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ANALYSIS

USDCAD

Dollar/CAD traders are trying to buy the dips this morning as month-end dollar selling seems to have run its course. The timing of thesere-balancingflows is notoriously difficult to predict but wed wager that a lot of portfolio managers jumped the gun yesterday given the broader USDs inability to meaningfully bounce after the Fed meeting. Theres been a lot of chatter about CADs under-performance yesterday amidst these flows and we think this was largely because of September WTIs 5% implosion; a sell-off that has now ruined the oil markets upside breakout pattern from July 21. We think some pre-hedging ahead of todays massive 1.3400 option expiry (now valued at $2.2blnUSD) also attracted CAD sales.

 

Canada just reported a slightly better than expected May GDP figure (+4.5% vs +3.5%), but the markets lack of reaction tells you everything you need to know...old newsmove on. Todays 10amET NY optioncut also features a $2.3blnUSD expiry at 1.3500, although the magnetizing effect of this strike shouldnt come into play unless USDCAD breaks above 1.3450 in the next hour. Watch for some potentialvolatility going into the 11amET London fix, in case these month-end flows arent over just yet.

USDCAD DAILY

 

USDCAD HOURLY

SEP CRUDE OIL DAILY

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EURUSD

Euro/dollar ripped higher yesterday and, while Trumps election-delay thoughts helped spark the move, we felt the rally was largely driven by month-end USD sales and perhaps a sprinkle of risk-on from well-timed buying of large-cap US tech names going into last nights better than expected Nasdaq earnings parade. Themarkets subsequent reversal lower from its overnight highs above 1.19 proves the point. These flows are fickle and they eventually pass.

 

We dont seriously believe traders are worried about the US elections getting postponed and we think the growing talk of the USDs reserve currency status being at risk is all hogwash. The global eurodollar system, no matter how broken it is, aint going anywhere anytime soon.

EURUSD DAILY

EURUSD HOURLY

SPOT SILVER DAILY

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GBPUSD

Sterling continues to rip the face of whatever Brexit-inspired GBPUSD shorts still remain in this market. It closed NY trade very strongly yesterday on broad USD weakness; shattering chart resistance at the 1.2970s and 1.3040s in the processand the market now looks poised to shoot for the 1.3200-1.3210 level. Do not stand in front of this freight train for now as the market is not trading off UK fundamentals.

GBPUSD DAILY

GBPUSD HOURLY

EURGBP DAILY

AUDUSD

The Aussie recovered to close NY trade above the 0.7170s yesterday and we think month-end USD sales and some US tech stock buying were also the drivers. These flows seemed to have passed however, which could now force another test of the pivotal 0.7170 level going into the London fix at 11amET.

AUDUSD DAILY

AUDUSD HOURLY

USDCNH DAILY

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USDJPY

Dollar/yen traders made up their mind yesterday afternoon and continued to follow the broader USD lower when EURUSD cracked above the 1.1800 mark. We think the ongoing downtrend for US yields continues to add weight to this market, but USDJPYs correlation with broader USD flows has been even tighter of lateand so were watching this dynamic even more closely.

 

Japanese Finance Minister Taro Aso said the same thing that one of his officials said the day before, with regards to recent yen strength. Stability is important, so Im closely monitoring it with a sense of urgency.This wasnot the reason behind USDJPYs bounce off the 104.20s and back above the 104.70s support level overnight, but it sure feels like Japanese officials dont like the market trading below the 105 handle.

USDJPY DAILY

USDJPY HOURLY

GERMAN 10-YR BUND YIELD DAILY

 

 

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