More positive headlines out of China propel risk sentiment higher again
Erik Bregar of Exchange Bank of Canada - InsideFutures.com - Wed Feb 19, 9:41AM CST

ANALYSIS

USDCAD

Dollar/CAD traders couldnt muster a NY close above the 1.3260s resistance level yesterday despite a weaker than expected Canadian Manufacturing Sales print for December and a stronger than expected NY Fed Manufacturing Survey for February. After a brief risk-off fit that saw gold prices surge above the $1,600 mark, global markets eventually shook off coronavirus concerns yet again and nowhere was this more apparent than in the sharp recovery in March crude oil prices. This saw USDCAD lose the 1.3260s after trading above it in early NY trade and set the market up for an offered tone going into Asian trade.

This offered tone picked up pace after Chinas National Health Commission reported just 56 new coronavirus cases outside of Hubei province for February 19th, which is now the lowest daily rise in new cases since January 29. Bloomberg reported that the Beijing was considering cash infusions and mergers to bail out the Chinese airline industry. Morehere. Market chatter also suggested that China will cut its benchmark loan prime rate (LPR) at the PBOCs monthly fixing tomorrow. All this contributed to a modest risk-on vibe which saw USDCAD slip below the 1.3240s support level heading into London trade.

This technical weaknessushered in yet more USDCAD selling, but this has come to a halt following the release of Canadas latest CPI report and the US most recent read for producer price inflation. The headline inflation figures for Canada mildly beat expectations in January (+0.3% MoM and +2.4% YoY vs +0.2% and +2.3% respectively), but the core YoY measure simply met expectations of +1.8% YoY and the Common CPI measure actually missed consensus by two tenths (+1.8% YoY vs +2.0%). US PPI, on the other hand, beat expectations by a big margin on the headline and core measures (+0.5% MoM vs +0.1% for both).

Wed argue that this mornings economic data is net positive for USDCAD and explains the strong bounce we're now seeing.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

MAR CRUDE OIL DAILY

MAR CRUDE OIL DAILY


EURUSD

Euro/dollar is grasping for straws again this morning after a couple waves of risk-on over the last 24hrs cancelled out yesterday mornings gold-driven bounce. Its hard to find any sort of fundamental narrative to stop the selling in euro right now and so we defer to the chart technicals and trader willingness to push the market below the key 1.0790 support level today. A NY close below here would be another bearish development for EURUSD and would open up more selling down 1.0550-1.0600 level in our opinion.

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

APRIL GOLD DAILY

APRIL GOLD DAILY


GBPUSD

The UK reported better than expected YoY reads for both headline and core inflation for the month of January this morning, but the MoM figures missed on the headline and just met expectations on the core measure. Sterling traders seemed unimpressed and decided to keep selling GBPUSD after yesterdays notable buyer failure at 1.3040s chart resistance.

This mornings hotter than expected US PPI data for January now seems to be driving some broad USD strength, that has in turn pressured GBPUSD back below the 1.2980s. Chart support in the 1.2940-50s is the next stop in our opinion, and we think the market technicals would get decidedly more bearish with a NY close below there.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY


AUDUSD

The Australian dollar benefited from last nights mild risk-on move in Asia, but all this is now unravelingas traders focus on upbeat US PPI data and broad USD buying flows, which have really picked up steam. Last nights +0.5% QoQ in-line read for Australias Q4 Wage Price Index was a non-event for markets, and it appears this mornings sizable option expiries around the 0.6700 strike arenot getting much attention either.

The Aussie looks more focused on making new lows here but we might need a weaker than expected employment report out of Australia tonight before that can happen. The market consensus is looking for +10k jobs created in January and 5.2% for the unemployment rate. The OIS market is pricing in just a 4% chance that the RBA cuts interest rates on March 3rd.

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

The yen is completely falling apart today, and while we think its safe to say some of the early moves today were risk-on driven, wed argue theres some sell everything Japan vibes in the marketplace today following a Bloomberg report that said Japan could become the largest hotspot for coronavirus infections outside of China. Morehere.

Dollar/yen has surged higher through chart resistance in the 110.10s while US 10yr yields tradejust modestly higher. Traders are now eyeing the 111 handle as theres not much chart resistance on the charts at all around current levels. We wouldnt fight this upward move in USDJPY until we see clear signs of buyer failure and we might not get thisuntil the mid-111s.

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BUND YIELD DAILY

US 10YR BUND YIELD DAILY

Charts: Reuters Eikon


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