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US FX Market Open – Friday, April 8, 2016: RISK RECOVERING, JPY OFF HIGHS

Posted by Marge Maresca on Apr 8, 2016 7:21:25 AM




Overnight Events

• Japan Fin Min Aso: Current FX moves one-sided, rapid moves undesirable – RTRS
• Aso: Will take necessary steps vs FX moves as needed – RTRS
• MoF official – Recent FX market showing speculative moves – Jiji
• Japan Econ Min Ishihara: FX moves rough, yen rise not on fundamentals – RTRS
• Chief Cabinet Secretary Suga:  FX one-sided, excessive, will act as needed – RTRS
• Japan Mar Consumer confidence index 41.7 vs 40.1 prev
• Australia PM to lead 1,000-strong business delegation to China next week - RTRS
• EU set to fix EU summit for after UK referendum - RTRS
• German Feb Exports 1.3%m/m vs -0.50% prev, 0.50% exp
• German Feb Imports 0.4%m/m vs 1.2% prev, -0.3% exp
• German Feb Trade balance, E19.8bn vs 18.9bn prev, 18.5bn exp
• German IG BCE union to seek wage hike of 5% for chemical sector – RTRS
• Swiss Mar Unemployment rate unadjusted 3.6% vs 3.7%
• Swiss Mar Unemployment rate adjusted 3.5% vs 3.4%
• Swiss Mar CPI 0.3%m/m vs 0.2% prev, 0.3% exp
• Swiss Mar CPI -0.9%y/y vs -0.8% prev, -0.9% exp
• UK Feb Industrial output -0.3%m/m vs 0.3% prev, 0.1% exp
• UK Feb Industrial output -0.5%y/y vs 0.2% prev, 0.0% exp
• UK Feb Manufacturing output -1.1%m/m vs 0.7% prev, -0.2% exp
• UK Feb Manufacturing output -1.8%y/y vs -0.1% prev, -0.7% exp
• UK Feb Trade balance GBP-11.964bn vs -10.29bn prev, -10.2bn exp
• UK Feb Trade balance, non-EU, GBP-3.357bn vs -2.199bn prev , -2.60bn exp
• UK PM Cameron admits he held stake in father’s offshore trust – RTRS
• Ladbrokes quotes 2/1 Cameron replaced as PM this year

Currency Summaries

• EUR/USD sees more chop between 1.1350-1.1400 in Europe
• Weighed in early trade on the back of EUR/GBP (pre-data p/t)
• Boosted on ECB comment about not targeting lower EUR
• Potentially in the grip of EUR 1.3bln 1.1370-1.1400 barriers
• 200-HMA underpins, now 1.1358
• 1.1500 barriers & Oct 15 2015 high @ 1.1495 key above

• Short-covering pushed USD/JPY to 109.10 in London
• USD/JPY bounced from 108.09 Asia low
• Profit taking on yen longs into the weekend also a factor
• EUR/JPY got a boost from 123.08 to hit 124.23, before drifting
• Comments from Fin Min Aso & Econ Min in Asia also leads to yen sales
• Japanese official jaw-boning from Tokyo open, moves ‘one-sided’, ‘rough’

• EUR/CHF 1.0869-1.0889 in Europe
• Risk averse conditions saw 1.0843 low yesterday
• Today very quiet, support eyed from SNB & 200-DMA 1.0850
• Swiss CPI -0.9% yy in March from -0.8% yy February
• Swiss jobless rate dips to 3.6% from 3.7%

• GBP/USD rose by a cent from 1.4041 (early Europe low) amid GBP/JPY buy-backs
• Ensuing slide to 1.4072 courtesy of disappointing UK IP/MP and trade data
• EUR/GBP based 2 pips shy of 0.8046 after retreating from 0.8093 (early Europe high)
• 0.8048 was pullback low from Thursday’s 22mth high of 0.8117

• USD/CAD fell to a European am low of 1.3070 as oil prices rose
• WTI 38.55/barrel at 6am ET, 125 cents higher on the day
• Canada jobs data due 8.30am ET: employment f/c +10k

• AUD/USD was helped to a European am high of 0.7569 by AUD/JPY buy-backs
• Thursday slide from 0.7637 to 0.7490 was influenced by cross losses

• NZD/USD pushed its recovery envelope from 0.6763 to a high of 0.6809 during Europe am
• Thursday low = 4 pips shy of Tuesday low

Today’s events

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.  

Option Expirations(Source:ThompsonReuters)

 • JPY off highs, related vols surrender gains. USD/JPY 1mth 11.5 vs 13.3
• Topside demand over BoJ and d/side barriers cap JPY call bids
• EUR drawn to large 1.14 expiry, Vols ease from Thurs’ highs
• 3mth expiry underpinned by ECB/FOMC/Brexit inclusion
• Post 3mth GBP vols multi year highs. GBP gamma performs well
• 1 week USD/CAD vol underpinned in to Jobs data and BoC
• USD/CNH 1mth vol now lowest since before Aug deval’ sub 5.0

Chart - GBP/USD cloud rejection continues to weigh (Source:ThompsonReuters)
Cable managed a daily close below 1.4095 - 61.8% retrace of the 1.3836-1.4514 rise - which now reinforces the overall bearish outlook. Recent rejection of the cloud (1.4148-1.4391) continues to weigh. The expectation is for an eventual break below 1.3996 - 76.4% retrace of 1.3836-1.4514 rise, a daily close below which should weaken the structure even further. Only a daily close back within the cloud will give bears pause and risk further upside gains. Chart: 

Economic Data(Source:Bloomberg)


Topics: US FX Market Open


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