USD trading mixed after US data, but still lower vs European open
Erik Bregar of Exchange Bank of Canada - InsideFutures.com - Thu Apr 16, 10:56AM CDT

ANALYSIS

USDCAD

The Bank of Canada kept its overnight target rate on hold at 0.25% yesterday, and while it announced new provincial and corporate bond purchase programs, the USDCAD market largely shrugged off this news. Its almost as if FX traders are numb to everything central banks do nowwe know theyre going to do whatever it takes to sooth their respective bond markets and none of these measures are really surprising any more. With regard to the Bank of Canada'seconomic outlook, governor Stephen Poloz cited two plausible scenarios in the banks Monetary Policy Report, but admitted the uncertainty around COVID-19 makes it impossible to judge when the economy will recover. Deputy governor Carolyn Wilkins, while expressing concern that corporate credit markets still werent functioning properly, said that the Bank of Canada was not actively discussing other unconventional monetary policy tools at this point. Dollar/CAD respected trend-line chart resistance in the 1.4110s throughout the whole meeting, with traders seemingly more focused on gyrations in oil prices following the largest weekly EIA inventory build on record (+19.25mln barrels).

Broad market risk sentiment oddly recovered into the NY afternoon yesterday but deteriorated once again heading into Asian trade overnight. Australias hard-to-believe 5.9k job gain for March (vs expectations of -40k) added a little insult to injury and allowed the broader USD to rally further but some soothing words from the ECBs Schnabel ("ready to do more to avoid euro fragmentation") helped risk sentiment and Italian bonds recover.

Theres some debate this morning over whether or not todays US data set was better or worse than expected. The US Philly Fed survey for April came in at -56.6 vs -30.0 expected, which was flat out awful. However, the number of Americans filing unemployment insurance claims, for the week ending April 11, rose just 5.25M last week vs +5.5M expected. Wed argue that the data set was mixed, and explains why the FX markets are now dialing back some initial, mis-placed, optimism.

Dollar/CAD is now trading just above the lower bound of a new, upward sloping, resistance band that has formed over the last 24hrs, currently 1.4100-1.4120.


USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

MAY CRUDE OIL DAILY

MAY CRUDE OIL DAILY


EURUSD

Euro/dollar staged an impressive recovery off chart support in the 1.0850s yesterday and it was hard to find a fundamental narrative to explain the bounce. Early Asias slip back below the 1.0905 level was fitting in our opinion, as was the AUD-inspired fall back into the high 1.08s. Buyers were found once again at the 1.0850s in the European AM today following Schnabels comments, but theyre struggling to get the market back into the 1.09s following this mornings mixed US data set (bad Philly Fed/better jobless claims).


EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

SPOT GOLD DAILY

SPOT GOLD DAILY


GBPUSD

Sterling also managed to rally handsomely off its own chart support in the 1.2430s yesterday, and it has followed EURUSD pretty closely even since. The markets reaction to this mornings US data has been more muted though, vis a vis the euro, and wed note GBPUSDs continued ability to hold chart support in the 1.2470-80s. Were talking about a very tight trading range though and so wewouldn't get too excited in either direction here. We think the 1.2430-1.2520s will become the new pivotal price range for GBPUSD heading into next week.


GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

AUDUSD

Traders didnt take well to Australias better than expected March Employment Report last night because the survey period ended on March 14, well before the major coronavirus restrictions kicked in. The headline showed 5.9k jobs created in March versus expectations for a loss of 40k, and the unemployment rate ticked higher just one tenth to 5.2%, versus expectations of 5.5%.

AUDUSD was justifiably knocked below the 0.6300 figure as result, which we felt dragged other currencies lower heading into European trade as well. This morning ECB comments and the better than expected US jobless claims number has seen the Aussie recover, but we think the market is going to need a heck of a lot more good news in order to erase yesterdays technical damage on the charts.


AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

Dollar/yen continues to trade with the broader USD as opposed to the broader risk tone. This means its now rallying with risk-off and its falling with risk-on, which iscounter-intuitivethe markets long held positive correlation with risk sentiment. Perhaps traders are finally coming to the conclusion, after Japanese PM Shinzo Abe said he would expand his state of emergency to cover all regions of the country, that the dollar is a better safe-haven than the yen?

The market is now slipping lower after losing chart support in the 107.60-80s. Just look at how unimpressed bond markets are about this morning's US data set...US 10yr yields have slipped back below 0.60%! So far this development isnot helping USDJPY, so does that mean the positive risk sentiment correlation is back on after a 48hr hiatus?


USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10 YR YIELD DAILY

US 10 YR YIELD DAILY

Charts: Reuters Eikon

Interested in creating a custom foreign exchange trading plan?Contact usor call EBC's trading desk directly at1-888-729-9716.

About Exchange Bank of Canada
Exchange Bank of Canada, EBC Canadas Foreign Exchange Bank, is the only Schedule 1 Canadian bank specializing in foreign currency exchange and international payments for financial institutions and corporations. EBC provides innovative foreign exchange management and integrated international payment solutions tailored to meet business needs on a global scale. Leveraging industry leading technology and a client-focused team of experts EBC delivers comprehensive, cost-effective and trusted payment processes and foreign exchange currency solutions to create financial and operational efficiencies. To learn more, visit:www.ebcfx.com.

Disclaimer:All product names, logos, and brands are property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, logos, and brands does not imply endorsement.
This publication has been prepared by Exchange Bank of Canada for informational and marketing purposes only. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Exchange Bank of Canada, its affiliates or any of their employees incur any responsibility. Neither Exchange Bank of Canada nor its affiliates accept any liability whatsoever for any loss arising from any use of this information. This publication is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any of the currencies referred to herein, nor shall this publication be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The general transaction, financial, educational and market information contained herein is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a "call to action" or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. You should note that the manner in which you implement any of the strategies set out in this publication may expose you to significant risk and you should carefully consider your ability to bear such risks through consultation with your own independent financial, legal, accounting, tax and other professional advisors. All Exchange Bank of Canada products and services are subject to the terms of applicable agreements and local regulations. This publication and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced in whole or in part, or referred to in any manner whatsoever nor may the information, opinions and conclusions contained in it be referred to without the prior express written consent of Exchange Bank of Canada.