John J. Hardy, FX Consultant, Saxo Bank
The greenback mounted a comeback today as USD bears perhaps overextended themselves ahead of a trio of important US event risks tomorrow and Friday's US employment report - more on those below.
Technical and other developments
JPY crosses - Moved sharply lower in today's trade. the enormous correction (rally) in US bond markets suggests that USDJPY could try even lower in the coming couple of sessions unless US data triggers a renewed heavy sell-off.
USD crosses - Weaker on very strong bonds but weakness didn't hold with important remaining US event risks coming fast and furious through Friday.
GBP - attempts at resilience vs. the Euro, though interest rate spreads suggest that this resilience is not justified. GBPUSD is closing right on an interesting 0.618 Fibo retracement, which is an interesting area of hope for any GBP bulls out there. Some of the moves in sterling may be attempts to get in or out of positions ahead of Thursday's BoE meeting.
AUDUSD - The important retracement level in AUDUSD we went over this morning has so far held, probably also as a nod to the important data points from the US tomorrow. A sell-off from new highs in equities today also kept the Aussie on its back foot for most of the NY session
USDCAD - An interesting comeback today from an attempt at new lows since mid-October. Tomorrow is likely to confirm whether the reversal is a reversal or just a pause in the sell-off. USDCAD is an interesting one to watch. Interest rate themes don't suggest that lower prices are justified, but the tremendous rally in oil prices of late are a positive influence for the currency.
Chart: USDCAD
A modest reversal today after the pair fell to new lows since mid-October - a bullish sign, or just an unwillingness for CAD bulls to commit until the raft of US data for the rest of the week is out of the way? The oIl spike suggests more CAD strength while interest rate spreads suggest containment within the range at the moment.
A modest reversal today after the pair fell to new lows since mid-October - a bullish sign, or just an unwillingness for CAD bulls to commit until the raft of US data for the rest of the week is out of the way? The oIl spike suggests more CAD strength while interest rate spreads suggest containment within the range at the moment.
Looking ahead:
Watch out for the weekly API supply numbers out shortly after the US close today (2130 GMT) as oil has traded within a dollar of its 2009 high price just above 82 dollars a barrel. Tomorrow is an important day after two relatively volatile days that have started off the year. Three major event risks of importance are spread out over several hours. First the ADP employment change report at 1315 GMT (last month's report did a very poor job of predicting the Nonfarm Payrolls number), then the ISM non-manufacturing number (affected by cold December weather?) at 1500 GMT followed by the FOMC minutes at 1900 GMT , for which the market will be desperate for hints on the latest Fed thinking.
Watch out for the weekly API supply numbers out shortly after the US close today (2130 GMT) as oil has traded within a dollar of its 2009 high price just above 82 dollars a barrel. Tomorrow is an important day after two relatively volatile days that have started off the year. Three major event risks of importance are spread out over several hours. First the ADP employment change report at 1315 GMT (last month's report did a very poor job of predicting the Nonfarm Payrolls number), then the ISM non-manufacturing number (affected by cold December weather?) at 1500 GMT followed by the FOMC minutes at 1900 GMT , for which the market will be desperate for hints on the latest Fed thinking.
Be careful out there as always.
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