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Barnier Knocking Around GBP Traders. EUR Looking Heavy. US CPI/Retail Sales 8:30am.

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Summary
  • A spectacular finish for sterling yesterday sees GBP buying spill over into European trading overnight. The EUs Barnier, after telling the markets Brexit talks were at an impasse, tells a German newspaper that the EU may offer the UK a two-year transition period.

  • GBP looking better on the charts across the board. German government spokesman Siebert is dampening the mood just now with comments about it being too early to discuss Brexit transition ideas.

  • JPY sees some demand overnight, but its likely stop-loss related. USDJPY and EURJPY gave up some support levels on the charts. Remember too we have a market that is increasingly positioned short and has not seen any follow through this week because of option expiries.

  • Not much to talk about in Euro over the last 24hrs but chart technicals are starting to weigh. Watch EURJPY and EURGBP.

  • AUD continues to enjoy a bit of a bid for a change. Higher iron ore and copper prices being talked about as supportive factors. Technicals continue to improve. NZD bid helping too.

  • CAD is steady after lackluster trade yesterday. Hearing talk of another $900mln in expiries today between 1.2450 and 1.2465, so we could be going nowhere fast. GBPCAD technicals much better. EURCAD fighting to hold 1.4750 again today. BOC Business Outlook survey out Monday.

  • Traders hoping todays release of US CPI and Sep Retail Sales can shake things up a bit. Aside from Brexit headlines knocking around the GBP, its been an otherwise quiet week. Markets expecting +2.3% YOY for CPI and+1.7% for Retail Sales.

  • CME open interest changes 10/12: AUD +309, GBP +394, CAD -2010, EUR -806, JPY +2489.

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Daily FX Snapshot
USD/CAD - Canadian Dollar

Dollar/CAD continues to wonder around with a weak undertone. Last weeks technical failure after the dual employment reports and the broad weakness in USD across the board this week are the only factors we can point to. We enter NY trading today slightly better with the 1.2450-60 level holding and cross flows helping. Some traders are giving up (note over 2k in position liquidation yesterday in futures). Option expiries today (noted above) could make this market a little sticky. A rally above the 1.2490s invites the low 1.25s again, near-term resistance 1.2530s. A break of yesterdays low could mean a test of the low 1.24s and a resumption of the longer-term USD downtrend. We are very much at a crossroad in USDCAD and need a catalyst to break out of the 1.2450-1.2550 range. Bank of Canada meets again Oct 25.

USDCAD
EUR/USD - European Central Bank Euro

The Euro struggled yesterday in quiet trade, and it continues to trade lower as we enter NY trading. The bearish reversal on the EURGBP is not helping, nor is EURJPY (since the 132.70s level gave way) . US/GE yield spreads are wider today (doesnt help EUR) and theres talk of a larger and more ominous head & shoulders top formation making the rounds (see chart). Remember, longs called it right adding to positions over the last week and half. US CPI and Retail sales next up. Long positions have a lot more to think about this morning. Perhaps some profit taking ahead of the weekend?

EURUSD
GBP/USD - British Pound

Sterling enters NY trading today back within the hourly rising channel that started to form earlier this week on the intraday charts. The Barnier volatility from yesterday now looks like a shake out of recent long positions (open interest up 8k during this weeks rally). All the crosses scored daily reversals bullish the GBP yesterday as well (GBPJPY, EURGBP, GBPCAD). Shorts need to be on guard now as the market tests weekly resistance in the low 1.3320s (a strong break above would repair the weekly chart as we mentioned earlier this week). Reuters reporting stops getting hit on the move through 1.33 earlier but were easing off now on the Sibert comments. Dealing with Brexit headlines continue to make trading sterling challenging at the moment. Tell that to all the short positions that covered in September only to see the market fall apart into October. Well get an updated read later today from the CFTC as to positioning going into October 10th.

GBPUSD
Charts: TWS Workstation

Erik Bregar - Trader
Exchange Bank of Canada
Toronto, Ontario
Email:erik.bregar@ebcfx.com
Phone:647-728-4918

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