FOREX: Trump Trade Headlines Weigh on CAD, JPY Downswing Extends
Oct-24 09:30
- The US administration's termination of trade talks with Canada brought overnight losses for the Canadian dollar, with Prime Minister Mark Carney facing a binary choice - either seek to repair ties with the White House, or pursue a more aggressive line with the US. The latter would be politically popular domestically, but risk further escalation from the Trump administration.
- Although USDCAD spiked on the news, the 40 pip reaction has been moderate so far, reaching an intra-day high of 1.4028. The price action does strengthen bullish trend conditions, however, the imminent release of US CPI has likely dampened the immediate impact as well as these headlines having less of a market impact in recent weeks. Sights are 1.4080, the Oct 16 high and the bull trigger, before the April 10 high at 1.4111.
- The moderate extension higher for US yields has further underpinned the USDJPY rally, which briefly rose above the 153.00 handle. A positive session today would mean the sixth consecutive day of gains, with eyes firmly on 153.27, the technical bull trigger. Comments from Fiscal Policy Minister Kiuchi suggesting little concern around a weaker JPY as well as FinMin Katayama not ruling out further JGB issuance to fund the upcoming economic assistance package will have also assisted the overnight price action. A break of 153.27 would open up 153.82, a Fibonacci projection.
- Initial weak French PMI data was offset by a stronger-than-expected German services flash PMI, prompting two-way price action for the Euro. For Germany, in addition to the stronger growth signals, an uptick in output charge inflationary pressures added to the hawkish theme of the flash report. However, EURUSD sits modestly lower on the session, perhaps owing to the renewed weakness for gold this morning, providing a marginal boost to the dollar.
- EURGBP now stands roughly unchanged from yesterday's breakout to the upside at 0.8713. The Guardian reported overnight on the potential for an income tax increase in the Autumn Budget, which would be the best option when considering which of the manifesto pledged taxes to increase in our view. The underlying trend condition in EURGBP remains bullish. Key resistance and the bull trigger remains at 0.8769, the Jul 28 high.
- US CPI will highlight today's data calendar, possibly being the last report that won’t be adversely impacted by the shutdown until the new year.
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FOREX: USDJPY Approaching Post-Fed Highs at 148.38
Sep-24 09:24
- The low yielders have been under pressure this morning, with USDJPY notably rising to within 10 pips of the post Fed highs at 148.38. Uncertainty regarding Japanese politics and the upcoming LDP leadership election may be playing its part here, while moving average studies continue to highlight a dominant uptrend for the pair. A resumption of gains would open 149.14, the Sep 3 high.
- Furthermore, the impressive grind higher for the likes of EURJPY and CHFJPY bolster the bearish yen theme. Fresh cycle highs for EURJPY today further consolidate the breach of 173.97 last week, keeping bullish conditions firmly intact. Sights are on 174.86 next, a Fibonacci projection, before the 2024 highs which reside at 175.43, a key medium-term resistance.
- US new home sales is the main data point later today, before Thursday’s US jobless claims data. It’s worth noting that Tokyo CPI is scheduled Friday.
FOREX: GBPUSD Hovers Above Trendline Support
Sep-24 09:22
- Over the course of the European morning, the US Dollar is trading with a supportive tone. Despite most major pairs remaining well within the post-Fed ranges, the likes of EUR and GBP have extended session declines to just shy of 0.4% in recent trade.
- For EURUSD, the solid amount of option expiries between 1.1750-1.1800 appear to have capped the overnight price action, with the pair slowly edging back below 1.1775 as we approach the NY crossover. Last week’s low at 1.1726 is the immediate point of reference on the downside, however, support to watch is at 1.1678. the 50-day EMA.
- GBPUSD has traded through the 50-day EMA, and this leaves support at 1.3458 exposed, a trendline drawn from the Aug 1 low. Clearance of this line would strengthen a bearish threat. Below here, key support resides at 1.3333, the Sep 3 low.
FOREX: BofA Flag EUR, GBP, JPY & CHF Demand At Month-End; USD & EM Sales
Sep-24 09:21
Ahead of month-end, Bank of America’s rebalancing model points to EUR, GBP & JPY inflows, based on traditional 60/40 portfolios. Elsewhere, they flag the potential for outflows from EM and USD (marginally) as U.S. equities have rallied. They also note that positive equity and fixed income returns suggest rebalancing flows favour a firmer CHF.
