Whose head is spinning?
Erik Bregar of Exchange Bank of Canada - InsideFutures.com - Thu Oct 10, 9:38AM CDT

ANALYSIS

USDCAD

Dollar/CAD is trading back near its 1.3280-1.3300 support zone this morning, after a tumultuous overnight session of conflicting US/China trade headlines ultimately saw buyers fail with a breakout attempt above the 1.3330s. The headlines come out in this order:

US, CHINA MAKE NO PROGRESS IN DEPUTY-LEVEL TRADE TALKS (SCMP) Risk off

WHITEHOUSE - SCMP report is inaccurate. We are not aware of a change in the Vice Premiers travel plans at this time. (CNBC). CHINAS LIU TO STAY IN WASHINGTON THROUGH FRIDAY FOR MEETINGS Risk on

Chinese trade sources tell Fox Business that the Chinese Trade Team will leave after one day of talks on Thursday Risk off

US WEIGHING CURRENCY PACT WITH CHINA AS PART OF PARTIAL DEAL (Bloomberg) Risk on

CHINA MOFCOM URGES US TO STOP UNREASONABLE PRESSURE ON CHINESE COMPANIES INCLUDING HUAWEI (Reuters) Risk off

WHETHER CHINESE DELEGATION STAYS WILL DEPEND ON TODAY (Fox) Risk on

We hate to say it, but the market is trading lower here simply because the last headline sounds slightly less negative in our opinion and we still have a whole news cycle ahead of us for the NY session where something positive could happen on the US/China trade front. The US just reported its CPI data for September and the numbers missed expectations (flat vs +0.1% MoM and +1.7% YoY vs +1.8%), which is not surprising given Tuesdays soft PPI data. OPEC cut its 2019 global oil demand forecast for the fourth time in five months in its Monthly Oil Report released this morning. Moreherefrom the WSJ.

Yesterdays FOMC Minutes re-highlighted the fact the several policymakers favored keeping rates steady but this is nothing new in our opinion, and it doesnt matter frankly when NOT disappointing the markets is clearly the only course of action for the Fed right now. Jerome Powells favorite new phrase The economy is in a good place got no attention when he used it again in another speech yesterday. To this we say, ya right. The Feds is clinging to the low official unemployment rate as its key measure for the strength of the job market but its one of the most outdated, lagging and misleading indicators out there.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

NOV CRUDE OIL DAILY

NOV CRUDE OIL DAILY

EURUSD

The buyers came back in force during the overnight session today, after the initial, negative sounding US/China trade headlines from SCMP ignited a risk-off bid to gold prices. The price spike in December gold up to the $1520 level got EURUSD back above its trend-line support zone in the 1.0965-1.0975 area, and we think this gave fuel to the chart technicians and buy stop hunters when Europe got going. A break above the psychological 1.1000 resistance level then triggered yet even more buying and before you know it EURUSD was tackling its next major resistance level in the 1.1020s.

This mornings 7:30amET release of the ECB Minutes showed the dissent amongst a number of policymakers surrounding Mario Draghis decision to re-launch QE (largely expected we would say), but we think the governing councils overarching consensus for more forceful and pre-emptive monetary policy action is coming across as a slightly more dovish development for markets this morninghence another reason why EURUSD could be stalling here. The full minutes of the meeting can be readhere. All this being said though, we still think Christine Lagarde has a problem to fix at the ECB. So long as the rift of dissent and lack of unanimity grows on every major policy topic, we think the new ECB President will be hard pressed to announce any further easing measures.

The FT reported this morning that Mario Draghi and the governing council ignored in-house advice from the central banks monetary policy committee when deciding to restart QE last month. Morehere.

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

DEC GOLD DAILY

DEC GOLD DAILY


GBPUSD

Sterling is treading water once again around familiar chart resistance in the 1.2230-40s, but with some more negative momentum now as it gave up gains above this level earlier today. Wed argue this mornings UK data dump was largely a non-event for markets as the focus remains on Brexit.

UK GDP (Aug) -0.1% vs flat exp. +1.1% YoY vs +0.9% exp

UK Industrial Output (Aug) -0.6% MoM vs -0.1% exp

UK Manufacturing Output (Aug) -0.7% MoM vs flat exp.

We think traders will be watching Boris Johnsons meeting today with Irish PM Leo Varadkar for more clues. Moreherefrom the BBC. We think a NY close below the 1.2230s will reaffirm confidence for the funds, who remain net-short the market.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY


AUDUSD

Australian dollar and Chinese yuan traders appeared to focus on the positives from last nights barrage of conflicting US/China trade headlines during the overnight session, with the most notable moves in both currencies occurring after the Whitehouses denial of the SCMP story. Both the AUD and CNH maintained an upward trajectory throughout early European trade today, and we think EURUSDs rally through 1.1000 added some fuel to the fire. However, these moves are reversing somewhat now as the US 10yr yield breaks above 1.60% and the German bund yield moves back above -0.50%. Were not quite sure yet whats driving this hit to the Fed rate cut trade at the start of NY trade here, as the Feds Kaplan said an hour ago that hes open-minded on further easing.

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

Dollar/yen is shooting higher here above the key 107.50 level as US and German yields break higher. The moves are still fresh and the headlines continue to pour in. Perhaps were going to see a positive US/China trade development shortly? Stay tuned on Twitter @EBCTradeDesk.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BOND YIELD DAILY

US 10YR BOND 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.