Forex news for NY traders on January 10, 2018

A snapshot of other markets at the end of the NA session is showing:

  • Spot gold $4.48 or 0.34% at $1317.26
  • WTI crude oil futures of $.48 or 0.76% at $63.44
  • US major stock indices are ending with modest losses: S&P index down -0.11%. NASDAQ composite index down my 0.14%. Dow industrial average down -0.07%.
  • US bond yields are ending the session little changed and off high-yield levels after a successful 10 year note auction. Two-year 1.972%, up 0.4 basis points. Five-year 2.329%, unchanged. 10 year 2.556%, up 0.4 basis points. The high yield in the 10 year reached 2.5954%. Finally the 30 year's trading at 2.896%, unchanged.

There was a lot of focus on the CAD today. To start off, the building permits came in much weaker than expected at -7.7% vs -1.0% expectations. Now it was for December and weather/holidays can always throw a monkey wrench in building permits - even with seasonal adjustments. However, it WAS down -7.7% and that's a big number. So the USDCAD rallied higher (the CAD got weaker). The price moved up to test its 200 hour MA just under the 1.2500 level and stalled.

Also helping to weaken the CAD in the NA morning, was a report of Canada launching a wide range trade dispute against the US through the WTO. Now this is while the NAFTA talks are still taking place. One would think, that would not be something to do, unless you wanted to stir things up with Trump and his trade negotiators in a rather aggressive fashion, and/or you thought NAFTA was not a realistic possibility.

In the NY afternoon, the market got the answer when the headline crossed that Canada thought the US would pull out of the NAFTA talks.

That sent the USDCAD through the 200 hour MA at 1.2495 and up toward its key 100 day MA at 1.25904 (the high reached 1.2483). It also took out some of the expectations of a BOC tightening next week (the OIS went from about 85% to a 71.9% probability - still high but off the high).

When the White House came back with their own innocent "What me withdraw?" denial, traders threw up their hands in frustration. The price moved back to the 200 hour MA, and the rest of the NY afternoon has been spent waffling below the 100 day MA above and above the 200 hour MA below. That may be the range until the BOC decision next week.

In other news today:

  • Fed's Evans - a dissenter at the December rate hike meeting - was a bit dovish in a speech. He said that he though waiting to mid 2018 was more appropriate
  • Fed's Kaplan also spoke and was more of the consensus. He see's 3 hikes in 2018. He expects to see more wage inflation and is concerned that the Fed may have to play catch up,
  • Fed's Bullard was a third Fed official to speak. Bullard is a dove - probably the most dovish of Fed members - and he thinks the accumulation of low inflation over the years suggests the Fed should be in no hurry to tighen. In fact, there is some payback for the years of below average inflation (which is in start contrast to Kaplan's view that the Fed may have to pay catch up).

The comments from the Fed officials had little market impact.

I get the feeling, it will be the words of the new Fed Chair Powell who the market will solely listen to - at least in the short term - as the market gets used to him as chair.

Some trading thought for the some of our favorite pairs:

  • EURUSD: The EURUSD rallied in the London session on the back of the China news that they may curtail purchases of US debt. That news hurt the greenback and took the price above the 100 and 200 hour MA briefly at 1.2000 area. However, the price moved back below the MA level shortly thereafter and the rest of the day was spent retracing most of the days gains.
  • USDJPY: The USDJPY did continued it's move lower started yesterday when the BOJ trimmed it's bond purchases. That momentum continued today, and the price fell below the 200 day MA at 111.70. The low reached 111.26 for the day. There is better support at the 111.00 area. Not only is it a natural support level but it also corresponds with the 50% of the move up from the September low (at 111.02 actually). The price is trading between those two extremes at 111.34 at the end of the trading day.
  • The AUDUSD is waffling between support at 0.7805 (call it 0.7800) and resistance in the 0.7875-86 area. In the new trading day, retail sales will be released. Traders will be looking for a break and run.

Below is a snapshot of the strongest and weakest today. The JPY is the strongest. The CAD is the weakest. The USD is ending mostly lower with modest gains and losses against most of the major pairs.

Good fortune with your trading.