The following is paraphrased from ScotiaBank
USDCAD (1.3004) • CAD is up a modest 0.3%, a relative performer against its high-beta growth-sensitive G10 peers in an environment of elevated risk appetite. There are no domestic releases scheduled ahead of Thursday’s monthly GDP for April, leaving the focus once again centered on the broader tone, with some risk surrounding the release of U.S. PCE (Fed’s preferred inflation measure) at 8:30am ET and EIA oil inventories at 10:30am ET. Risk reversals have been remarkably steady, with no post-Brexit moderation in the premium for protection against CAD weakness. The lack of movement suggests an ongoing concern for market participants as they consider the near-term balance of risk. In terms of CAD drivers, we highlight the risk surrounding the renewed widening in the 2Y U.S.-Canada yield spread.
USDCAD short-term technicals: bullish—signals are bullish across both trend and momentum indicators however their magnitude is remarkably muted and the ADX remains trendless (under 25) at 16. Near-term support is expected at 1.2950 and 1.2920, with impressive resistance noted above 1.31. The 100 day MA (1.3069) has capped USDCAD gains on a closing basis (see bottom chart), however we continue to anticipate a break with expectations of a climb toward 1.33 and 1.35.
EURUSD (1.1079) • Spot remains capped under 1.11, with the market showing little desire to move markets significantly. Eurozone data reflected weaker economic confidence (pre-Brexit) for June. German data reflected stronger consumer confidence (July) and flat to slightly higher m/m readings for the German state CPI data. EU leaders continue to meet in Brussel and are urging the UK to initiate its exit as quickly as possible.
EURUSD short-term technicals: neutral/bearish—EURUSD is essentially moving sideways still. Spot is showing no inclination so far to extend gains through the 1.11 area and we still rather think the break lower in the market last week below the base of the 6-month rising channel base (1.1145/50) casts a quite negative outlook over the EUR from a medium-term point of view. Expect short-term gains to remain limited to the low/mid 1.11 area at most.
GBPUSD (1.3434) • The weaker economic outlook (amid worries about a plunge in business investment), rising market expectations of renewed BoE easing, sovereign downgrades, political chaos, dreadful football and that Brexit thing. The litany of GBP-negative factors apparent after a cursory glance over the UK landscape make it some wonder that the pound is not lower. It remains nearly 10% below levels prevailing at this time last week but there is no real upside potential for the GBP at present beyond short-term positioning adjustments.
GBPUSD short-term technicals: neutral/bearish—Cable looks to have found some support on the intraday charts over the past 24 hours and even the technical signals on the longer-term charts are shaping up a little more constructively. We think the entrenched bear trend has further to play out; relief for the GBP in this context is stability, rather than strength. Given the scale of the GBP’s decline over the past week, retracement potential is significant – in theory. We rather think near-term gains are liable to remain limited to the 1.3475/1.3575 range.
USDJPY (102.71) • JPY is entering the NA session flat vs. the USD, having faded its Asian session gains from the European open. Recent movement in JPY has been remarkably limited and the lack of material weakness has been notable in the context of a broader market tone of risk appetite. JPY is generally trading in tandem with a widening U.S.-Japan 2Y yield spread and measures of sentiment are moving in a similar, JPY negative manner as risk reversals hint to a moderation in the premium for protection against JPY strength.