European equity markets were modestly weaker during the London morning, but even more noteworthy was the lack of attention paid by Asian shares to the weaker-than-expected data out of China overnight. The USD wasn’t particularly strong, but the tone has certainly been less offered than it was this time last week. Bond yields were higher across the board, but US gains appeared to be the strongest. We look for the 1.380-1.385 and 1.650-1.650 ranges in EURUSD and GBPUSD to act as decent near-term resistance in each pair, until more US data are out of the way. In EURUSD, 1.375 will become more important to watch as month-end/quarter-end approach.
The modest short covering rally in the CAD post-data on Friday is not particularly noticeable on the daily chart, especially since USDCAD managed to close [slightly] within the upper-end of its range, above 1.1215. Moreover, price action in the pair this morning did not appear to be indicating fatigue in terms of topside, especially with decent support tending to show up at or around the London lows (1.123).
We think the short-term market remains modestly net short of CAD at around 1.123. However, with key nominal rate differentials keeping the pair well supported at this stage, the level of discomfort with that short CAD position is probably quite low. We look for the key US data between today and Friday to guide the pair, with 1.1278-1.130 and 1.1175-1.120 acting as the first important layers of resistance and support.
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BMO