All eyes on Fed chairman Powell this morning

Summary

• USDCAD: Dollar/CAD is trading higher this morning, after the market closed above trend-line resistance in the 1.3180s yesterday.  The swift fall in crude oil prices following Trump’s tweet didn’t abate at all yesterday, and so there was little incentive for traders to sell strength as the day wore on.  The close above chart resistance, in turn, paved the way for the drift higher we have witnessed since then, and we now have a USDCAD market wrestling with another trend-line level in the 1.3210s.  April crude oil prices are trying to regain the 55.50-60s this morning, the broader USD is trading mixed and Housing Starts for December were just reported at +1.07M vs expectations of +1.25M.  The focus will now turn to Fed chairman Powell at 9:45amET, as he presents the semi-annual Monetary Policy Report before the US Senate Banking Committee.  While we don’t think Powell will be rock the boat here with regard to the Fed’s patient and data dependent outlook, we would not be surprised to see trading algorithms whipsaw the market depending on the wire headlines that are written.  We think the momentum for USDCAD remains higher for the moment.

• EURUSD: Euro/dollar volatility continues to evaporate as traders search for catalysts to break the market out of its recent range.  A catalyst may come shortly as Fed chairman Powell takes the mic.   While we still think that a move above trend-line resistance in the 1.1360s will entice further buying, the market’s continuing inability to breach this level makes us wary of the downside in EURUSD here.

• GBPUSD: Sterling is surging higher this morning after more reports crossed the wires overnight about Theresa May formally taking the “no-deal” Brexit option off the table.  This has been confirmed by the UK PM this morning as she speaks before parliament.  There will be another Meaningful Vote on Theresa May’s Brexit proposal on March 12, and if this vote is rejected, they’ll be too subsequent votes:  March 13 (leaving the EU without a deal) and March 14 (extending the Article 50 period).  GBPUSD traders are cheering these headlines because the odds of Brexit crashing out of Europe have now been significantly reduced.  When you combine this with pro-Brexiter Jeremy Corbyn’s backing of a 2nd Brexit referendum yesterday, it is not surprising to see a wave of GBP optimism here.  The market is currently wrestling with chart resistance in the 1.3210-25 level.  Support comes in today in the 1.3170s.  What is interesting too is that the overnight headlines starting during the NY rollover period last night (5-6pmET), and therefore produced a rare, intra-week, gap on the hourly GBPUSD chart around the 1.3110-20 area.  This could prove to be a downside magnet for price should support not hold today.

• AUDUSD: The Aussie couldn’t manage to close above trend-line resistance in the 0.7170s yesterday, as so prices have been drifting lower ever since.  Copper prices are finally pulling back a tad after touching the 2.9750 mark on the March futures contract yesterday, and we think is dragging AUDUSD lower a bit as well.  Next up is Fed chairman Powell as his testimony before the US Senate.  We think the bulls need to see a move above the 0.7170s in short order, otherwise we could be looking at further selling down to the 0.7120s.

• USDJPY: Dollar/yen rallied strongly yesterday, and reached the next chart resistance level in the 111.10-20s rather quickly after the S&Ps broke above 2808.  The exuberance from Trump delaying the March 1st tariff deadline didn’t last long however.  Sellers hit the S&Ps and USDJPY heading into the NY close, and this is leading to some pretty negative momentum here heading into trading today.  The weaker than expected US Housing Starts figure (just reported) is not helping at this hour.  We think the upside in USDJPY may have now run its course here and we would not be surprised to see further selling here.

Tune in @EBCTradeDesk for more real-time market coverage.

Market Analysis Charts

USD/CAD Daily Chart

USD/CAD Hourly Chart

April Crude Oil Daily Chart

EUR/USD Daily Chart

EUR/USD Hourly Chart

USD/CNH Daily Chart

GBP/USD Daily Chart

GBP/USD Hourly Chart

EUR/GBP Daily Chart

AUD/USD Daily Chart

AUD/USD Hourly Chart

March Copper Daily Chart

USD/JPY Daily Chart

USD/JPY Hourly Chart

March S&P Daily Chart

Charts: TWS Workspace

About the Author

Erik Bregar - Director, FX Trading

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.