Originally published by AxiTrader
Welcome to the first edition of my new Forex Today column.
In it I'll be trying to add a bit more colour and a lot more charts than I do in my broader overnight Market Wrap I do first thing every morning to set myself and my trading up for each day and each week.
The Canadian dollar is sharply higher against the US dollar to start the week after oil rose a touch and a BoC official said it was time for the bank to reassess the need for low rates in the wake of recent GDP data.
Senior Deputy Governor Carolyn Wilkins who said in a speech overnight that Q1’s growth had been “pretty impressive”. She added, “As growth continues and, ideally, broadens further, Governing Council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required”.
That's seen USD/CAD break down and through 6-month trendline support as well as taking out the 200 day moving average for the first time since February It's now at 1.3320 this morning down 160 points.
It looks biased toward 1.3220 to me.
Euro is still hanging in there this morning only marginally weaker even as the US-German 10 year bond spread is contracting. That and the rally in French and other European bond markets in the wake of Emmanuel Macron's showing in the first round of the French parliamentary election should weigh on the single currency.
But for the moment at 1.1202 it's doing well holding above the top of the previous uptrend channel but below the multiple highs in the low 1.1280 region.
1.1130/35 - the top of that old trend channel is now near-term support and a critical level before the 38.2% of the recent rally which comes in around 1.1100/10
The pound is under pressure again this morning against the US dollar, euro and many pound crosses. At 1.2665 the pound is now down and through the 1.2680 target I had last week as the garden variety pullback and has lost 0.55% to open the week. The pressure on the pound is likely to remain as uncertainty grows. There’s even talk of the Queen's speech next Monday being postponed while the government sorts itself out.
There’s even talk of the Queens speech next Monday being postponed while the government sorts itself out.
Through in more chat from Brexit Minister David Davis that the UK's position hasn't changed on the talks, the EU negotiator, Michel Barnier, telling the UK to get on with it and we have an extremely uncertain outlook.
It makes the BoE decision this week - and the possibility of a move back to a unanimous vote to hold rates steady at 0.25% - a potential bear point for the pound.
Friday's low at 1.2330/35 is the key near-term support. Below ther we have the 50% retracement level at 1.2578 and the 200-day moving average at 1.25650/70 as key levels to watch.
The Aussie dollar is hanging tough this morning. Not a lot of reasons for traders to have done anything with public holidays in the two big markets of Sydney and Melbourne yesterday and no real catalysts for a move. It's at 7540 this morning against the USD – up 0.2% - while against the pound it's stronger with GBP/AUD at 1.6781, the lowest level for the pound against the Aussie since mid-April.
For more thoughts on the AUD/USD please see my specific daily note.
The yen is a little stronger this morning with USD/JPY back under 110. At 109.83 though USD/JPY is mid range for the past week or so. This pair is going to be driven by the competing themes of the FOMC and BoJ meetings this week.
Whereas the Fed is expected to tighten and focus on the labour market as a positive contributor to the inflation outlook and thus its goals of achieving a 2% inflation target and maintenance the BoJ seems likely to highlight that Japan still has some work to do on the inflation front.
That would normally put upside pressure on USD/JPY especially as US rates are rising again while the BoJ is likely to reinforce it will hold its 10's near zero. This should keep a lid over yen rallies - falls in USD/JPY.
For the moment the parameters to watch are 110.86, then 111.30/35 on the topside and 109.11 below.
