Ten Chinese cities totaling 30 million people now on lockdown
Erik Bregar of Exchange Bank of Canada - InsideFutures.com - Fri Jan 24, 9:29AM CST

USDCAD

Dollar/CAD pulled back off its new 1.3070-1.3170 range highs yesterday following the WHO press conference and its now whipping around with a sideways tone after Canada reported an arguably mixed Retail Sales report for November. The headline figure beat expectations (+0.9% MoM vs +0.4%) but the core ex-autos measure missed (+0.2% MoM vs +0.4%). The US flash PMIs for January will likely get some play shortly, but we think broader risk sentiment surrounding the worsening coronavirus situation in China will set the tone for USDCAD going into the weekend.

USDCAD DAILY

USDCAD DAILY

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USDCAD HOURLY

MAR CRUDE OIL DAILY

MAR CRUDE OIL DAILY


EURUSD

The German flash PMIs for January beat expectations this morning while the Eurozone PMIs came in marginally weaker on the whole. Details below. The combination of these two European data points made for a feeble attempt by traders to break EURUSD above yesterdays NY highs at 1.1060, which we think then invited the sellers back in. Broad risk-off USD demand (led by USDCNH strength) also appeared to be a factor leading to the subsequent EURUSD selling we saw in early London trade today as more scary coronavirus headlines continued to circulate. Over 800 people are now infected in China; 25 people have died, and 10 cities with a combined population of 30 million (almost the size of Canada!) is effectively on lockdown.

All this being said, were starting to see signs of seller failure emerge at yesterdays trend-line support level in the 1.1030s as NY trade gets underway. We think a bounce for EURUSD could be in order today if the US flash PMIs for January disappoint.

German Manufacturing Flash PMI: 45.2 vs 44.5 exp and 43.7 prev

German Services Flash PMI: 54.2 vs 53.0 exp and 52.9 prev

German Composite Flash PMI: 51.1 vs 50.5 exp and 50.2 prev

Eurozone Manufacturing Flash PMI: 47.8 vs 46.8 exp and 46.3 prev

Eurozone Services Flash PMI: 52.2 vs 52.8 exp and 52.8 prev

EurozoneComposite Flash PMI: 50.9 vs 51.2 exp and 50.9 prev

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

FEB GOLD DAILY

FEB GOLD DAILY


GBPUSD

We think everybody was hoping that this mornings UK flash PMI data for January (whether the numbers were good or bad) would resolve the coin-flip rate cut odds for next weeks Bank of England meeting. The numbers turned out to beat expectations across the board (details below) but unfortunately nothing materially changed in the OIS market for January 30thpricing, leaving the sterling traders who bought the headlines feeling a bit disappointed wefeel. If we combine this subdued OIS market reaction with the risk-off driven demand for USD around the 4amET hour, we think this largely explains GBPUSDs swift move lower in early London trade today.

Similar to EURUSD though, were now seeing seller failure start to emerge at chart support in the 1.3080s and we think GBPUSD could bounce here as well if the US flash PMIs for January miss expectations.

UK Manufacturing Flash PMI: 49.8 vs 48.9 exp and 47.5 prev

UK Services Flash PMI: 52.9 vs 51.0 exp and 50.0 prev

UK Composite Flash PMI: 52.4 vs 50.6 exp and 49.3 prev

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY


AUDUSD

Reserve Bank of Australia rate cut odds for February 4thhave collapsed precipitously down to 29% in the last 24hrs, in the wake of yesterdays sold Australia employment report for December. A number of the big Australian banks, including Westpac, have now removed their rate cut calls as well. None of this is helping the Aussie however as coronavirus fears continue to mount. We think the only thing holding up AUDUSD right now is the fact that USDCNH continues to struggle to hold gains above the 6.9310-30 resistance level. Is this technical development producing a false sense of calm for now? Perhaps. We think pre-weekend risk sentiment will be the dominant driver for AUDUSD today. Will traders want to be long risk assets, and risk-proxies like AUD, going into a weekend where the coronavirus situation could get worse?

AUDUSD DAILY

AUDUSD DAILY

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AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

What a week its been for dollar/yen. Last week ended with tons of optimism for USDJPY following the US/China phase one deal signing, but there was no serious push to get the market above chart resistance in the low 110s. Recall our warning here from January 17th: wed make the argument that the market should be demonstrably higher than this by now, given Mondays break above key weekly chart resistance in the 109.60s. We think the longer the market meanders just above the 110 figure without another push higher will make it vulnerable to reversing lower.Sure enough, thats what weve seen this week. While nobody could have predicted the coronavirus outbreak were now seeing unfold, we continue to be firm believers in the ability for chart technicals to foretell fundamentals narratives and the USDJPY structure was leaning negative coming into all this.

The World Health Organization stopped short of declaring an international emergency yesterday, leading US yields and USDJPY to bounce off their lows, but everyone knows that this assessment could change on a dime as more data gets reported fromcountries with reported cases of infection. We think todays NY close for the popular risk proxies will be very important. Were headed into the weekend portion of the Chinese New Year holiday where nothing can trade but a whole can go wrong.

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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