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US FX Market Open – Friday, March 10, 2017: EUR/USD, EUR/CHF higher ahead of NFPs

Posted by Marge Maresca on Mar 10, 2017 7:35:43 AM


Overnight Events

• EUR/USD +0.28%, USD/JPY +0.4%, GBP/USD -0.05%
• DXY -0.2%, DAX +0.70%, Brent +0.5%, Iron +0.3%, Gold -0.3%
• DE Jan Trade Bal. E18.5 bln vs evsd 18.3 bln prev, 18.0 bln exp
• UK Jan Construction O/P 2.0% y/y vs 2.6% prev, 0.2% exp
• UK Jan Ind. O/P +3.2% y/y vs 4.3% prev, 3.3% exp
• UK Jan Mfg O/P +2.7% y/y vs rvsd 4.2% prev, 3.0% exp
• UK Jan Trade Bal. –GBP10.83 bln vs rvsd -10.91 bln, -11.05 exp
• S Korean constitutional court removes President Park from office
• China CB governor repeats familiar refrain about keeping the yuan stable in 2017
• EZ and UK bond yields gap higher on Japanese selling after the ECB
• Base metals bounce back a little, equities mainly higher, UST yields also a touch higher
• A second Scottish independence referendum is now looking inevitable  - Rtrs
• BoE UK Infl. expectations 2-year horizon 2.9% vs 2.8% in Nov
• Greater profit growth expected for Japan Inc in fiscal ’17 – Nikkei
• Japan - No barriers to auto imports after US fires first trade salvo – Rtrs
• BoJ reduces purchases of 1-3 year JGBs to Y300 bln from Y320 bln – Rtrs
• PBOC/SAFE Pan – China opening up bond market to foreign investors – Rtrs
• PBOC DepGov Yi – Corporate debt levels excessively high – Rtrs
• DepGov Yi – Won’t devalue CNY to stimulate exports – China Economic Daily
• IMF Lagarde – Exit from EUR would make France poorer – Le Parisien

Currency Summaries

• 10yr German bund rise aids EUR strength post Draghi
• EUR/USD marginally extends Thurs' peak to 1.0619 - offers 1.0620 cap for now
• Resistance daily cloud 1.0608-55, 30dma 1.0629, Kijun-sen 1.0649, 100dma 1.0659
• Flow limited as markets await NFP - Next day vol 7.0/54 pips break even
• Expiries help contain – biggest at 1.0600 on EUR 1.7bln
• Asia low 1.0573. 10DMA 1.0571, y/days pre Draghi low 1.0525, bids below

• 115.00 option barriers have been taken out, stops above 115.00 were triggered
• Market has reached 115.49, expect decent offers ahead of Jan 19 115.62 high
• USD/JPY above daily cloud which spans 114.52-115.01
• USD/JPY upward pressure as UST/JGB spreads widens
• 30/60-day UST/JGB spreads & USD/JPY log correlations high across curve
• EUR/JPY taken higher by buoyant EUR/USD & USD/JPY
• EUR/JPY has risen from 121.55 to 122.57, breaking above 122.19 cloud top

• Probably no coincidence EUR/CHF and EUR/USD holding a bid
• CHF cross climbs out of Thurs sharp 1.0691 pullback low
• Flows said light but cross looking more constructive ahead of US NFPs
• Plays 1.0705-1.0745 and eyes Thurs 1.0750 failure high
• USD/CHF tight above its daily cloud top at 1.0102
• Spot out of the game ahead of the U.S data
• Chart:

• GBP/USD is consolidating recent losses sub-1.22 pre-US jobs data
• 1.2153-1.2180 was Ldn am range. 1.2134 was Thursday’s 7wk low
• EUR/GBP scaled a fresh 7wk peak of 0.8730 during the European am
• Euro continues to benefit from hawkish Draghi comments Thursday
• Brexit uncertainty & Scottish indyref2 risk helping weigh on GBP

• USD/CAD is pivoting a large 1.3500 option expiry pre-twin jobs reports
• 1.3500 expiry = $1bln strike. 1.3486-1.3508 was European am range
• Strong US jobs data/weak Canada jobs data could spur 1.3535 test/break
• 1.3535 was Thursday’s 2017 high after CAD hurt by WTI oil drop thru $50/barrel

• AUD/USD met fresh headwind pre-0.7533 (200DMA) during the European am
• 0.7498 was Asia low. 0.7529 was rally high from Thursday’s 0.7491 7wk low

• NZD/USD extended north from 0.6892 to 0.6924 during the European am
• 0.6892 was Asia low. Offers may emerge near 0.6950 if kiwi continues higher
• Large 0.6950 option expiry Monday, NZ$352mn strike.
• Key support 0.6886/88 (Jan 3-4 lows), threatened twice on Thursday

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.  

• O/N vols propped but most at low end of recent pre NFP scale
• 1 week vols higher and underpinned since capturing FOMC yesterday
• 2mth vols and EUR puts/JPY calls jumped mid week capture of French election
• AUD and CAD vols off 2 year lows this week as Commods hit
• Cable vols off long term lows amid spot demise. JPY vols off lows as spot gains
• EUR/USD low realised/range bound spot keep 1mth vol at lows since Oct

Economic Data (GMT) - (Source:ThompsonReuters)

• 13:30  Nonfarm Payrolls Feb mkt +190k, prev +227k
• 13:30  Private Nonfarm Payrolls Feb mkt +193k, prev +237k
• 13:30  Manufacturing Payrolls Feb mkt +10k, prev +5k
• 13:30  Unemployment Rate Feb mkt 4.7%, prev 4.8%
• 13:30  Avg Hrly Earnings Feb mkt +0.3% m/m, prev +0.1%
• 13:30  Workweek Hours Feb mkt 34.4, prev 34.4
• 18:00  Baker-Hughes Rig Count weekly
• 19:00  Federal Budget Feb prev $51.0 bln surplus

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

• 16:45  FedTrade ops 30-yr Fannie Mae/Freddie Mac max $1.90 bln


Topics: US FX Market Open


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