Announced Trump/Xi G20 meeting + strong Chinese export data helps global equities bounce
Summary
  • USDCAD:Dollar/CAD is leaking lower this morning as US equity and crude oil futures rally higher this morning. Traders are citing WAPOs late day headline (about President Trump and Chinas Xi agreeing to meet at the G20 summit in November) as one of the reasons for the bounce late yesterday. While it felt like a rehash of the DJ article earlier in the day, it was enough to pull November crude back above the 71.00 support level. We also got some very positive Chinese export data overnight, which is helping to ease US/China trade tension fears. USDCAD struggled to extend gains yesterday as various waves of broad USD selling kept the market pinned to trend-line support in the 1.3030s. That level has now given way as we head into a quiet end of the week for economic data. We think todays large option expiry at the 1.3000 strike (1.1blnUSD) will keep the market heavy in the early goings. Resistance now 1.3025-30 (downward sloping). Next support 1.2960-80.

  • EURUSD:Euro/dollar is pulling back mildly this morning after closing the NY session quite strongly yesterday. Chinas PBOC fixed USDCNY (onshore Yuan) higher for the fourth day in a row today; sort of defying the strong move down in USDCNH (offshore Yuan) yesterday. We think this has played a role in EURUSDs pull back here. We also have 1.1blnEUR in options expiring at the 1.1550 strike this morning, which could be having a magnetic effect on price. BTP/Bunds trade steady around the +300bp mark. The ECB has told markets that it wont single handedly come to the Italys rescue in the event of a financial crisis. More here. Germany reported September CPI in-line with expectations (+2.3% YoY and +0.4% MoM). Support today is 1.1550.

  • GBPUSD:Sterling is entering NY trading this morning with a negative tone. This comes after three failed attempts to break trend-line chart resistance in the 1.3240s over the last 24hrs, and reports that the UK wants to opt-out of the open-ended Irish backstop plan proposed by the EU. Expect more headlines in the hours and days ahead as markets brace for the EU summit next week, where traders are expectingsome formal progress to be made on Brexit negotiations. Theres a large EURGBP option expiry on Monday (1.4blnEUR at the 0.8800 strike), which if it attracts price, might keep GBP on the defensive here, all else being equal. Longs must hold 1.3170-90 in our opinion to keep the markets upward trajectory in place.

  • AUDUSD:The Aussie sits comfortably this morning above the 0.7100 level that the market broke above yesterday on the heels of the soft US CPI report. We feel this now opens the door for short covering into the 0.7150-60 area. December copper is enjoying the risk-on tone to global equities today, with the overnight Chinese export data helping with that. We also continue to notice shrinking LME copper inventories and strong physical premiums (demand) in China, which leads us to believe copper may be in for a significant move higher soon if the market can stop focusing on US/China trade headlines. Coppers daily chart shows a bullish inverted head & shoulders bottoming pattern at this point. Something for the entrenched AUDUSD fund short position to think about, we feel.

  • USDJPY:So weve got our bounce in USDJPY finally, but it took another selling wave in US stocks yesterday to push USDJPY into the 111.90 support level first. The market has now also recovered back above a trend-line level in the 112.10 area, which we feel may help the market inch higher still. Resistance is in the 112.50s, then 112.70s. Watch US equities again today as this is the dominant driver of USDJPY at the moment. We feel the S&Ps bounce has legs so long as the futures can survive another test of the 2740s.

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Erik Bregar - Director, FX Trading
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