• Financial Institutions
  • Corporations
  • Travelers
  • SOLUTIONS
  • Foreign Bank Note Exchange
  • International Drafts
  • International Wire Transfers
  • Global EFT
  • Foreign Check Clearing
  • Foreign Draft Issuance
  • INDUSTRIES
  • Travel
  • Technology Companies
  • Payroll
  • Healthcare
  • Nonprofit
  • Partnerships

USD trading lower again amid another risk-on wave

Erik April 28th, 2020
USD trading lower again amid another risk-on wave

Take control of your international payments with CXI FX Now.

• Low transfer fees & great rates
• Fast international payments
• Safety and security
• Unparalleled customer service
• Consultative approach

Interested in creating a custom foreign exchange trading plan? Contact us or call EBC's trading desk directly at 1-888-729-9716

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

 

SUMMARY

 

  • European equities and S&P futures higher. BTP/Bunds tighter. No obvious news catalysts.
  • USDJPY breaks below 107.00.  AUDUSD challenging 0.6500 handle.  EUR and GBP higher too.
  • Talk of month-end/pre-Golden Week flows, WTI oil bounce and more Australian re-opening news.
  • USDCAD falls below 1.4020s, poised to re-test lower bounds of ~1.3900 to 1.4200-50 range.
  • US Conference Board Consumer Confidence & Richmond Fed Indexes up next at 10amET.
  • Aussie Q1 CPI at 9:30pmET tonight.  FOMC meeting at 2pmET tomorrow.  ECB on Thursday.

 

ANALYSIS

 

USDCAD

A broad, “risk-on”, USD selling wave is sweeping across global markets this morning, but it’s been a bit challenging to explain the reasons why amid a lack of obvious news catalysts.  Some traders are already talking about month end flows from asset managers and JPY repatriation ahead of the Japanese Golden Week holiday (which begins tonight ET).  Others are referring to the mild bounce in oil prices, as the US Oil Fund and the S&P GSCI Index now shun the June contact in favor of a more diversified portfolio of farther dated futures contracts across the WTI curve.  Then of course, we’re hearing some re-hashing of yesterday’s “lock-down easing hopes” as Australia re-opens its beaches and permits home visits.

We think the USD has been affected by “technical selling” today as well; with the most obvious signs coming from yesterday’s bullish NY close for AUDUSD above the 0.6330s and from this morning’s break below the 107.00 (March/April) lows for USDJPY.  European traders continue to ignore the dysfunction in Brussels and have tightened the BTP/Bund spread, which is helping EURUSD bounce once again.  Sterling continues to display its higher beta (relative volatility) vis a vis the euro, and USDCAD has now slipped below the 1.4020s and looks destined to re-test the lower bounds of the 1.3900 to 1.4200-50 range we’ve been talking about for the better course of April.

Today’s North American calendar will feature the release of some 2nd tier US data at 10amET (Conference Board Consumer Confidence & the Richmond Fed Indexes), but these might get more attention that usual given that they’re relatively fresh April reads on consumer/business sentiment.  The Fed begins its two-day FOMC meeting today and will announce its latest decision on monetary policy at 2pmET tomorrow.


USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

JUNE CRUDE OIL DAILY

JUNE CRUDE OIL DAILY


EURUSD

Euro/dollar dip buyers have defended Sunday night’s chart support level in the 1.0810s this morning, but it’s not really coming from any positive narratives out of Europe today.  The US dollar is getting sold across the board and European equities are rising more than 1% amid a broad wave of “risk-on” flows today.  It may be a little hard to explain at this hour, but wouldn't dwell on it too much.

Some traders are talking about the potential magnetizing affect of Thursday morning’s huge option expiry at the 1.0800 strike in EURUSD, which will take place right after the ECB meeting.  Hedging flows around this expiry could drag EURUSD lower again at some point over the next 48hrs but we’d argue that event is still a ways away though and that tomorrow’s FOMC meeting represents the more near-term event risk to position for.


EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

BTP/BUND SPREAD DAILY

BTP/BUND SPREAD DAILY


GBPUSD

Sterling has managed to break above the 1.2420-40s trend-line resistance band we talked about yesterday, and it achieved this during the 3amET hour this morning…right when USDJPY started to fall apart.  GBPUSD traders tried to put some upside pressure on trend-line resistance just above the 1.2500 figure at the NY open, but they have since backed off.  Yesterday's highs in the 1.0850s should now act as chart support.


GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

AUDUSD

The Australian dollar continues to lead the US dollar broadly lower today.  We believe yesterday's fundamental narratives still apply and we think yesterday’s bullish NY close above the 0.6330s, and buyer defense of this level in London today, has added some fuel to the fire.  The market is now struggling to break decisively above the 0.6500 level as we head into NY trade however, which could funnily enough bring about some USD short covering into the London close.

Australia will report its Q1 CPI figures tonight at 9:30pmET, with the consensus expectations being +0.2% QoQ and +2.0% YoY.  We’re not sure so traders will care if the numbers disappoint, seeing as the marketplace is more focused now on the Australian re-opening effort.


AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

Dollar/yen’s break below the 107.00 level is making headlines this morning.  The “whys” are a bit lacking, but the technical breakdown below these March/April lows has been hard to argue with.  If we combine the lack of local JPY liquidity that is coming (Golden Week holidays) with the event risk that lies ahead (Fed & ECB meetings), we could be in store for a resumption of the late February/early March downtrend in USDJPY. 

Option market traders aren’t betting on a rapid decline in the market just yet though, if we look at pricing for the 1-month USDJPY risk reversal (currently just -1.80).  Spot market traders are also trying to regain the 106.60s trend-line support level as NY trade gets underway.  Perhaps the flows we saw overnight were truly month-end/pre-holiday related?


USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

USDJPY 1-MONTH RISK REVERSAL DAILY

USDJPY 1-MONTH RISK REVERSAL DAILY

Charts: Reuters Eikon


About the Author

Erik Bregar Director, Head of FX Strategy at Exchange Bank of Canada

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 thatthe 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.
Archive