- Brexit vote casting long shadow over FX markets
- Swiss franc the biggest European mover this week
- EURUSD trade 'a study in technical levels'
Today's Canadian jobs print is in traders' crosshairs today with the loonie vulnerable to further losses against a reasonably robust greenback. Photo: iStock
By John J Hardy
The USD bounced back yesterday from very technical levels as the knock-on effect from last Friday’s ugly US jobs report has failed to see significant weakening in the greenback beyond the initial reaction in most USD pairs.
One reason could be the impending June 23 UK referendum and unwillingness to take significant macro bets ahead of this event – particularly in the pound or the euro. The Federal Reserve is increasingly losing credibility after its recent ugly stumble on tardy hawkish guidance that triggered last Friday’s tantrum (had the Fed not manipulated market expectations, would the USD even have sold off much after the jobs data?).
This makes next Wednesday’s Federal Open Market Committee meeting unlikely to provide much drama, particularly with the far more important UK referendum the following week.
Among the European currencies, the biggest mover this week has been the Swiss franc, possibly driven by Brexit fears, but certainly aggravated by flows into CHF (judging from the May sight deposits data published early this week).
The Swiss National Bank is meeting at an awkward time next Thursday, just a week before the UK referendum.
EURUSD has been a study in technical levels in recent weeks, finding support precisely at the 200-day moving average before rallying to the 61.8% . This suggests a market that isn’t trading strongly on conviction and may not send any new directional signals until the other side of the UK referendum.
For now, the downside swing level looks like the 1.1225/00 zone and the upside resistance is yesterday’s 1.1416 highs.
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Source: Saxo Bank
The G-10 rundown
USD – A technical bounce yesterday, but nothing that threatens a reversal of the post-jobs report selloff.
EUR – EURUSD a very technical chart at the moment as market perhaps reluctant to push too hard on euro strength ahead of UK referendum.
JPY – Rejection of new lows in USDJPY yesterday seeing a rally, but nothing threatening just yet. JPY crosses likely linked to risk appetite as long as the latter is on the defensive.
GBP – Nervous ahead of UK referendum – wash, rinse, repeat. Next week’s Bank of England outing is hardly likely to offer much of interest.
CHF – Heavily bid of late and key supports have given way – last area of the range is down in the 1.08/1.0750 area.
AUD – 0.7500 is the obvious resistance and bears clearly getting involved here – downside pivot from here looks like the 0.7300/0.7275 zone.
CAD – Vulnerable given deflationary focus and softening oil prices, particularly if today’s Canadian employment data is weak.
NZD – Absurdly strong and the Reserve Bank of New Zealand will have to lean against at some point. As well, if risk appetite weakens sufficiently, should also begin wearing down the kiwi at some point.
SEK – EURSEK slipping higher from the starting gates this morning, likely in weak negative correlation with risk appetite – next point of interest on the economic calendar is next week’s CPI numbers.
NOK – Possibly taking direction from today’s CPI data. 9.20-40 the key range in EURNOK.
Upcoming Economic Calendar Highlights (all times GMT)
- Norway May CPI (0800)
- Canada May Net Change in Employment/Unemployment Rate (1230)
- US Jun. Preliminary University of Michigan Sentiment (1400)
— Edited by Michael McKenna
John J Hardy is head of FX strategy at Saxo Bank