EURIBOR OPTIONS: Midcurve Call Spread Buyer

• RES 4: 1.3387 High Jul 7 and a key resistance
• RES 3: 1.3333 50-dma
• RES 2: 1.3304 High Jul 10
• RES 1: 1.3223 20-day EMA
• PRICE: 1.3217 @ 16:14 BST Jul 21
• SUP 1: 1.3084 1.618 proj of the Apr 28 - May 8 - May 26 price swing
• SUP 2: 1.3032 1.764 proj of the Apr 28 - May 8 - May 26 price swing
• SUP 3: 1.2992 50.0% retracement of the 2021 - 2022 bull leg
• SUP 4: 1.2949 2.00 proj of the Apr 28 - May 8 - May 26 price swing

Rallies in USDCAD have been firmly sold for the duration of the week, however the pair trades modestly stronger into the Friday close. Nonetheless the onus remains lower for now. Early weakness Thursday keeps the medium-term trend pointed lower, and has resulted in a break of 1.3117, the Jun 27 low. This confirms a resumption of the downtrend that started on Oct 13 2022. The break lower opens 1.3084, and 1.3032, Fibonacci projection points.

• Price and labor pressures may have softened in the latest month, but GDP growth has been coming in comfortably stronger than expected. It started with the third release for Q1 GDP growth surprisingly being revised from 1.3% to 2.0% contrary to just the 1.4% expected.
• Private consumption played a healthy role in this upward revision, shifting from the previously thought 3.8% to 4.2% for a fresh high since 1H21, along with exports.
• This relative consumer strength has continued, as even though overall retail sales disappointed for June, the control group that more directly feeds into national accounts came in twice as strong as expected at 0.6% M/M in June along with an upward revision.
• Along with a slew of other releases, it has left the Atlanta Fed’s GDPNow tracking at 2.4% for Q2 growth after steady upward revisions, stronger than the 1.8% tentatively estimated by analysts in the Bloomberg survey for the Jul 27 Q2 advance release.
• There is however one important caveat to the national accounts data and it’s that whilst GDP has been solid, an alternate approach in real gross domestic income (GDI) still fell -1.8% in Q1 despite upward revisions. The upshot is that average GDP and GDI growth in Q1 was just 0.1% annualized in a puzzling soft patch considering the strength in the expenditure accounts.

• RES 4: 0.7029 High Feb 14
• RES 3: 0.6993 76.4% retracement of the Feb 2 - May 31 bear leg
• RES 2: 0.6936 High Feb 16
• RES 1: 0.6900 High Jun 16 and key resistance
• PRICE: 0.6733 @ 16:12 BST Jul 21
• SUP 1: 0.6723 Low Jul 21
• SUP 2: 0.6719 50-day EMA
• SUP 3: 0.6651 Low Jul 11
• SUP 4: 0.6596 Low Jun 29 and key support

AUDUSD initially traded favourably through the Thursday European open on a solid local jobs report. This impact soon faded, however, keeping prices from any major test on the first upside resistance level at 0.6900, the Jun 16 high. A break of this level would open 0.6936, the Feb 16 high. Initial support lies at 0.6719, the 50-day EMA. Weakness through here would open potential for losses toward the 0.6718 200-dma.