Sterling losses lead broad USD strength into NY trade
Summary
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USDCAD: Dollar/CAD continued its drift higher yesterday after a brief pause caused by a bounce in crude oil prices. Broad USD buying has been the theme in overnight trade, with losses in sterling leading the way. April crude oil prices are taking another crack at the upside this morning, which is now leading USDCAD to stall at trend-line resistance in the 1.3340s. Today’s calendar features the US Non-Manufacturing ISM for February at 10amET and three Federal Reserve member speeches (Rosengren currently speaking, Kashkari at 9:30amET and Barkin at 11:30amET). We wouldn’t be surprised to see USDCAD pull back a touch today as traders prepare for the Bank of Canada meeting tomorrow.
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EURUSD: Euro/dollar has been trading with a choppy tone ever since the NY close yesterday. Two trend-line support levels in the 1.1310-20 continue to stem further losses, but the broad USD buying momentum observed elsewhere overnight is weighing on EURUSD recovery attempts. The Markit Services PMI data out of France, Italy and Germany for February came out better than expected today. Italy’s Q4 GDP figures came in slight less worse than expected (-0.1% QoQ vs -0.2%). The selling in April gold futures has paused for the time being and USDCNH is trading steady. We think EURUSD may continue to struggle ahead of the ECB meeting on Thursday.
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GBPUSD: Sterling losses are leading the USD broadly higher this morning as new Brexit headlines take their toll on the market. Traders are anxiously awaiting updates from the UK’s latest efforts to negotiate with Brussels (more here), but Bloomberg is now reporting that no breakthroughs are expected. We’re also seeing headlines from the UK’s McDonnell who said not many Labour MPs will back Theresa May’s Brexit deal, but will instead back a 2nd Brexit referendum. We don’t think any of the overnight headlines should come as a shock to market participants, but we have to remember that trading algorithms often set the momentum nowadays depending on how the wire headlines are worded. We think GBPUSD will attempt to dial back its losses today by extending its bounce off the 1.3100 level. The UK Markit Services PMI data for February came in above expectations this morning. Bank of England Governor Carney will be speaking at 10:35amET before the House of Lords Economic Affairs Committee.
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AUDUSD: The Reserve Bank of Australia kept interest rates on hold last night and left their statement roughly balanced in tone. Full text here. This didn’t come as a surprise to market participants, and so AUDUSD continued to trade within Monday’s range for the most part. Chart support lies in the 0.7070s while resistance resides in the 0.7090s. Next up is a speech from RBA’s Governor Lowe at 5:10pmET (which just so happens to be a very illiquid time of day) and Australia’s Q4 GDP figures at 7:30pmET. We think tonight’s Asian session could be particularly volatile and we’d be way of further downside in AUDUSD should the 0.7070s give way.
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USDJPY: Dollar/yen indeed searched for buyers yesterday and the rather swift, intra-day selloff in the S&Ps proved to be the catalyst. Those buyers did emerge at the 111.60 level we talked about yesterday however, and this has given USDJPY a rather positive bias again heading into NY trade today. Over 3blnUSD in options expire between 111.90 and 112.00 this morning, which should keep the market bid at least until 10amET. Traders are expecting a read of 57.3 when the US reports its Non-Manufacturing ISM number for February this morning.
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Market Analysis Charts
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