Coronavirus headlines cause Asian session volatility once again. Bank of Canada up next.
Erik Bregar of Exchange Bank of Canada - InsideFutures.com - Wed Jan 22, 9:14AM CST

USDCAD

Dollar/CAD put on a classic display of buyer failure in Asian trade last night. The market broke above the 1.3070s with risk-off flows around the 8pmET hour as the Asian news cycle began with reports of the coronavirus spreading to 440 cases in China with nine deaths. However, these flows reversed course quickly around the 10pmET hour after Chinese health authorities displayed a sense of calm during a news conference. The effect was USDCNH-led USD selling, which then knocked USDCAD back into the 1.3070s. This was a very poor technical setup heading into European trade today and was fuel for the USDCAD sellers to pounce in our opinion when the British pound started surging (more on this below). The selling halted at familiar trend-line support in the 1.3030s and the market is now bouncing a bit following a slightly weaker than expected MoM print for Canadian December CPI (flat vs +0.1% expected).

Up next is the Bank of Canadas interest rate decision and monetary policy report (MPR) at 10amET, followed by a press conference with Stephen Poloz and Carolyn Wilkins at 11:15amET. We dont expect any change to interest rates this morning (in-line with market consensus), and with global growth concerns seemingly pushed aside for now, we think traders need to be on guard for potential downgrades to Canadian GDP and inflation forecasts (which would be USDCAD positive).

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

MAR CRUDE OIL DAILY

MAR CRUDE OIL DAILY


EURUSD

Yesterdays better than expected German ZEW survey is now long forgotten as EURUSD traders go back to hugging Monday's lows in the 1.1080-1.1100 region, where almost 1blnEUR in options expire today. We think sterlings crazy rally today is helping EURUSD from falling further over the last couple hours and we think the 1.1090 level will now act as the pivot for todays price action. A move back above this level will likely invite another small wave of short covering whereas a move back below it will likely see last weeks bearish head & shoulders pattern complete itself with a more pronounced sell-off. The European Central Bank meets tomorrow morning at 7:45amET, following by a press conference from Christine Lagarde at 8:30amET.

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

FEB GOLD DAILY

FEB GOLD DAILY


GBPUSD

Sterling is ripping the face off new short positions this morning after the UK reported a surge in manufacturing optimism in its CBI survey. Moreherefrom the Financial Times. This report is not normally a market mover, but considering the coin flip odds now in place for a 25bp cut at the Bank of Englands next policy meeting following yesterdays better than expected UK employment report, we think its getting special attention. The OIS market is now showing just a 48% chance of a cut vs 70% at the beginning of the week, and all those shorts that came in following the slip below the 1.3080-1.3100, over a week ago, appear to be scrambling to get out. GBPUSD has smashed up through the 1.3100 level and now looks poised to trade higher still, should we close NY trade above it.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY


AUDUSD

The Australian dollar continued lower at 8pmET last night following the new coronavirus headlines out of China, but it too has recovered since the news conference put on by Chinese health officials. The think sterlings big rally today (on the back of the market re-price BOE rate cut risks more hawkishly) is helping AUDUSD as NY approaches as well. We think the fund shorts, who have probably been enjoying the bearish head & shoulders pattern develop over the last week, may have to endure a creep up in prices to the 0.6870s near-term. Tonights much anticipated Australian employment report for December at 7:30pmET could also be viewed as another reason to lighten up positions for now.

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

Dollar/yen weakened again last night around 8pmET with another coronavirus-inspired risk-off wave, and while it recovered nicely in European trade today as the broader markets calmed down a bit, its taking another leg lower now following some more negative headlines out of China:

CHINA'S HUBEI PROVINCE SAYS CONFIRMS 17 DEAD, 444 TOTAL CASES IN CORONAVIRUS OUTBREAK - STATE TV

The US 10yr yield is following suit; trading lower once again to pressure chart support at the 1.77% level.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

GERMAN 10YR BUND YIELD DAILY

GERMAN 10YR BUND YIELD DAILY

Charts: Reuters Eikon


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