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US FX Market Open – Friday, February 24, 2017: Rising risk aversion boosts yen

Posted by Marge Maresca on Feb 24, 2017 7:21:47 AM


Overnight Events

• EUR/USD +0.1%, USD/JPY -0.2%, GBP/USD +0.1%, DXY -0.2%,       
• DAX -1.2%, CAC -1.1%, Brent -0.6%, Gold +0.6%, Copper +0.6%
• Dollar slips, set for first week of falls in three - Rtrs
• China says has no intention of using currency devaluation to its advantage - Rtrs
• Germany says unsure of Trump trade stance, but keen for US talks - Rtrs
• Macron seen beating Le Pen in second round with 61 pct of vote - Opinionway poll - Rtrs
• Greek PM Tsipras: Greek bailout review must be concluded by Mar 20 - Rtrs
• May's Conservatives gain UK parliament seat as rivals suffer setbacks - Rtrs
• GB Jan BBA Mortgage approvals 44.657k vs prev 43.581k rvsd
• Swedish Feb inflation expectations jump to 2.7% 12mth vs 2.2% in Jan
• Swedish Feb Consumer confidence 104.5 pts vs prev 104.6. 104.1 pts f/c
• Swedish Feb overall sentiment index 111.6 pts

Currency Summaries

• EUR/USD boosted to 1.0604 early on stop hunt
• Swiftly to 1.0570 on the back of EUR/JPY selling
• Cross weighed by rising risk aversion (Trump/China & EZ election risk)
• Talk large dollar selling for month-end rebals (spot val mth-end)
• EUR 45bln euro zone bond redemptions/coupons due around month-end
• 100-HMA @ 1.0567 looks pivotal for current rough 1.05-1.06 range

• USD/JPY remains focused on downside, has reached 112.31 from 112.96
• Intra-day bear break 112.38 - 76.4% retrace of 111.59-114.95 rise
• 112.20-30 (820M), 112.50 (550M) & 112.75 (970M) NY cut expiries may contain
• Bulls are at risk from the rising daily cloud base, which is now @111.81
• Likely bouts in risk aversion should underpin the yen
• EUR/JPY has fallen from 119.50 to 118.90, daily cloud base @119.54 weighs

• USD/CHF chop close to 1.0047 pullback low. 1.0070 top of Ldn range
• Correction lower could be complete, techs back return higher
• EUR/CHF lower but SNB continues to limit play
• Cross continues to hold above the 1.0623 Brexit day low
• Plays 1.0657-1.0645 in Europe. 1.0676 this week's peak

• GBP/USD scaled a 15-day peak of 1.2570 early Europe after vaulting 1.2561
• 1.2561 was Thursday high after GBP caught bid pre-1600GMT Ldn fix, again
• UK Tories won Copeland by-election Thursday, taking seat from Labour
• 1st time governing party won seat from opposition via by-election for 35 years
• EUR/GBP elicited support pre-0.8422 early Europe before rising to 0.8451
• 0.8422 was Thursday’s low. 0.8403 = recent 2mth low (0.8403 = 1.19 GBP/EUR)

• USD/CAD elicited fresh support pre-1.3076 after early Europe USD selling
• 1.3076 was Monday’s low. 1.3083 was Thursday’s low, after USD fell on Mnuchin
• Canada Jan inflation data due 8.30am ET, CPI f/c +1.6% y/y vs +1.5% f/c
• Softer than expected number could inflate USD/CAD towards 1.3149 (200DMA)

• AUD/USD has fallen to 0.7683 amid profit-taking on long positions
• 0.7741 was 15wk high Thursday. 0.7720 was Asia high Friday
• A French name went short AUD/USD (above 0.77), targeting 0.74
• AUD/NZD eased to a 1wk low of 1.0655 during the European am

• NZD/USD met fresh headwind at 0.7238 (Asia high) during the European am
• 0.7212 = subsequent low. 0.7214 was Asia low. 0.7246 = 2wk high Thursday
• Profit-taking on longs has helped deflate AUD/NZD from 1.0748
• 1.0748 was Wednesday’s 3mth high. 1.0655 = European am low


Deja-vu for traders of the USD index - Reuters News
Traders of the DXY dollar index could witness a repeat performance of end-January. As was seen at the end of last month, traders are anticipating large dollar selling rebalancing flows for month-end. The DXY index is lower and technically looking more bearish after breaking below its daily Ichimoku cloud base. The exact same thing happened at end-January but traders would do well to remember the rather rapid base and rough 2% rebound that followed in February. The DXY index is 57% EUR so those trading it with USD in mind are actually heavily exposed to EUR-centric risk. French election and other euro zone risks spiralled in February boosting the DXY. With euro zone bond markets far more stressed now than they were at the end of January, another rebound may well follow month-end. Charts 1) 2)

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)

• Vols broadly lower across the board with USD off highs, despite looming Trump and FED
• Even the 3mth date (French election)  in EUR pairs has pared bulk of the week’s gains
• EUR/USD 1mth 8.3 from 9.4 Wed’s and 3mth 0.65 lower at 10.75. 3m RR 2.7 vs 3.1 EUR put
• USD/JPY 1mth vol meets demand last week’s 10.3 post US election low vs 11.3 Wed’s
• Cable 1mth matches last week’s post US election lows at 8.75. AUD curve new 2yr lows
• USD/JPY barriers 111.50-110.00. Huge 1.05-1.07 EUR/USD expiries next 2 weeks  

Economic Data (GMT) - (Source:ThompsonReuters)

• 15:00  New Home Sales (Jan) mkt 575k SAAR, prev 536k SAAR
• 15:00  U of Michigan Consumer Sentiment Index (final Feb) mkt 96.0, prev 95.7
• 15:00  U of Mich Current Conditions Index (final Feb) mkt 111.2, prev 111.2
• 15:00  U of Mich Expectations Index (final Feb) mkt 85.5, prev 85.7
• 16:15  FRBNY Staff GDP Nowcast (Q1) prev +3.1% q/q AR
• 18:00  Baker-Hughes Rig Count (weekly)

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

• 16:45  FedTrade operation 30-year Ginnie Mae (max $1.150 bn)


Topics: US FX Market Open


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