The US data yesterday took a sudden turn for the better as the March durable goods orders slightly beat expectations, and the February data was adjusted +0.8% higher. The core capital goods orders strongly beat expectations as well, and with the upward revision of February there was an enormous net +2.0%.
Later, new home sales data for April surprised as well and through the first four months of the year, new home sales are running almost 20% higher than last year and some 60% higher than in early 2011.
Today is short on economic calendar catalysts to generate USD-related volatility. Looking across the various currency pairs, GBPUSD sticks out as perhaps the most mispriced USD pair at the moment, with perhaps the distraction of a weak EUR and the EURGBP sell-off distracting from the overpriced GBPUSD – but let’s see if today provides any traction on that view. 1.5450/1.5500 is the important resistance zone there.
Elsewhere, we have a Bank of Canada meeting up today. As Canadian data has generally surprised to the strong side lately and as the BoC has maintained a very neutral outlook, it is tough to see this meeting as a major catalyst for CAD. The distraction there is the fresh volatility in oil prices, where the selloff saw both CAD and NOK trading weakly yesterday.
It won’t matter what the BoC says if oil prices are set to selloff another few dollars, which could see USDCAD seal the deal in its bid to trade back in the range and back toward the 1.2800+ top.
Elsewhere, CAD resilience may be an interesting theme eventually – for example, against AUD and NZD.
Chart: USDCAD
USDCAD in focus today on the BoE decision/statement. Technically, the pair has impressed with the recent rally and has now poked into the old range above 1.2350/1.2400, but we’ll need to see the reaction to today’s BoC meeting for confirmation. Support is now around 1.2250, and the bearish case isn't more thoroughly denied until we work back above the 61.8% retracement near 1.2485.
The G-10 rundown
USD: The dollar has made a significant comeback – perhaps there's some risk of trading a bit sideways ahead of the Friday GDP revision, which may be an ugly one, and the unknown of next week’s key, large event risks.
EUR: It was interesting yesterday to see a general lack of response to the risk-off mood, which has tended to support the euro in the recent past. We have reached interesting retracement levels in EURUSD below 1.0900 in EURUSD. Resistance is now 1.10. If risk remains in a sour mood, we might expect euro outperformance in some of the crosses.
JPY: Weak until proven otherwise, and interesting that yesterday’s sour mood didn't provide more of a boost to JPY, not even in the crosses. This may have been due to the distraction of the huge break higher in USDJPY, but let’s see if this can continue. For USDJPY, the obvious focus is the 122.00 level, which is now support.
GBP: Looks too strong versus the USD at the moment, and looking for resistance 1.5450/1.5500 to hold and keep the focus lower. EURGBP may be resistant to further downside pressure if equities continue to trade weakly today.
CHF: Waiting for Greece new to provide the real catalyst via EURCHF, but USDCHF is very interesting as we have rallied back to the key structural pivot area just above 0.9500, a break of which could open the way for a quick run back to parity and higher on the other side of whatever news on Greece awaits us.
AUD: Trading on a weak footing but not cutting much of a profile at the moment as we look for the next catalysts from China, commodity prices (mostly supportive at the moment) or Australian economic data. The next RBA meeting is up next Tuesday.
CAD: Weak yesterday on sharply falling oil prices and focus on Bank of Canada today, where the risks don’t appear skewed in either direction, if anything, we might expect a slightly optimistic outlook from the bank, though with little desire to send any strong signals. Watching whether we can confirm the USDCAD attempt to re-enter the old range above 1.2350/1.2400.
NZD: NZDUSD is nearing the abyss below 0.7177 and may be ready for a very significant follow-through move lower from a long-term overvaluation – but we’ll likely need a strong set of US data next week (or a potent risk-off move – or both, as illiquid currencies should trade poorly in such an environment.)
SEK: The attempt below the local range in EURSEK was partially beaten back – the kind of behaviour we have come to expect from that pair. It’s hard to build a bullish case for SEK despite its cheap valuation when the Riksbank is so aggressively dovish.
NOK: Generally looking for downside risks to outweigh upside risks, particularly if oil prices follow through lower, but also on the risk longer term that the market is misreading the Norges Bank guidance. After yesterday’s rally, EURNOK could quickly find the 8.50/55 zone coming into play in the sessions ahead.
Upcoming Economic Calendar Highlights (all times GMT)
- Sweden Riksbank Deputy Governor Floden to Speak (1100)
- Canada Bank of Canada Rate Decision/Statement (1400)
- Japan Apr. Retail Trade (2350)