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US FX Market Open –Friday, July 15, 2016: GBP FEELS HALDANE’S DOVISH HEAT

Posted by Marge Maresca on Jul 15, 2016 11:32:00 AM

 

feel_heat.png

Overnight Events

• USD/JPY +0.6%, GBP/USD +0.08%, EUR/USD +0.21%
• GBP/USD big swings within 1.3342-1.3449 in Europe
• DXY -0.13%, DAX -0.4%, Brent -1.01%, Iron +0.5%, FTSE250 -0.7%
• UK May Construction Output -1.9% y/y vs rvsd -0.6% prev, -3.5% exp
• EZ Trade Bal. NSA E24.6 bln vs 27.5bln prev, 23.0 bln exp
• EZ Jun Final Inflation 0.1% y/y vs 0.1% prev, 0.1% exp
• BoE’s Haldane Material easing of policy needed in August
• Haldane right to use sledgehammer if doubts over policy efficacy- Rtrs
• Forget the helicopters, look out for that steamroller – Rtrs COLUMN
• S&P - Global corporate defaults rise to 100 issuers
• Japan draws up work reforms to boost growth - Nikkei
• China June industrial output +6.2% y/y, retail sales +10.6%, +5.9/10% eyed
• China June net FX sales CNY97.7 bln, end-June FX deposits $656.2 bln• USD/JPY +0.6%, GBP/USD +0.08%, EUR/USD +0.21%
• GBP/USD big swings within 1.3342-1.3449 in Europe
• DXY -0.13%, DAX -0.4%, Brent -1.01%, Iron +0.5%, FTSE250 -0.7%
• UK May Construction Output -1.9% y/y vs rvsd -0.6% prev, -3.5% exp
• EZ Trade Bal. NSA E24.6 bln vs 27.5bln prev, 23.0 bln exp
• EZ Jun Final Inflation 0.1% y/y vs 0.1% prev, 0.1% exp
• BoE’s Haldane Material easing of policy needed in August
• Haldane right to use sledgehammer if doubts over policy efficacy- Rtrs
• Forget the helicopters, look out for that steamroller – Rtrs COLUMN
• S&P - Global corporate defaults rise to 100 issuers
• Japan draws up work reforms to boost growth - Nikkei
• China June industrial output +6.2% y/y, retail sales +10.6%, +5.9/10% eyed
• China June net FX sales CNY97.7 bln, end-June FX deposits $656.2 bln

Currency Summaries

EUR/USD  
• EUR/USD 1.1116-49 in Europe after 1.1102-1.1140 in Asia
• Biased higher, initially on back of the GBP/USD squeeze
• Later underpinned by EUR/GBP buying
• EZ inflation all flat or up, after ex-tobacco 0.0 yy from -0.2%
• EZ trade surplus grows to EUR 24.6bln in May

USD/JPY
• USD/JPY rose from 105.05 to 106.32 in Asia, before consolidating below the top
• Despite numerous denials in recent days, talk still of "helicopter money"
• Risk "on" environment pushed USD/JPY to its highest level since June 24
• Nikkei Index closed up 0.68%
• Note there are 1.6B worth of 105.50 strikes set to expire at the NY cut
• EUR/JPY jumped from 116.70 to reach 118.36

CHF
• Yesterday USD/CHF 0.9765 low with daily cloud 0.9766-0.9700
• 21, 55 and 100-DMas 0.9745-53: http://reut.rs/29B61x2
• EUR/CHF similar picture: firm 100DMA rejection Tues/Wed/Thurs
• Cross looking to 1.0868 initial Fibo off 1.0623-1.0944
• Stocks, commodity and GBP rebounds suggest SNB takes a breather
• Without CB and after testing low end recent ranges CHF rise likely
• CHF longs a convenient, perhaps cheap hedge, to uncertainty
• Cloud base @ 0.9700 (closing basis) is key

GBP/USD   
• GBP roller coaster between 1.3342-1.3449 in Europe
• Sold-off in early dealings after several big names tip shorts
• Rallies back despite weaker data
• UK May construction output -2.1% mm vs -1% f/c
• Biggest drop in exports volumes since July 2006
• GBP later crushed after BOE's Haldane says wield sledge hammer in May
• Curiously Haldane voted to hold only yesterday. Vlieghe only dissenter

USD/CAD
• Range 1.2878-1.2922 today. 1.2863-1.2987 Thursday
• 55DMA initial resistance 1.2929, 21DMA 1.2941, 100DMA 1.2976
• Spprt Thurs low, 05 Jul low 1.2847, cloud base 1.2840, 4 July low 1.2832
• Option vols hit new 2016 lows Thurs before meeting demand - 1mth 8.75
• Gamma longs prudent in choppy mkt's - 1wk 8.5 vol - 121 pips break even
• Oil steady. US data should aid gamma longs  - US CPI, retail sales today

AUD/USD     
• 0.7608-0.7676 Asia range, settles mid 76's
• Bulls eye close above 0.7673 (76.4% of 0.7836-0.7145)
• Next resistance 3 May high 0.7720, 26-27 April double top 0.7765
• Spprt Thur/Wed lows 0.7591/0.7578,  0.7572 is 61.8% 0.7836-0.7145
• Potential value in vols which are now at 2016 lows

NZD/USD
• Hit yesterday - heightened rate cut fears at 11 Aug meet
• 0.7296-0.7176 yesterday, 0.7201-0.7141 today before meeting demand
• Spprt 30DMA 0.7125, 7 Jul low 0.7114. Today's hi, Tenkan-sen 0.7203 cap
• AUD/NZD extended Thur' 1.0437-1.0628 spike to 1.0702 today (last 1.0650)
• 55DMA and todays low 1.0606/04 prop. Cloud resistance 1.0620-1.0842

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)

• EUR/USD vols lows since early May/June, though 1wk underpinned by ECB
• 2wk USD/JPY gets BoJ – up 5.0 vols and 80 pips to 19.0/310 pips
• USD/JPY risk reversals maintain steady downside bias on setback fears
• GBP vols met demand after MPC setbacks to new post Brexit lows
• 1wk GBP/USD demand 13.0 - perceived value in choppy market at 200 pips
• AUD vols 2016 lows. 1mth NZD 3.0 from 2.0 above AUD on RBNZ cut fears 

 

Topics: US FX Market Open

 

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