USD trading lower again amid another risk-on wave
Erik Bregar of Exchange Bank of Canada - InsideFutures.com - Tue Apr 28, 9:52AM CDT

ANALYSIS

USDCAD

A broad, risk-on, USD selling wave is sweeping across global markets this morning, but its been a bit challenging to explain the reasons why amid a lack of obvious news catalysts. Some traders are already talking about month end flows from asset managers and JPY repatriation ahead of the Japanese Golden Week holiday (which begins tonight ET). Others are referring to the mild bounce in oil prices, as the US Oil Fund and the S&P GSCI Index now shun the June contact in favor of a more diversified portfolio of farther dated futures contracts across the WTI curve. Then of course, were hearing some re-hashing of yesterdays lock-down easing hopes as Australia re-opens its beaches and permits home visits.

We think the USD has been affected by technical selling today as well; with the most obvious signs coming from yesterdays bullish NY close for AUDUSD above the 0.6330s and from this mornings break below the 107.00 (March/April) lowsfor USDJPY. European traders continue to ignore the dysfunction in Brussels and have tightened the BTP/Bund spread, which is helping EURUSD bounce once again. Sterling continues to display its higher beta (relative volatility) vis a vis the euro, and USDCAD has now slipped below the 1.4020s and looks destined to re-test the lower bounds of the 1.3900 to 1.4200-50 range weve been talking about for the better course of April.

Todays North American calendar will feature the release of some 2ndtier US data at 10amET (Conference Board Consumer Confidence & the Richmond Fed Indexes), but these might get more attention that usual given that theyre relatively fresh April reads on consumer/business sentiment. The Fed begins its two-day FOMC meeting today and will announce its latest decision on monetary policy at 2pmET tomorrow.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

JUNE CRUDE OIL DAILY

JUNE CRUDE OIL DAILY


EURUSD

Euro/dollar dip buyers have defended Sunday nights chart support level in the 1.0810s this morning, but its not really coming from anypositive narratives out of Europe today. The US dollar is getting sold across the board and European equities are rising more than 1% amid a broad wave of risk-on flows today. It may be a little hard to explain at this hour, but wouldn't dwell on it too much.

Some traders are talking about the potential magnetizing affect of Thursday mornings huge option expiry at the 1.0800 strike in EURUSD, which will take place right after the ECB meeting. Hedging flows around this expirycould drag EURUSD lower again at some point over the next 48hrs but wed argue that event isstill a ways away though and that tomorrows FOMC meeting representsthe more near-termevent risk to position for.


EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

BTP/BUND SPREAD DAILY

BTP/BUND SPREAD DAILY


GBPUSD

Sterling has managed to break above the 1.2420-40s trend-line resistance band we talked about yesterday, and itachievedthis during the 3amET hour this morningright when USDJPY started to fall apart. GBPUSD traders tried to put some upside pressure on trend-line resistance just above the 1.2500 figure at the NY open, but they have since backed off. Yesterday's highs in the 1.0850s should now act as chart support.


GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

AUDUSD

The Australian dollar continues to lead the US dollar broadly lower today. We believe yesterday's fundamental narratives still applyand we think yesterdays bullish NY close above the 0.6330s, and buyer defense of this level in London today, has added some fuel to the fire. The market is now struggling to break decisively above the 0.6500 level as we head into NY trade however, which could funnily enough bring about some USD short covering into the London close.

Australia will report its Q1 CPI figures tonight at 9:30pmET, with the consensus expectations being +0.2% QoQ and +2.0% YoY. Were not sure so traders will care if the numbers disappoint, seeing as the marketplace is more focused now on the Australian re-opening effort.


AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

Dollar/yens break below the 107.00 level is making headlines this morning. The whys are a bit lacking, but the technical breakdown below these March/April lows has been hard to argue with. If we combine the lack of local JPY liquidity that is coming (Golden Week holidays) with the event risk that lies ahead (Fed & ECB meetings), we could be in store for a resumption of the late February/early March downtrend in USDJPY.

Option market tradersarent betting on a rapid decline in the market just yet though, if we look at pricing for the 1-month USDJPY risk reversal (currently just -1.80). Spot market traders are also trying to regain the 106.60s trend-line support level as NY trade gets underway. Perhaps the flowswe saw overnight weretruly month-end/pre-holiday related?


USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

USDJPY 1-MONTH RISK REVERSAL DAILY

USDJPY 1-MONTH RISK REVERSAL DAILY

Charts: Reuters Eikon

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