Markets optimistic ahead of Trump speech.

ANALYSIS

USDCAD

Dollar/CAD drifted higher earlier this morning as US 10yr yields teased traders with another break above the 1.95% level. This felt like follow-through upside momentum from last weeks yield surge (delayed by yesterdays Remembrance Day/Veterans Day banking holiday) and it also felt like positive anticipation ahead of a speech from President Trump at the Economic Club of New York later today. Sources familiar with Trumps remarks say there will be a constructive statement on China when the President speaks at 12pmET, and so we think market participants are bracing for more good news that could hurt the Fed rate cut trade even further (USD positive). The funds, who extended their net short USDCAD position to a new 18-week high during the week ending Nov 5th, are looking very vulnerable here in our opinion. The first gut shot came from the Bank of Canadas surprisingly dovish hold to interest rates at the end of October (which saw the market rebound sharply to 1.3200), and the next blow came this past Friday when Canada reported an unexpected loss of jobs for the month of October (which saw the market finally break above 1.3200). If we combine all this (higher US rates, more concern for the BOC, overstretched USDCAD short positioning, technical break above 1.3200) with a seasonal tendency for the USD to perform well in November (2nd best month of the year going back 10 years), we think USDCAD is on the verge of a positive trend change. We think a strong NY close above the 1.3250s will confirm this idea, but so far the market is resisting as US 10yr yields back up a bit to 1.93%.

This weeks calendar will feature the US CPI and Retail Sales data for October, as well as a deluge of central bank speak (most notably Jerome Powells testimony before the congressional Joint Economic Committee and the House Budget Committee on Wed/Thurs)

Tuesday: Trump 12pmET. Feds Barkin at 12pmET. Feds Harker at 1pmET

Wednesday: US CPI (Oct), Feds Powell, Barkin, Kashkari, Harker

Thursday: US PPI (Oct), Feds Powell, Evans, Clarida, Daly, Williams, Bullard & Kaplan, Bank of Canadas Poloz speaks

Friday: Bank of Canadas Timothy Lane speaks

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

DEC CRUDE OIL DAILY

DEC CRUDE OIL DAILY

EURUSD

Euro/dollars fortunes continue to deteriorate this morning as bond traders bid US yields higher to start a holiday shortened week. This mornings less negative German ZEW Economic Expectations survey (-2.1 vs -13.0) saw the market attempt to regain the 1.1030s, but this failed miserably (which should be hugely disappointing for EUR bulls). The market now appears focused on a 1.2blnEUR option expiry at the 1.1000 strike for 10amET, and then of course Trumps speech at noon ET. The leveraged funds at CME started re-adding to their net short EURUSD position during the week ending Nov 5th (the week the market collapsed back below 1.1100). This weeks notable European economic headline will be the German flash GDP estimate for Q3 on Thursday, which is expected to show Germany entered a mild recession (-0.1% growth). We would not fight the near-term trend lower in EURUSD for the time being.

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

DEC GOLD DAILY

DEC GOLD DAILY

GBPUSD

Sterling has seen some selling in European trade today, but its still enjoying some relative outperformance vis a vis euro after yesterdays announcement from Nigel Farage that the Brexit Party will not compete in 317 seats won by the Tories in 2017. Moreherefrom the BBC. Market participants celebrated this and bid GBP higher across the board yesterday as it reduces the chances of splitting the pro-Brexit vote and, on the surface, would help Boris Johnsons Conservatives win the majority in parliament they need to finally pass the Withdrawal Agreement Bill. Some are chalking up this mornings GBPUSD pullback however to a negative sounding headline from Nigel Farage: WE WILL GIVE NO MORE GROUND TO THE CONSERVATIVES (Reuters)taken out of context this sounds negative, but this was said while re-hashing yesterdays commitment (and so it's not that negative in our opinion). Todays rise for the Labour party in the Survation poll (+3 to 29%) is a more notable negative in our opinion for GBPUSD.

Sterling now sits just above chart support in the 1.2820s after having surged to 1.2900 yesterday. Todays mixed UK employment report for September didnt have much effect on the markets (softer than expected wage growth, but lower unemployment rate and less than expected job losses). Yesterdays weaker than expected UK Q3 GDP read (+0.3% vs +0.4%) was quickly forgotten about as well after the Nigel Farage headlines. Tomorrows UK CPI and Thursdays UK Retail Sales figures will likely get cast to the wayside too, as the UK election remains the dominant focus for markets. The funds reduced their net short GBPUSD position slightly during the week ending Nov 5th by trimming more short than long positions.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY


AUDUSD

The Australian dollar is trying to bounce this morning, after holding chart support in the 0.6830s on two occasions during the overnight session. The leveraged funds at CME reduced their net short AUDUSD position all the way down to 27k contracts during the week ending Nov 5th, which is now the lowest since June 2018. It looks like the shorts finally started to capitulate early last week, but we wonder if this occurred at exactly the wrong time. The market has been on the back foot ever since AUDUSD repeatedly rejected the 0.6920s, USDCNH regained 7.00 and the Fed rate cut trade fell apart again. We think AUDUSD will be continue to be vulnerable if US 10yr yields break above 1.95%. Australia reports its Q3 Wage Price Index tonight at 7:30pmET and its October Employment Report tomorrow night. China will also be reporting some data tomorrow night (October Industrial Output and Retail Sales).

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

Dollar/yen is seeing some mild selling at the start of NY trade this morning as US 10yr yields back up from their overnight highs a little bit. All eyes are now on Trumps speech today at noonET today and how it will affect US yields. We think were at a pivotal moment here for US yields and USDJPY and we think both markets risk correcting lower big time if we dont get upside breakouts on the charts. The leveraged funds at CME continued to add to their new net long USDJPY position during the week ending Nov 5th. Japan reports its Q3 GDP figures tomorrow night, with traders looking for just +0.2% growth.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BOND YIELD DAILY

US 10YR BOND YIELD DAILY

Charts: Reuters Eikon

Interested in creating a custom foreign exchange trading plan?Contact usor call EBC's trading desk directly at1-888-729-9716.

About Exchange Bank of Canada
Exchange Bank of Canada, EBC Canadas Foreign Exchange Bank, is the only Schedule 1 Canadian bank specializing in foreign currency exchange and international payments for financial institutions and corporations. EBC provides innovative foreign exchange management and integrated international payment solutions tailored to meet business needs on a global scale. Leveraging industry leading technology and a client-focused team of experts EBC delivers comprehensive, cost-effective and trusted payment processes and foreign exchange currency solutions to create financial and operational efficiencies. To learn more, visit:www.ebcfx.com.

Disclaimer:All product names, logos, and brands are property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, logos, and brands does not imply endorsement.This publication has been prepared by Exchange Bank of Canada for informational and marketing purposes only. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Exchange Bank of Canada, its affiliates or any of their employees incur any responsibility. Neither Exchange Bank of Canada nor its affiliates accept any liability whatsoever for any loss arising from any use of this information. This publication is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any of the currencies referred to herein, nor shall this publication be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The general transaction, financial, educational and market information contained herein is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a "call to action" or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. You should note that the manner in which you implement any of the strategies set out in this publication may expose you to significant risk and you should carefully consider your ability to bear such risks through consultation with your own independent financial, legal, accounting, tax and other professional advisors. All Exchange Bank of Canada products and services are subject to the terms of applicable agreements and local regulations. This publication and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced in whole or in part, or referred to in any manner whatsoever nor may the information, opinions and conclusions contained in it be referred to without the prior express written consent of Exchange Bank of Canada.