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US FX Market Open – Friday, April 21, 2017: Euro a little lower ahead of French election

Posted by Marge Maresca on Apr 21, 2017 7:23:23 AM


Overnight Events

• EUR/USD -0.1%, USD/JPY -0.15%, GBP/USD -0.15%, AUD/USD +0.1%
• DXY +0.1%, DAX +0.25%, FTSE -0.1%, Copper +0.3%, Gold flat
• Euro a little lower ahead of French election, 1.0738-1.0695 Friday
• Sterling falls after weaker than expected retail sales data
• EU has no 'Plan B' if French voters deliver upset - Rtrs
• DE Apr Markit Mfg flash PMI 54..7 vs prev 55.6. 55.5 f/c
• DE Apr Markit Service flash PMI 56.3 vs preb 57.1. 56.8 f/c
• EZ Feb Current Account NSA 27.9bln vs prev 3.1bln rvsd
• EZ Apr Markit Mfg flash PMI 56.8 vs prev 56.2. 56.0 f/c
• EZ Apr Markit Serv flash PMI 56.2 vs prev 56.0. 56.0 f/c
• GB Mar Retail sales -1.8% m/m, +1.7% y/y vs prev 1.7% rvsd/+3.7%. -0.2%/+3.4% f/c
• ONS: Weak Q1 retail sales consequence of price increases across whole range of sectors
• UK government says it will extend N. Ireland talks deadline to June 29 - Rtrs
• French security forces fully mobilised to protect elections after Paris shooting-PM - Rtrs
• Putin and Erdogan to discuss Syria in Russia meeting on May 3 - RIA - Rtrs

Currency Summaries

• EUR/USD is trading within strike of a large 1.0700 option expiry for NY cut
• E1.27bln strike. 1.0695-1.0738 was European am range (high before low)
• 1.0738 notched after better than expected French mfg/service PMIs
• French presidential election 1st round Sunday, voting stations close 2pm ET

• Said to be decent offers which should continue to cap market @109.50
• Market rallied to 109.48 on Thurs, but near bottom of 109.07-42 range Fri
• Stops likely to be clustered below Thu's 108.73 low
• NY Cut Exp: 108 (1B), 108.50 (544M), 109 (650M), 110 (782M), 110.25 (540M)
• USD/JPY thin as many sidelined ahead of French election first round
• Japan April PMI mfg 52.8, March final 52.4, export orders growth faster
•  EUR/CHF has eased back below 1.07 after Thursday's close above
•  The upside is limited as French election event risk continues to support CHF
•  1.0710 Asia high. Tight 1.0703-1.0690 Europe so far Friday
•  No close above 100-day MA & Kijun resists at 1.0705 & 1.0711. Adds weight
•  USD/CHF has risen from 0.9965 to 1.00 but offers at parity stem the rally
•  Close below 200-day MA at 0.9952 needed to increase downside sentiment

• GBP/USD fell to a low of 1.2781 after weak UK retail sales data at 4.30am ET
• Mar retail sales -1.8% vs -0.2% f/c. Stops tipped sub-1.2770 (Wednesday low)
• EUR/GBP rose to an intra-day peak of 0.8387 on the back of the weak UK data
• 0.8354 = European am low (pre-UK data). Key support 0.8333 (1.20 GBP/EUR)
• USD/CAD elicited support pre-1.3457 after easing from 1.3480 (Asia high)
• 1.3457 was the pullback low from Thursday’s six-week high of 1.3500
• Canada inflation data due 8.30am ET: annualized CPI f/c +1.8% vs +2% in Feb
• Softer than expected number could spur 1.3500 revisit/break
• Large 1.3500 option expiry next Tuesday (Apr 25), $1.2bln strike
• AUD/USD lifted away from the o/n 0.7515 low to 0.7541 in early Europe
• The pair was helped higher by iron ore gains. Dalian iron ore closed up 6%
• The 100-200-HMAs stalled at session highs, sideways below into NY
• AUD/NZD extended losses from 1.0752 to 1.0732 in Europe. 1.0768 Asia high
• NZD/USD firmed to an intra-day high of 0.7017 during the European am
• 0.6984 was 1wk low in Asia after stops below 0.7000 tripped


Pound is cheap safe-haven if France votes for extremes
The pound could catch a safety bid on Monday if Sunday's first round of the French presidential tees up a shock run-off between Melenchon and Le Pen. Anxiety over a possible French exit from the euro and/or the survival of the euro itself if Le Pen and Melenchon are the May 7 options could trump Brexit concerns. In this scenario, EUR/GBP could quickly drop to 0.80. The cross has not traded at 0.80 since June 24--the day after Britain voted to leave the EU. Even at 0.80, EUR/GBP would still be two-and-a-half pence above the mid-point of its 0.5681-0.9805 lifetime range. By way of comparison, EUR/CHF is nearly 20 big figures below the 1.2664 mid-point of its 0.8500-1.6828 lifetime range. Indeed, the SNB would almost certaintly step in to try and limit CHF appreciation if Sunday's vote results in Melenchon/Le Pen May 7 while the BoE would most probably sit on its hands if GBP rose. Charts 1) 2)

Today’s events

Option Expirations (Source:ThompsonReuters)

An expiring FX option heading into the New York Cut, if close enough to the strike price, can act as a magnet for selling/buying.  If the option is large, it can generate enough trading to move the market.  

• USD/JPY: 108.00 (1B), 108.50 (544M), 109.00 (650M), 110.00 (782M), 110.25 (540M)
• EUR/USD: 1.0550 (863M), 1.0600 (1.1B), 1.0675-80 (638M), 1.0700 (1.2B), 1.0720-25 (745M)
• GBP/USD: 1.2225 (535M), 1.2460 (596M), 1.2650 (424M), 1.2675 (349M), 1.2900 (314M)
• EUR/GBP: 0.8465 (400M). AUD/USD: 0.7520-25 (478M), 0.7570 (278M)
• NZD/USD: 0.7025 (357M). USD/CAD: 1.3410 (210M), 1.3500 (322M), 1.3540 (605M)

Economic Data (GMT) - (Source:ThompsonReuters)

• 14:45  Markit Manufacturing PMI (flash Apr) mkt 53.5, prev 53.3
• 14:45  Markit Services PMI (flash Apr) mkt 53.0, prev 52.8
• 15:00  Existing Home Sales (Mar) mkt 5.60 mn SAAR, prev 5.48 mn SAAR
• 18:00  Baker-Hughes Rig Count (weekly) prev 683, +11 w/w, +332 y/y

Events, Other Releases (GMT) - (Source:ThompsonReuters)

• 09:30  FRB Minneapolis' Kashkari participates in Q&A session; St. Paul, MN
• 11:45  FedTrade operation 30-yr Ginnie Mae (max $975 mn)


Topics: US FX Market Open


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