Dollar/CAD regained the top of the 1.3230-50 trend-line support zone at the close of NY trade yesterday as oil markets ultimately didnt fall for Pompeos war mongering against Iran. This has helped stem the post-Fed selling in USDCAD, but traders have one more headline to deal with before they can call it quits for whats been a busy week of headlines. Canadian Retail Sales for July will be reported shortly at 8:30amET and the market consensus is for a gain of 0.6% MoM, +0.3% ex. Autos.
OCT CRUDE OIL DAILY
Euro/dollar continues to struggle at trend-line chart resistance in the 1.1060s this morning, and the more the market keeps failing here (5th time already this week), the more were loosing confidence in the markets attempt at a bottoming pattern. Last Thursdays bullish outside day recorded post ECB was positive, as was Tuesdays strong bounce off trend-line support in the 1.0980s, but EURUSDs repeated inability to close above the 1.1060s is concerning in our opinion. Todays slump since the start of European trade seems to be GBPUSD driven, as sterling traders have second thoughts on yesterdays breakout above 1.2500. Germany reported weaker than expected PPI figures for the month of August earlier today (-0.5% MoM vs -0.2%), but the numbers were market moving.
DEC GOLD DAILY
Sterling looks set to completely reverse yesterdays upside breakout above the 1.2500 level this morning. The sense were getting from market chatter is that Sky News cherry picked positive sounding headlines from its interview with Jean Claude Juncker yesterday, and that the sad reality of the current Brexit stalemate will come to light once again when the full interview airs on Sunday. GBPUSD has smashed back down through the 1.2500 level as we type, and is now testing a horizontal support level in the 1.2470s. We think a NY close below the 1.2500 will be super disappointing for the bulls and could lead to more GBP selling to start next week.
Boy, what a difference a dovish sounding RBA Minutes, a Fed disappointment, and a 0.1% rise in the Australian unemployment made for the AUDUSD market this week. We started the week with decent, albeit not great, chart technicalsbut things really fell apart when these negative fundamental developments put repeated pressure on trend-line support in the 0.6840s. With this level now broken and RBA rate cut odds surging once again for October 1st (78% now vs 25% at the start of the week), we think AUDUSD will continue to struggle here into next week. The next major chart support level comes at the 0.6750 level.
Dollar/yen is struggling this morning as well, after traders failed to reverse the post-Fed negative reversal and close NY trade above the 108.10 level yesterday. US 10yr yields are providing some support though as they have yet to take out their pre-Fed lows of 1.7430%. All eyes are on the repo and effective fed funds markets again this morning as traders await the results of the NY Feds next emergency repo operation ($75blnUSD being offered up again today). Today will also feature whats known as quad witching in the stock market, where once a quarter well get the simultaneous expiration of contracts for stock index futures, index options, stock options and single stock futures. With over 8blnUSD notional expiring at the S&P 3000 strike today at the market currently at 3010, expect perhaps a slightly negative drag on USDJPY at some point today.
US 10YR BOND YIELD DAILY
Charts: Reuters Eikon
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