vs +0.1%) and softer than expected CPI figures (+1.4% YoY for May vs +1.6%), but traders seem to be ignoring this.  They’re also ignoring the fact that German bunds are now yielding -0.20%, which is the lowest on record.  It’s all about gold prices, for now at least.  Next week’s calendar should put European data back in focus, as we’ll get the Markit Manufacturing PMIs out on Monday, the Services PMIs out on Wednesday, German Factory Orders and Industrial Production, and then of course we’ll have the ECB meeting on Thursday.

 

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

AUG GOLD DAILY

AUG GOLD DAILY

 


 

GBPUSD

Sterling is crumbling yet again today as traders simply find it easier to sell amidst continued Brexit/UK political uncertainty and global risk-off sentiment.  An attempt was made to regain the 1.2620s (yesterday’s support turned resistance) in early European trade but the sellers rushed back in when this failed.  GBPUSD is now scrambling for support in the mid-1.25s and the EURGBP cross has broken above chart resistance in the 0.8860s.

 

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

 


 

AUDUSD

The Australian dollar continues to hold up remarkably well despite all the risk-off selling that is hitting global stocks and copper prices today.  We think this is part in parcel due to the rally in gold prices and EURUSD’s inability to make news lows here.  We also think the fact that USDCNH hasn’t yet taken out the 6.9500 level to the upside is somewhat supportive as well.  We think AUDUSD will continue to chop around in the 0.6905 to 0.6925-35 area until the Reserve Bank of Australia announces its latest decision on interest rates next week (Monday night ET).  There is overwhelming market consensus at this point that the RBA will cut rates by 25bp.

 

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

JUL COPPER DAILY

JUL COPPER DAILY

 


 

USDJPY

Dollar/yen is collapsing lower today as risk aversion rears its ugly head again following Trump’s provocation against Mexico.  Bloomberg is also reporting that China has readied a plan to restrict exports of rare earths to the US if the trade war deepens.  More here.  We think today’s move below chart support in the 109.20s is technically negative, and should keep the sellers in charge near term.  It will be interesting to see later this afternoon if the funds (who remain net long USDJPY as of May 21) continue to purge long positions as the market moves against them.    

 

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

JUN S&P 500 DAILY

S&P 500 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 Rachel Butler 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.