US Senate Passes Blueprint For Tax Reform. USD Bid. CAD Traders Focused on CPI/Retail Sales.
  • US Senate passes blueprint for 2018 budget, an important first step in the long process of approving US tax reform. Traders bid up USD across the board in Asia on the headline.

  • Politico reports, citing sources close to Trump, that its down to Jerome Powell and John Taylor for the next Fed Chair. Decision to come in next few weeks. PredictIt still has Powell out front.

  • Cdn CPI at 8:30amET. Markets expecting +1.7%. Cdn Retail Sales expected +0.4%.

  • Yellen speaking after the close of NY trading today, 7:30pm. Could make for an interesting Sunday open.

  • CME open interest changes 10/19: AUD +1875, GBP +2037, CAD -2057, EUR +3187, JPY -7528

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Daily FX Snapshot
USD/CAD - Canadian Dollar

Dollar/CAD popped a little higher on the broad USD bid in Asia, but the market is giving it all back now ahead of Cdn CPI and Retail sales, due at 8:30amET. The two week range (triangular consolidation) of closing prices is getting narrower, which means a break is likely coming soon. While we prefer to wait for the market to show its hand here in terms of trend, we continue to note more support levels on the charts as opposed to resistance levels. Combine that with market positioning (which still appears crowded on the short USD side), and we feel the path of least resistance could be higher. Well continue to look for signs of seller failure on the charts. On the crosses, EURCAD traders seem determined to resolve the weekly triangular consolidation to the upside (see chart). GBPCAD has been a drag all week, but the strong GBP bounce against USD and EUR this morning is providing a bid. The Bank of Canada meeting will be the focus for next week (Oct 25). Markets pricing in just 14% of 25bp rate hike.

EUR/USD - European Central Bank Euro

The 1.1850 level proved to formidable resistance for EUR/USD during NY trading yesterday. US yields recovered as US stocks bottomed and the Politico headline, while initially causing some USD selling late in the day, was interpreted by traders as a mixed bag (remember Taylor is a hawk). Asian traders tried once more to challenge the level but sold EURs along with everything else on the upbeat headlines about US tax reform. Market feels heavy going into NY trading today. Resistance 1.1830s. Support 1.1750s. The bearish daily H&S topping pattern is technically still in play. Almost $3bln EUR in option expiries today (1.1800-1.1850) could keep things a little range bound in the early goings. Flows from EURJPY continue to support but EURGBP, failing at the 90 handle again, is a negative headwind today. Were starting to pay attention to market chatter and sentiment indicators ahead of the ECB policy meeting next week (Oct 26). USDCNH steady.





GBP/USD - British Pound

Sterling saw selling overnight on the US tax reform headlines as well, flushing out stops below 1.31, but the market has recovered smartly on positive Brexit comments from the EUs Tusk and GBP cross buying (EURGBP rejects 0.9000 again and GBPJPY breaks back above the 148.60s). Its been a rough week for GBPUSD technicals considering last weeks progress on the charts. Were now back in a range unfortunately with support just below 1.31 and resistance in the 1.3240s.


Charts: TWS Workstation

Erik Bregar - Trader
Exchange Bank of Canada
Toronto, Ontario

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