Surge in Brexit & China deal optimism leads to broad "risk-on" flows. Canada reports blowout jobs number.

ANALYSIS

USDCAD

Dollar/CAD is collapsing lower this morning after Canada released a blowout employment report number for the month of September. The headline job gain came in at +53.7k vs +10k expected, wages rose +4.3% YoY vs +3.8% last time around, and the unemployment rate ticked down to 5.5% vs 5.7% expected. We would say that the surge Brexit and US/China deal optimism over the last 24hrs, starting with yesterdays buyer failure above the 1.3330s, was a negative precursor to this. We also think yesterdays bearish outside day pattern on the USDCAD chart was a negative omen. This mornings crude oil bid off an alleged missile attack on an Iranian oil tanker is getting some attention, but we think the focus will now quickly return to President Trumps upcoming meeting with Chinese Vice Premier Liu He at 2:45pmET today. We would caution however that positive expectations are very high ahead of this meeting and so we think traders need to be on guard for a risk-off, USD-positive, move should the headlines disappoint. We think this event risk could keep USDCAD supported for the time being at the 1.3205-1.3225 support zone.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

NOV CRUDE OIL DAILY

NOV CRUDE OIL DAILY

EURUSD

Euro/dollar continues higher again in early European trade today, led this time by the surge higher in sterling in our opinion. With the market now breaching above trend-line chart resistance at 1.1025-40, we think traders have to be prepared for a move the 1.1100 level at some point. Reuters is reporting this morning that the ECB could buy German debt for one year before reaching its self-imposed issuer limits. Mario Draghi doubled down on his call for EU governments to do more earlier today:

ECB's Draghi: More Active Euro Zone Fiscal Policy Would Make It Possible To Adjust Our Policies More Quickly

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

DEC GOLD DAILY

DEC GOLD DAILY

GBPUSD

Sterling has skyrocketed 3% in the last 24hrs as hopes for a Brexit deal surge following a surprising headline that came out of a meeting between Boris Johnsonand the Irish PM Varadkar. Their joint statement highlighting a pathway to a possible deal has now been followed up by talk of a constructive meeting today between EU Brexit negotiator Michel Barnier and his British counterpart Stephen Barclay. Pound risk reversals are exploding higher into the positive (calls now trading at a big premium to puts) as option traders now bet the GBPUSD market has turned the corner. We reckon the funds are also scrambling for the exits, as they were net short the market coming into these headlines. EU Council President Donald Tusk introduced some doubt, an some immense volatility, in GBPUSD this morning with his tweet:

The UK has still not come forward with a workable, realistic proposal. But I have received promising signals from Taoiseach@LeoVaradkarthat a deal is possible. Even the slightest chance must be used. A no deal#Brexitwill never be the choice of the EU,

...but the markets seemed to ultimately focus on the second sentence. Wed be extremely careful about making decisions in no-mans land, which is where we currently sit on the charts for GBPUSD. We think risk can better be defined at chart support at the 1.2590s and chart resistance at the 1.2670s, then the 1.2730s.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY


AUDUSD

The Aussie is pumped for some sort of mini deal or truce on the US/China trade front later today, but to say the expectations are high for todays meeting between Trump and Vice Premier Lui He is an understatement in our opinion, and so we think traders need to be on guard for some heavy selling in the event we dont get the positive headlines that everyones expecting. Some AUDUSD sellers have stepped in at trend-line resistance at the 0.6790-0.6800 level as NY trade gets underway. We think the downside levels to watch are 0.6770-80 and 0.6750. On the topside, we would watch the 0.6810s and then the 0.6830s as resistance levels. USDCNH continues to hold support in the 7.0920s. Stay tuned for 2:45pmET.


AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

Dollar/yen continues its gallop higher this morning as global markets price in some sort of deal between the US and China later today. Expectations are very high though and so wed urge caution ahead of todays 2:45pmET meeting between President Trump and Chinese Vice Premier Liu He. The market broke above chart resistance at both 108.10 level early today, but it is meeting sellers now at resistance in the 108.40s. US 10yr yields are also taking a little breather here as NY trade gets underway.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BOND YIELD DAILY

US 10YR BOND YIELD DAILY

Charts: Reuters Eikon

Interested in creating a custom foreign exchange trading plan?Contact usor call EBC's trading desk directly at1-888-729-9716.

About Exchange Bank of Canada
Exchange Bank of Canada, EBC Canadas Foreign Exchange Bank, is the only Schedule 1 Canadian bank specializing in foreign currency exchange and international payments for financial institutions and corporations. EBC provides innovative foreign exchange management and integrated international payment solutions tailored to meet business needs on a global scale. Leveraging industry leading technology and a client-focused team of experts EBC delivers comprehensive, cost-effective and trusted payment processes and foreign exchange currency solutions to create financial and operational efficiencies. To learn more, visit:www.ebcfx.com.

Disclaimer:All product names, logos, and brands are property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, logos, and brands does not imply endorsement.This publication has been prepared by Exchange Bank of Canada for informational and marketing purposes only. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Exchange Bank of Canada, its affiliates or any of their employees incur any responsibility. Neither Exchange Bank of Canada nor its affiliates accept any liability whatsoever for any loss arising from any use of this information. This publication is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any of the currencies referred to herein, nor shall this publication be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The general transaction, financial, educational and market information contained herein is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a "call to action" or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. You should note that the manner in which you implement any of the strategies set out in this publication may expose you to significant risk and you should carefully consider your ability to bear such risks through consultation with your own independent financial, legal, accounting, tax and other professional advisors. All Exchange Bank of Canada products and services are subject to the terms of applicable agreements and local regulations. This publication and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced in whole or in part, or referred to in any manner whatsoever nor may the information, opinions and conclusions contained in it be referred to without the prior express written consent of Exchange Bank of Canada.