Today’s Trades 11.21.2017 – EURUSD, EURCAD, EURJPY

Swing

*Good morning/afternoon everyone!*

Its a quiet morning for the euro, dollar and British pound which haven’t seen any major moves despite a pullback in yields. Today’s price action has been marked by mild recoveries in the commodity currencies but for the most part, currencies are marking their time. We still believe that the dollar will extend higher ahead of tomorrow’s FOMC minutes but we have 1 more day of trade (Wed) before prices grind to a halt. We also see further losses in the euro as Germany’s political troubles plague the currency. Today’s existing home sales report won’t have much impact on the dollar and Yellen doesn’t speak until after the NY close though we don’t expect the market to react strongly to her words either. AUD is supported by RBA Governor Lowe’s comments last night. NZD will be affected by today’s dairy auction while CAD could trade lower as NAFTA talks draw to a close.

*The MAIN THEMES I see today are*

-EUR
-GBP
+AUD
+CAD

*Trading Biases*

-EUR, -GBP,
+AUD, +CAD, +USD
mildly +NZD
neutral JPY, CHF

*Today’s Initial Trades*

1. Sell EURJPY at 131.97, Stop at 132.25, Target 131.69
2. Sell EURCAD at 1.5012, Stop at 1.5040, Target 1.4984
3. Sell EURUSD at 1.1723,, Stop at 1.1751, Target 1.1695

Close ALL open day trades by 10:20AM NY / 15:20 GMT

EUR/CAD Back to 1.50?

EUR/CAD Back to 1.50?

Chart Of The Day

EUR/CAD Back to 1.50?

The euro maintained a bid throughout the North American session leading some traders to wonder if we’ve finally seen a bottom. Its difficult to say as ECB President Draghi could easily talk the currency down on Tuesday by highlighting all of the reasons why policy needs to remain extremely accommodative but if there weren’t a speech on the horizon, we would say that euro is poised for a move to 1.1700 and higher. Aside from Draghi’s speech, Q3 GDP reports are scheduled for release from Germany and the Eurozone along with the latest ZEW surveys and slightly firmer euro supportive numbers are expected all around. The loonie on the other hand appears poised for further losses as NAFTA concerns grow. The 5th round of talks are being held in Mexico City this week and if you recall, the talks were very contentious during the fourth round. On a fundamental and technical basis, we believe the Canadian dollar will trade lower this week.

Technically, after consolidating for 5 straight days, Monday’s rally in EURCAD has taken the pair right to the 20-day SMA. While this may be a potential area of resistance, EUR/CAD breakouts tend to have strong continuation. If the pair breaks above 1.4875, taking out today’s high, we could see the rally extend as high as 1.50. There’s firm support near 1.4730, as that’s where recent lows and the 100/200-day SMAs hover.

Today’s Trades 11.08.2017 – EURCAD, EURGBP, EURJPY

Swing

*Good morning/afternoon everyone!*

With 10 year Treasury yields down nearly 1bp at one point this morning, the U.S. dollar is trading lower against most of the major currencies. Sterling is the only currency that is performing worst than the greenback because Gilt yields of the same period are down nearly 3bp on the back of a report that BoE agents see weaker investment growth over the next 2 years (no surprise with Brexit)! There are some Brexit talks today that could also affect sterling trade. There was no specific news to explain the USD’s weakness outside of last night’s softer Chinese trade balance which should have driven AUD and NZD lower but instead had greater impact on USDJPY. According to the Chinese government China’s economy still faces uncertainties which suggests that softer growth lies ahead. On North Korea, Trump’s warning to “not underestimate us. And do not try us” had very little impact on the market. The main event today is the RBNZ rate decision -- NZD is trading firmer ahead of the announcement. *I’ll be LIVE Trading it with you starting at 2:45pm NY (same daily webinar link).* We may also see some moves in the Canadian dollar with oil inventory, housing starts and building permits on tap.

*The MAIN THEMES I see today are*

-EUR
-USD
-GBP
+CAD

*Trading Biases*

-USD, -EUR. -GBP,
+CAD, +AUD, +JPY
neutral NZD, CHF

*Today’s Ideas*

1. Sell EURJPY at market now 131.74, Stop 132.02 Target 131.46
2. Sell EURCAD at 1.4783, Stop 1.4811, Target 1.4755
3. Buy EURGBP at .8838, Stop .8810. Target .8866

Cancel ALL pending orders by 3:30PM NY / 19:30 GMT / 5:30AM AEST
Close ALL open day trades by 4PM NY / 20 GMT / 6AM AEST

EUR/CAD Back to 1.45?

EUR/CAD Back to 1.45?

Chart Of The Day

EUR/CAD Back to 1.45?

There are 3 monetary policy announcements next week and only 2 are expected to be big market movers -- the European Central Bank and Bank of Canada rate decisions. EUR/CAD will be in play and a strong trend could emerge if these central banks surprise. For the past few weeks, investors have been positioning for balance sheet changes by the ECB and hawkish sentiment from the BoC but on Friday, there was talk the ECB may delay making changes until December and if that proves to be true, it would be exceptionally negative for the euro. If the Bank of Canada surprises with another rate hike after this past week’s strong GDP numbers, the Canadian dollar will soar and these cross dynamics could send EUR/CAD down to 1.45.

Technically, EUR/CAD ended the week with two very strong days of selling and this move has taken the pair to 2 month lows. The break below 1.4725, a previous support level opens the door to a move down to 1.46 and possibly even 1.45. EUR/CAD would need to rise back above 1.4850 to negate the downtrend in the pair.

EUR/CAD to Break 1.45?

Chart Of The Day

EUR/CAD to Break 1.45?

The euro rally came to a halt today on the back of softer Eurozone data and the recovery in the greenback. Manufacturing activity in the Eurozone slowed in the month of July, causing the PMI composite index to drop to 55.8 from 56.3. Service sector activity remained steady but that was not due to strength in the region’s 2 largest economies (France and Germany). Germany experienced slower growth all around and while service sector activity in France slowed, manufacturing activity accelerated. These are the first signs of the strains caused by a strong currency. With the PMIs falling short of expectation and investor confidence weakening (ZEW), we believe tomorrow’s German IFO report will add further pressure on the euro as businesses are the most sensitive to the exchange rate and the prospect of higher interest rates. In contrast, we believe the Canadian dollar could hold onto its gains and take another trip below 1.25. The loonie hit a fresh 14 month high on the back of stronger wholesale sales and the more than 1% increase in oil prices. While USD/CAD ended the NY trading session above the key 1.25 level, the 2016 low of 1.2461 is more significant support and we would not be surprised if USD/CAD drifted to that level before Friday’s Canadian GDP report.

Technically, EUR/CAD failed to break above 1.4700 last week, despite multiple attempts. This rejection of the 20 and 100-day SMA cross near 1.4680 puts the currency pair on track to test its 2 month low right above the 200-day SMA at 1.4450.

Sell EUR/CAD Rally

Sell EUR/CAD Rally

Chart Of The Day

Sell EUR/CAD Rally

There were a number of big takeaways from central bankers today. The first is that the ECB is not happy with the latest jump in the euro. They came straight out and said the market misjudged Draghi’s comments – he is not talking about raising interest rates and probably won’t edge the currency higher by discussing taper until the euro eases lower. It should be no surprise that the central bank of an export dependent region with low inflation would try to prevent excessive strength in their currency. So while euro could hit 1.14, we think it will start to retreat from there. Meanwhile Bank of Canada Governor Poloz said nothing to refute the optimism of his peers at today’s central bank conference. In many ways this could be interpreted as Poloz giving his blessing to the rise in the currency. BoC Deputy Governor Patterson helped explain why the central bank is growing less dovish, because they feel that the economic shock from oil is largely behind them. For this reason, we think CAD will hold onto its gains against the Euro and we want to sell into a rally.

Technically, there’s a lot of resistance in EUR/CAD between 1.4930-1.4950. Not only does the 20-SMA cross down into the 50-day SMA near that zone but the 38.2% Fib retracement of the 2015 to 2016 rally and the 50% Fib retracement of the 2016 to 2017 decline also converge near those levels. As such we believe this resistance will hold, with EUR/CAD eventually making its way back down to its June lows.

EUR/CAD to 1.46?

EUR/CAD to 1.46?

Chart Of The Day

EUR/CAD to 1.46?

The best performing currency this past week was the Canadian dollar which shot higher on the back of hawkish comments from the central bank. Senior Deputy Governor Carolyn Wilkins questioned the need for less stimulus, sparking talk of a rate hike for the first time in 7 years. With oil prices also rising, we expect further gains in CAD. In particular, we think the loonie will outperform the euro not only because 1.13 is a significant resistance level but also because next week’s Eurozone PMI reports are expected to be softer. Technically as long as EURCAD holds below 1.4850, there’s no major support in EUR/CAD until 1.4600.

EURCAD – Runaway to 1.5000?

EURCAD – Runaway to 1.5000?

Chart Of The Day

The gap open in the euro that blasted the pair through the 1.0900 level continues to exert its force higher even into what is likely to be a generally dovish ECB meeting this Thursday. In te meantime, the loonie has been hammered by the double whammy of weaker oil prices and a new set of tariffs against Canadian lumber just issued by the Trump administration.

Fears of a trade war with US biggest trading partner have some traders concerned that USDCAD could push towards the key 1.4000 level as capital flees from the Great White North. Even without any additional tension, the slow drift lower in oil could hurt the loonie for the foreseeable future.

All of which is creating a very powerful rally in EURCAD that could see the cross hit the key 1.5000 mark within the next few days. A runaway gap is a rare technical formation but when it occurs it can lead to powerful rallies that could last for days. EURCAD continues to exhibit all signs of such a setup.

EUR/CAD to 1.46?

EUR/CAD to 1.46?

Chart Of The Day

EUR/CAD to 1.46?

The euro also came under selling pressure today as investors realized that Deutsche Bank’s lower settlement deal with the U.S. Department of Justice is not real. There was a media report on Friday that said they reached an agreement to lower the penalty to $5.4 billion from $14 billion and while talks are underway investors there’s been no official deal. The problem now is that a lower number has now been thrown out there so if the actual settlement is higher and closer to $10 billion, the euro could still be punished and for this reason along with the ongoing banking crisis in Europe, we believe the euro will underperform. In contrast, the Canadian dollar extended its gains as oil prices pressed higher. Fundamentally, we believe that oil has bottomed and the CAD following the OPEC deal. It’s a busy week in Canada but we don’t have any major economic reports until Friday so fundamentally we could see further pressure on EUR/CAD.

Technically today’s high in EUR/CAD coincided with the 200-day SMA – an important indicator that has previously served as support and resistance for the pair. We believe this level should hold and EUR/CAD should find its way back down to the 50-day SMA at 1.4610. If EUR/CAD breaks above the 200-day SMA near 1.4750, the 50% Fibonacci retracement of the 2008 to 2012 sell-off should cap gains.

EUR/CAD – Headed to 1.4400

EUR/CAD – Headed to 1.4400

Chart Of The Day

EUR/CAD is headed for 1.4400 and possibly even lower. The sharp sell-off in EUR/CAD today was driven entirely by the rise in the Canadian dollar. CAD soared after the Bank of Canada’s monetary policy announcement. Interest rates were left unchanged which was widely anticipated and while the central bank admitted that wildfires in Alberta shaves 1.25% off Q2 GDP growth, they also expect growth to rebound in the third quarter. But it was the large drop in inventories that sent oil prices towards $50 a barrel and CAD to fresh highs. The 1.3000 support level in USD/CAD looks shaky which means the Canadian dollar could see stronger gains. Euro is also under pressure as the U.S. dollar extends its rise.

Technically, EUR/CAD has broken below the 50-day SMA, the May 17 and 18 low, the 23.6% Fib retracement 2016 decline as well as the 50% Fibonacci retracement of the 2015 to 2016 rally. With this move, there’s no support until 1.4400. As long as EUR/CAD holds below 1.4620, it is poised for a new leg lower.

EUR/CAD – Will 1.5000 Hold?

EUR/CAD – Will 1.5000 Hold?

Chart Of The Day

Oil appears to have found a near term bottom at the $25/bbl level and that has helped to keep loonie steady for the past few weeks as the pair has come way off its recent highs of 1.4600 and that in turn has driven EUR/CAD lower towards the key 1.5000 level. In a battle of two weak economies the euro is getting even more battered that the loonie as the data from the EZ goes from bad to worse.

Today’s IFO report which showed a very large 4 point decline in future expectations is only the latest data point to shows that German economy is coming dangerously close to a recession. That’s likely to keep euro under pressure for the near term as markets begin to anticipate even more easing from the ECB.

Meanwhile tomorrow’s oil inventory numbers could be key drivers of CAD trade. If the pressure eases the loonie could see a strong pop that could send it towards the 1.3500 level and that in turn could push EUR/CAD through its double bottom support at 1.5000

Big Trade – New USD/JPY 11.23.2015 +70

Swing

12/2 -- BK USD/JPY Big Trade -- Close here at 123.32 for +70. We will reload lower

11/30 -- EUR/CAD Orders Canceled

11/24 -- USD/JPY First Entry at 122.62 TRIGGERED

BK Big Trade -- New Orders for USD/JPY and EUR/CAD

1. USD/JPY

Place Order to Buy 1 Lot USD/JPY at 122.62

Place Order to Buy 1 More at 120.90

Stop for ALL at 118.90

2. EUR/CAD

Place Order to Sell 1 lot EUR/CAD at 1.4270

Place Order to Sell 1 more at 1.4470

Stop for ALL at 1.4650

We are laying out 2 new Big Trade orders this morning. Last week’s Fed speak and FOMC minutes tell us that the Fed is on track to raise interest rates next month and we want to use this latest decline as an opportunity to buy USD/JPY at a lower level. We also believe that this week’s economic reports will be strong, reinforcing the positive outlook for the U.S. economy.

We are bearish euros and despite this morning’s better than expected PMI numbers, we believe the ECB will increase stimulus next month because the outlook for France and the Eurozone as a whole only worsened with the Paris attacks. Also, we have been watching the moves in oil and firmly believe that $40 is a very significant support level. Losses beyond that level should be limited.