Focus today is on AUD & USD as geopolitics rears it’s ugly head

What Happened Yesterday

The majors are being pulled and pushed around by various geo-political events at the moment, so it’s wise to sit back and let them pass before jumping into any trades.

The first ‘nasty left field’ move was on USDCAD. The Canadian dollar fell off the edge of the precipice after a Reuters report said Canada increasingly believes that U.S. President Donald Trump will soon announce his intention to withdraw from the North American Free Trade Agreement treaty.

Canada sends about 75% of its exports to the United States so these developments on NAFTA could throw a “monkey wrench” into prospects of a rate hike next week.

Chances of the Bank of Canada raising rates next week slipped to 64%, the overnight index swaps market indicated. They had climbed to nearly 90% after much stronger-than-expected domestic jobs data on Friday and a business survey on Monday that showed optimism.

The market was sitting short USDCAD (for all the right reasons) but this geopolitical issue saw it take off from 1.2425 rallying all the way to a high of 1.2583. Once again this is totally against the Oil move which continues to grind higher up to $63.50.

Sterling continues to randomly oscillate around Brexit updates, economic releases and forecasts for upcoming releases. It’s a complete dogs breakfast!

GBPUSD opened the European session around 1.3510, hit a low of 1.3480 and then bounced to a high of 1.3562 before closing around 1.3510 …. that’s directionless choppy markets at it’s best!

We really need fresh political or economic data to break the recent 1.3300 – 1.3600 range.

The USD is also being impacted by reports that China was ready to slow or halt its U.S. Treasury purchases.

Officials reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. government bonds, Bloomberg News reported, citing people familiar with the matter.

USDYEN was down 1.13% at 111.37, after touching 111.26, its weakest since late November.

If the reports turn out to be true and China no longer sees Treasuries as an attractive option, the repercussions could be significant as the country is one of the biggest holders of U.S. debt, just as the Fed is about to step away from being the buyer of last resort. That could really screw up things for the FED.

The USD Index crashed to a low of  91.92 today, despite the fact that U.S. data remained strong and yields continued to rise. It did however however manage to regain most of the lost ground later in the session climbing to a high of 92.42. 

All in all it was an extremely loose trading day driven by random ‘uncertain geo-political’ events. That’s a clear signal to sit back and relax and wait for better trading conditions.

Technical Set Up – What’s Happening with the Majors

The majors are all over the shop, but at the same time they aren’t really going anywhere.

AUDUSD

No clear direction as yet. Short term trades the best option at the moment until we get something concrete out of the central banks or the USD get’s clearer direction.

Focus today switches to the Australian Retail Sales data.

Check our detailed AUDUSD Analysis

NZDUSD

No clear direction as yet. Short term trades the best option at the moment until we get something concrete out of the central banks or the USD get’s clearer direction.

I’m expecting the NZD to track the AUD so focus today switches to the Australian Retail Sales data.

Check our detailed NZDUSD Analysis

USDJPY

There was more life in that BOJ move then first met the eye. The USD is caught up in numerous geopolitical issues but the downside is definitely under pressure at the moment.

Focus turns to the US data today.

Check our detailed USDJPY Analysis

EURUSD

Strong European data & Euro goes down, No data & it goes up…. go figure? It’s a bit too tricky for me at the moment.

Focus today turns to the US data.

Check our detailed EURUSD Analysis

GBPUSD

Brexit, economic data ….I’m not sure where direction is coming from so I’ll be sitting this pair out for the time being.

Sterling crosses the best option. US data the focus today.

Check our detailed GBPUSD Analysis

USDCHF

Belted back down below 0.9800 on general USD weakness. It’s pretty loose at the moment and not really going anywhere.

Focus today turns to the US data today.

Check our detailed USDCHF Analysis

USDCAD

Massive geopolitical issue surrounding NAFTA has the CAD on it’s knees. This is a big issue so stay tuned. In the meantime it’s worth watching from the sidelines.

Focus today turns to US data.

Check our detailed USDCAD Analysis

Today’s Fundamental Drivers

What’s the Plan for Today?

Most traders are aware the majors are discombobulating and are waiting for clearer conditions.

But there are still a few ‘short term’ trading opportunities around the economic data releases.

The Aussie is craving ‘anything’ to get started so today’s retail sales data will be closely watched by all and sundry.

Outside of that we have to wait for the North American session to see what the USD does.

Now this is a little tricky because there are a number of geopolitical events impacting the USD at the moment so trading the US data may be troublesome.

In actual fact the best thing to do is isolate the currencies that have geopolitical events and put a line through them. Now focus on the crosses that aren’t impacted by these issues and there lies your best trading pairs.

Good luck!

Today’s Focus – Major Currencies in Play

You need to follow the economic data releases & best technical set ups to work out where the majority of action and interest will be.

AUDUSD

Technical Set Up: Support 0.7815 & Resistance 0.7865

Fundamental Driver: Australian Retail Sales

Potential Strategy: The AUD is directionless… so if we get significant variance the AUD should move with it.

Check our Next Best Trades list for full details.

Central Bank Sentiment

No changes in central bank sentiment.

Plan the Trade, Trade the Plan!

The idea of our “Market Insight” is to give you some guidance into your daily preparation.

Your Daily Analysis needs to become habitual – For full guidance on our daily routine click here.

Make sure you don’t waste unnecessary time in front of the screens.

Remember you need to be fresh, confident and ready to trade and by sitting aimlessly in front of your screens you will become stale and uncertain.

The key to your sucess: Isolate the opportunities that work for you and focus on them.

Don’t worry about things that you can’t make…..chasing them will only cause problems (tiredness & irrational behaviour will take over).

Tune up your charts & get ready to trade…..see you in the 247 Trade Zone!

Brad

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