USDCAD – Back to 1.2500?

USDCAD – Back to 1.2500?

Chart Of The Day

The loonie has been a persistent loser for the past six weeks as the Bank of Canada did an abrupt about-face and turned resolutely neutral after surprisingly hawkish since the summer. After hiking rates not once but twice, the BOC saw its currency appreciate too much for its own liking and saw CAD data deteriorate at the start of Q3.

Lately, however, the Canadian economy has shown strong signs of rebound. Employment, Building Permits, Ivey PMI have all beaten forecasts while oil popped above the $50/bbl level and has remained there for several weeks.

Tomorrow the market will get a look at Canadian inflation data, which has been tepid at best running at about 1.5% per annum. However, if the CPI proves to be hotter than expected, that could shift BOC towards a more hawkish posture and spark a selloff in USDCAD towards the 1.2500 figure.

USDJPY – 113.00 is Key Support

USDJPY – 113.00 is Key Support

Chart Of The Day

USDJPY has been under pressure for the past several weeks, having failed to take out the 115.00 figure on multiple occasions. Furthermore, the pair is failing at its key correlation with 10-year bonds not rallying when yields go up and falling when they decline. That’s a warning light for dollar bulls as a breakdown in correlation often presages a decline in price.

Tommorrow the market will get a look at two key data points -- CPI and US Retail Sales. Both numbers are expected to be worse than the month prior. However, if they actually miss their forecast and turn negative, USDJPY will likely test the key support at the 113.00 level and a break there could lead to a much sharper selloff towards 110.00 as investors will begin to fear that US growth may have peaked.

For now, USDJPY remains in a tenuous uptrend, but it must hold the 113.00 level otherwise it will have formed a very ugly quadruple top and may drift all the way to 110.00 by year-end.

GBPUSD – Still Aiming for 1.3000?

GBPUSD – Still Aiming for 1.3000?

Chart Of The Day

Although cable rose today on general anti-dollar flows the rebound was rather anemic and the pair still remains mired under the 1.3200 resistance level as short continue to circle the unit. Earlier today the OECD noted that risks of a slowdown in UK have increased while reports also circulated that the EZ was demanding a full plan for Brexit from UK within the next two to three weeks.

Theresa May’s government appears to be in disarray with the second minister resigning within a week and many experts doubt that her stewardship may last much longer. In the meantime, the market will get a look at Industrial and Manufacture production data as well as construction output which may have contracted sharply.

All of this may put fresh pressure on cable and send it below 1.3100 once again as shorts prepare to assault the key 1.3000 support level sometime next week.

Can Kiwi Hold its Double Bottom?

Can Kiwi Hold its Double Bottom?

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Tomorrow the RBNZ will have its final rate decision meeting for the year, and while no one is expecting any action on the rate front, traders will watching carefully for any change of posture with respect to monetary policy.

Up to now the primary mandate of the RBNZ has been price stability. That means that it generally concentrated on inflation and left growth issues to fiscal policymakers. However, with the election of a new center-left Labor government, the RBNZ may now be tasked with the dual mandate of growth and inflation. This will be the first time that New Zealand monetary authorities will face the public and reveal their reactions to this proposed policy.

On balance that means the RBNZ should generally be more dovish in its outlook stressing the need for more growth, fretting about deflation and suggesting that the bank will follow a neutral path for the foreseeable future. However, recent data has actually been hawkish with both employment and inflation better than forecast. If the central bank bristles at any suggestion of a dual mandate and makes clear that it intends to maintain its independence than the kiwi could actually pop towards the .7000 barrier.

AUDUSD – Will .7600 Hold?

AUDUSD – Will .7600 Hold?

Chart Of The Day

Today, the Aussie saw a mild rebound on general anti-dollar flows but tonight it faces the test of the week as RBA meets for it monthly rate decision. While we, like everyone else, expect them to remain neutral we believe there is a strong chance that the RBA’s tone may be decidedly dovish.

Australia may be on the verge of a counter-cyclical slowdown. While the rest of the world appears to be growing, Australia is facing a heavily indebted housing market, stagnant wage growth and slowdown in exports. All of this is likely to cause RBA to be exceedingly cautious with its language and perhaps even guide the Aussie towards the .7500 figure.

Today’s bounce was relatively anemic and unless the central bank provides traders with reason to be bullish the pair will have a hard time climbing much beyond .7700. In fact, if the central bank hints that the next move may be a CUT rather than a HIKE the Aussie could quickly tumble towards .7500 support.

USDJPY – Can it Break 115.00?

USDJPY – Can it Break 115.00?

Chart Of The Day

USDJPY made an impressive reversal today rising above the 114.00 level in morning NY trade. The pair is being seesawed by US political news as market try to absorb the impact of new tax reform proposals. For now, it’s not clear if the tax legislation will indeed be stimulatory to the economy, but market’s focus will turn to tomorrow’s NFP and wage data.

The forecast is for a very large rebound in jobs after a hurricane leaden September. However, analysts may be overestimating the rebound and the market could be setting itself for disappointment. Although US data has been generally strong there is little indication that job growth surged this month.

The miss could take USDJPY once again below the 113.00 level and set up a triple top in the pair as the 115.00 level once again proves to be a cement ceiling. If however, it breaks the 115.00 level USDJPY could be on the way to a new uptrend.

GBPUSD – Headed to 1.3400?

GBPUSD – Headed to 1.3400?

Chart Of The Day

Cable showed some relative strength today as the pair was boosted by EURGBP flows and market expectation of a BoE rate hike later this week. The enthusiasm for the tightening should support the pair into the announcement and could push it towards the key 1.3400 resistance level before Thursday.

However, any further strength in the pound will depend on just how hawkish Governo Carney chooses to be. If the BoE provides a balanced statement minimizing any prospect of further hikes cable could quickly sell off. The pair remains dogged by Brexit concerns so further upside may be limited, but ironically enough the investigation by Robert Mueller into Russia’s activities to sabotage the US election has now given impetus to similar calls for an investigation into Brexit.

Although chances are very slim, it may still provide a way for UK to reexamine its Brexit decision which would, of course, be pound positive. In the meantime, the pair will trade on interest rate expectations and that should provide short-term boost for the bulls.

EURUSD- Ready to Crumble?

EURUSD- Ready to Crumble?

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Mario Draghi destroyed the euro today but essentially telling the market that despite the best economic growth in years, he wasn’t ready to pull the plug on QE just yet. By extending QE to 9 months into 2018 Mr. Draghi dashed any hopes of an early taper and broke the hearts of euro bulls.

The damage done to the currency today wasn’t just fundamental but technicals as well as it broke the 1.1700 figure and now rests just ahead of the key 1.1650 support. With Fed clearly on a path to more rate hikes, while the ECB remains a non-player for all of 2018, the prospect of further interest rate differential between the two currencies will only expand and could push the EURUSD quickly towards the key support at 1.1500 level.

Today’s policy courses suggests that the euro is strict sell on rallies trade for now, unless US policy suddenly turns dovish as well.

GBPUSD – Headed to 1.3000?

GBPUSD – Headed to 1.3000?

Chart Of The Day

Cable feeble attempt at a rally failed miserably this week, and the pair appears to be headed to 1.3000 as markets finally begin to fear the impact of Brexit.

With time starting to weigh and no serious progress on talks, the markets are beginning to fear that the prospect of a “hard Brexit” where UK leaves the EU without any deal whatsoever, could be a real possibility. This comes amidst clear signs that UK economic growth is slowing while inflation pressures persist, putting BoE in a very precarious policy position.

Meanwhile tomorrow the market will get a look at UK GDP which is expected to come in at 1.4% versus 1.5% the period prior. If the number misses, however, cable could see a test of 1.3000 as early as the end of day.

USDCAD – Back to 1.2600?

USDCAD – Back to 1.2600?

Chart Of The Day

Of all the comm dollars, none has held up as well against the buck as the loonie. While all others have tumbled against the greenback, the Canadian dollar held firm rejecting 1.2500 level on multiple occasions.

A big reason for loonie’s relative strength is the fact that the BOC is the only other G-7 central bank considering a rate hike. Tomorrow’s Canadian CPI and Retail Sales data should go a long way towards determining if another rate hike out of Canada is a real possibility before the year-end.

The market is looking for stronger data out of both CPI and Retail Sales data and if the numbers beat expectations USDCAD could test the 1.2400 level. However, if the data misses the pair could quickly push towards 1.2600 which has served as resistance for the past two weeks.

GBPUSD – Back to 1.3000?

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Today’s MPC member testimony in front of UK Parliament cast a particularly dovish tenor in the pound as UK monetary authorities clearly appeared reluctant to hike rates despite inflation data at five-year highs. The BoE officials are concerned that the slowdown in the Uk economy could turn into a recession if monetary conditions are tightened prematurely.

Tomorrow’s UK wage data will go a long way towards deciding which way the BoE will lean. Wage growth has been the principal concern of the more dovish MPC members, as real wages are now showing a -0.9% contraction. Tomorrow wages are expected to maintain the 2.1% pace of the month prior. If they print better than forecast than cable could catch a bid as some of the concerns would be allayed. However, if wages are worse than consensus at the same time as inflation remains stubbornly high, the cable is sure to take a hit and test the 1.3100 mark as hopes of any monetary tightening will be put on hold

Is USDJPY Rolling Over?

Is USDJPY Rolling Over?

Chart Of The Day

Although US fundamentals remain firmly positive, USDJPY has failed to respond to the data, rejecting the 113.00 level and falling through the 112.00 figure in morning US dealing today. Aside from the usual geopolitical tensions between the US and North Korea, there seems to be something greater that is worrying the market and when there is a discrepancy between price action and news flow, it always pays to take notice.

The weakness in USDJPY may suggest that the markets are no longer convinced that a Fed rate hike is a done deal in December. Tomorrow’s FOMC minutes will reveal just how committed US policymakers are to a tightening regime. The market expects general hawkish consensus, but if the minutes show a wide array of opinions, with many FOMC members still undecided, then the buck could suffer more selling and test long-term support at the 111.50 level.