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EUR Breaks Higher. Central Bankers Don't Say Much In Frankfurt. COT Shows Extending JPY Positioning.
Erik Bregar - IF - Tue Nov 14, 8:18AM CST
Summary
  • OVERNIGHT SESSION FOR ECONOMIC DATA: Australia NAB survey blows away expectations, coming in at +21 (all time high). Chinese Retail Sales and Industrial Production figures come in weaker than expected (+10% and +6.2% respectively). German GDP beats at +0.8%. UK CPI comes in a tad light at +3.0% YoY vs +3.1% expected. Eurozone Q3 GDP is reported in-line with expectations (+2.5%). German ZEW survey comes in at 88.8, a slight beat. US PPI on deck for today (+2.3% YoY expected).

  • FIRST ECB CONFERENCE ON CENTRAL BANK COMMUNICATION HAS SO FAR BEEN A NON-EVENT: The ECBs Draghi, the Feds Yellen, the BOEs Carney and the BOJs Kuroda all spoke after the 5am hour, but no market moving statements have been made so far.

  • CTFC COMMITMENTS OF TRADERS REPORT (NET SPECULATIVE POSITIONS AS OF NOV 7):GBP longs bail after the dovish rate hike from the Bank of England, market now net short a little bit. USD shorts (CAD longs) use the pullback in USDCAD to get out of losingpositions. The dip below 1.16 in EURUSD last week was met with buying (longs adding and shorts covering), makingthe net long position grow to a 3 week high. JPY shorts (USD longs) made fresh 3 year highs ahead of theKuroda speech and market reversal in USDJPYlast Sunday night.

  • CME OPEN INTEREST CHANGES 11/12: AUD +2049, GBP -3386, CAD -2696, EUR +3485, JPY -45.

  • AUDUSD: The NAB survey was all the talk in Australia overnight. With that, the selling in Aussie has ceased for the time being. The market has also bounced off a key support level in the 0.7610-0.7620 area (the 61.8% Fibo retracement of the May-Sep move + lower bound of channel support). See chart. We feel AUDUSD may drift a little higher here but the daily trend is still down and resistance comes in at 0.7650 (mid-channel resistance). Next support is 0.76 even, which also corresponds with a weekly uptrend line going back to Jan 2016. AUDNZD flows have been supportive today. Thursday is a big day with Australian employment figures due.

  • USDCAD: Not much going on in CAD over the last 24hrs, other than a nice technical bounce off the key support level weve been talking about since Friday (1.2660s). We broke through the 1.2720s in overnight trade (formally support, no resistance), so that is positive, but were starting to come in again now as the EURUSD rally incites some broad USD selling. Were still calling this market range-bound to lower. Key resistance now 1.2770-1.2800. Cdn Existing Home sales tomorrow.

  • EURUSD: There you have it folks. The 1.1660-70s have given way on EURUSD, effectively cancelling the overly reported H&S topping pattern, and the market is now surging back into 1.17s. Better than expected German GDP got the ball rolling this morning, along with EURGBP cross buying as UK CPI disappointed. As we mentioned yesterday, EURGBP continues to look a whole better technically and we now see foresee a retest of the 90 handle (which would be EUR supportive). Next stop for EURUSD? The 1.1750s (which in the 38.2% retrace of the Sep-Nov down move), then 1.1810 (the 50% retrace). Support comes in at 1.1700-1.1710 (upper bound of downward channel). An impressive day to say the least for EURUSD, which will likely have traders repositioning. We will be watching very closely how we close out today. Will the 3 week high of EUR longs take some profit here? A strong close above the 1.1750s would invite the 1.18s and quickly turn this market into a buy the dip play.

  • GBPUSD: Sterling cant seem to get out of its own way. The chop continued overnight and the weaker than expected UK CPI print didnt help. We remain marred in range-trade here, with 1.3070-80 supporting and resistance now coming in at the 1.3160-70 area. We get UK employment data tomorrow and Retail Sales on Thursday.

  • USDJPY: Dollar/Yen enjoyed a bit of a pop in early European trade, led by EURJPY buying, but that has since fizzled and the market is trading back down into yesterdays NY range. The latest COT report (released late due to a public holiday on Friday) further confirms our view that the USD long (short JPY trade) is getting increasingly crowded. Recent longs have to ask themselves what they want to do here as theyre likely underwater now. US stocks and treasury yields are mildly weaker overnight. Were still calling it range-bound to lower here for USDJPY, with technicals and extended positioning weighing. Support 113.10-20.

  • USDCNH: Not much fanfare out of China overnight with the weaker than expected Chinese data. Traders seem to be having second guesses about breaking the Yuan lower here (see chart), but the bullish pattern is not dead yet.

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Erik Bregar - Trader
Exchange Bank of Canada
Toronto, Ontario
Email:erik.bregar@ebcfx.com
Phone:647-728-4918

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