USDCAD – Back to 1.2500?

USDCAD – Back to 1.2500?

Chart Of The Day

Yesterday’s dovish BOC statement send USDCAD back above the 1.2600 figure -- a move that no doubt pleased the Canadian monetary officials who want to see the value of the currency remain relatively low. But the rally could be short-lived if the data continues to surprise to the upside.

Tommorrow the market will get a look at CPI and Retail Sales Reports and although both datasets are projected to be a bit lower than the month prior and upwards surprise could send USDCAD back to a retest of the 1.2500 level. Despite Governor Poloz’s caution, the central bank has not ruled out the prospect of another rate hike in May, and some analysts continue to believe that the BOC will act.

Furthermore, with oil prices within a dollar of the key $70/bbl mark, the Canadian economy could absorb a rate hike with relative ease so the loonie could still have some juice left in the trade if the data provides the catalyst.

Is Cable Topping  Out?

Is Cable Topping Out?

Chart Of The Day

Cable spiked to fresh post Brexit highs in early London trade today, but the rally lost its legs after UK Labor data missed its mark.

UK Claimant count expanded to 11.6K from 5K eyed while average earnings came in at 2.8% versus 3.0% forecast showing that wage growth remains tepid. The ILO unemployment rate however improved slightly to 4.2% from 4.3% projected. Overall the labor data news showed a slowdown in UK growth, but not to an extent that’s likely to prevent the BoE from hiking rates in May.

Cable has been on a one-way trip higher since the middle of last week, buoyed by EURGBP flows and upbeat sentiment about Brexit talks and the momentum in the pair remains strong irrespective of the data. Still, today’s news did not help the bulls as it clearly showed that UK economy is slowing which will make the task of normalization more difficult for BOE.

Today’s reversal and close near day’s lows also signals that bulls are tired and the pair may see more profit taking tomorrow especially if CPI data prints cooler putting the BoE rate hike in doubt. That could bring sterling all the way back to 1.4200

EURGBP Breaks Key Support

EURGBP Breaks Key Support

Chart Of The Day

After more than a year EURGBP broke below the key.8600 support level which more of an indication of market’s disappointment in the ECB policy than its an overall bullish call on cable. Recent data from the region has consistently hinted that economic growth may have peaked and as we noted today, “EZ IP contracted by -0.8% versus 0.1% eyed in further evidence that growth in the region may have peaked. This puts the ECB in a precarious position as the central bank prepares for a taper of QE just as economic conditions may have deteriorated. This is likely to prevent the ECB from considering any normalization process for the foreseeable future regardless of how much the hawks on the council press for it.”

This view was borne out by the dovish ECB minutes which suggested that the council intends to keep rates at zero for the foreseeable future even as it proceeds with the taper. All of this dovish news helped push EURGBP to its lowest level in more than a year, but whether the pair remains below .8700 will be contingent on UK politics and monetary policy. If anything UK economy is in worse shape the EU’s and any rate hike by the BoE could only exacerbate the slowdown. Combine that with the fact that Brexit negotiations are still stuck on the Irish border issue and the EURGBP break could well be a fakeout that traps eager shorts trying to ride the momentum.

USDJPY – Ready for 108.00?

USDJPY – Ready for 108.00?

Chart Of The Day

After having everything but the kitchen sink thrown at it over the past few days USDJPY has managed to withhold the risk aversion flows and trade above the 107.00 level by end of trade today. The never-ending political chaos in Washington DC no longer seems to have much impact on the pair as the friction over the trade tensions with China eased with President’s Xi’s conciliatory speech and President Trump’s never-ending legal problems are now ignored by the market. There is still risk that Trump could bomb Syria in response to the chemical gas attack, but unless that action is followed by expansion of military activities the market may ignore it as well.

Meanwhile, on the economic front, there is a lot o like for dollar bulls. Today’s hotter than expected PPI numbers suggest that CPI could rise as well, further solidifying the case for another Fed rate hike and tomorrow’s release of FOMC minutes is likely to confirm that the Fed will maintain its tightening bias.

Technically the USDJPY pair has made a solid inverted head and shoulders bottom and now looks like its ready to challenge the 108.00 figure if data proves supportive.

USDJPY – Is the Bottom In?

USDJPY – Is the Bottom In?

Chart Of The Day

USDJPY has been in a three-day selloff driven lower by risk aversion flows, but today the pair has managed to stage a comeback and is closing well above the 106.00 level. The markets appear to have stabilized after yet another wave of Trump rants on twitter and traders will now likely focus on the real business at hand as a series of key US economic reports are about to be released this week.

First on deck will be the ADP data due tomorrow at 8:15 EST and then the ISM Non- Manufacturing. Unless both reports widely miss their mark, they should prove positive for the pair confirming that US economy continues to grow steadily and that the Fed will maintain its rate hike policy for the foreseeable future.

Technically, USDJPY has made inverse head and shoulders bottom, which tends to be a very robust bottoming pattern and looks ready to make another run at the 107.00 figure.

USDJPY – 106.00 in View?

USDJPY – 106.00 in View?

Chart Of The Day

Second day in a row that USDJPY is up as risk assets continue to rise but yields remain depressed. The pair has been so grossly oversold that some sort of rebound was due but for now the 106.00 figure remains formidable resistance.

Tomorrow the market will get a look at the final revision of US GDP which is expected to come in at 2.7% versus 2.5% original forecast. If the number meets or better yet rises towards the 3.0% level the upside in USDJPY could be substantial. Faster than expected growth in Q4 would suggest that 2018 growth could approach 3% and therefore push US 10 year yields above the key 3% mark. All of that would be positive for USDJPY and the pair could run as high as 107.00 as short covering flows kick in.

Has Kiwi Found a Bottom?

Has Kiwi Found a Bottom?

Chart Of The Day

While the dollar rebound has been substantial against the majors this week, the kiwi has held up surprisingly well only off about 100 points from the recent swing highs. The pair is benefiting from the inability of the US 10 year yield to push past the 2.95% barrier.

As the highest yielder in the industrialized world, the NZDUSD is likely to hold up relatively well against the buck if US rates go no higher.

In the meantime on the economic front, the market will get a glimpse of the New Zealand Retail Sales with traders anticipating a big jump to 1.2% from 0.2% the period prior. If the number meets or beats forecasts kiwi could head back towards .7400

GBPJPY – Back to the Upside

GBPJPY – Back to the Upside

Chart Of The Day

Cable received a dose of good news today when it was revealed that the EU Parliament may consider “special status” for the UK -- a massive change from European’s original position that would make Brexit much more palatable for UK economy. While all of this remains speculation, the news helped lift sterling towards the 1.4000 level and if tomorrow’s UK Labor data proves supportive, the pair could challenge the 1.4100 figure by day’s end.

Meanwhile, tomorrow will also see the release of Feb minutes which are likely to maintain a hawkish bias and provide further support to the nascent rally in USDJPY.

All of this could prove especially positive for GBPJPY which took out the 150.00 figure in today’s trade and looks to be at the start of multi-day rally that could take it to 155.00

EURJPY Makes a Stand

EURJPY Makes a Stand

Chart Of The Day

After relentless selling for the past week, EURJPY appears to have bottomed at the 132.00 level. The pair has formed a bottom of four wick candles indicating that buyers continue to scoop up the pair whenever it approaches that level.

With USDJPY appearing to have found a bottom at the 106.00 figure and EURUSD holding bid near the 1.2500 high’s EURJPY may be poised to make a move back towards the 134.00 figure as the week comes to an end. After endless days of trying the break fresh lows, the short may be exhausted and a short squeeze in the pair is due.

AUDUSD – Back to .8000?

AUDUSD – Back to .8000?

Chart Of The Day

What a monster turn of trade in AUDUSD today as the dollar selloff created a massive doji in the pair suggesting that more upside is due. The Aussie initially dove lower on assumption that US rates will almost certainly catch up with Australian rates in the wake of higher than expected inflation. But the anti-dollar flows soon flooded back into the pair and it closing at the highs of the day pointing to a possible run towards .8000.

Today AU Employment data could provide the catalyst that the pair needs to move higher if the data surprises to the upside. Although the market expects no action from RBA, if AU labor market shows further signs of tightening, AU policymakers will have to take the threat of inflation seriously and may change their neutral stance faster than the market believes.

For now, the support in the pair remains at .7850 while .8000 represent serious upside resistance on any upside surprise.