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US FX Market Open – Friday, October 28, 2016: Sterling struggling once more

Posted by Marge Maresca on Oct 28, 2016 7:28:33 AM

poundcrack-2.png

Overnight Events

• Sterling hurt by N.Ireland court judgment siding with UK
• GBP/USD slips to 1.2123 from 1.2187 Asia/Europe high
• USD/JPY flat, EUR/USD +0.15%, GBP/USD +0.10%
• DXY -0.11%, DAX -0.6%, Brent -0.02%, Iron +3.7%
• ECB’s Coeure – accommodation to stay until we see sustained adj
• CH Oct KoF Ind. 104.7 vs rvsd 101.6 pev, 101.8 exp
• EZ Oct Bus Climate 0.55 vs rvsd 0.44 prev, 0.44 exp
• EZ Oct Econ Sent 106.3 vs 104.9 prev, 104.8 exp
• EZ Oct Cons Conf -8.0 vs -8.2 prev, -8.0 exp
• EZ Oct Cins Infl Exp 4.3 vs 4.7 prev
• SE Oct R.Sales disappoint- +0.6% y/y vs 2.9% Rtrs poll
• BoJ Gov Kuroda – Govt to take steps to up potential growth
• Jpn Sept core CPI -0.5% y/y, Tokyo Oct core -0.4%, -0.5% exp for both
• Jpn fund mgrs up stock exposure in Oct, trim bonds – Reuters poll
• CITIC VP – Chinese samurai bond offers to continue – Nikkei
• US monetary policy works better, may unwind harder – Rtrs COLUMN
• UK Oct GfK consumer confidence index -3, as eyed, Sept -1
• ECB/BoS Gov Linde – Reducing QE should be done slowly – Rtrs

Currency Summaries

EUR/USD   
• EUR/USD supported by frothy Bund yields: Plays 1.0893-1.0925
• Market still lacks direction and conviction
• German 10 yr choppy 0.1840 vs 0.1650 Thurs low then back to 0.1590
• Discounting a no ECB ease into the turn
• Technically: series of Doji candles with long upper wicks point lower
• 10DMA tracking price closely and price yet to close above.
• Above 1.0947 Wed high picture changes and points to 1.1190 Nov 11 cloud twist
• 200HMA-30HMA upper Bolli provide a fade at 1.0922 for 1.0890 cloud base
• Chart: http://reut.rs/2dRQOZB

USD/JPY  
• Stop fuelled rally to 105.35 Thurs and the higher marginally bettered today
• Firmer U.S yields, Fed hike expectation  and U.S GDP optimism driving
• Large opt exp likely bracket/anchor USD2 bln+ 104.00-75, 1.26 bln 105.00
• Gain consolidation to hold into NY with U.S data to ignite fresh interest
• Technically: 10DMA below @ 104.25 and 30DMA upper Bolli abv @ 105.90
• Chart: http://reut.rs/2eTxtJT

GBP/USD  
• GBP/USD fell to 1.2123 after NI court ruling in favour of UK govt over A50
• 1.2123 = 3-day low, approximates to 76.4% of 1.2082-1.2273
• NI court judgment reported on Reuters at 5.29am ET
• 1.2187 was early Ldn high. 1.2154 was Asia low. 1.2149 = Thursday low
• EUR/GBP rose to 0.8994 (8-day high) on the back of the NI court ruling
• 0.8958 was early Ldn low. 0.9026 (Oct 20) resistance beyond 0.9000/09

USD/CAD
• USD/CAD offers near 1.34 kept a lid on the pair in Asia & during European am
• 1.3398 = Asia high. 1.3399 = European am high. 1.3374 was Asia low
• Advance estimate of US Q3 GDP at 8.30am ET. Annualized growth of 2.5% f/c

AUD/USD   
• AUD/USD elicited support circa 0.7568 after heading south early Europe
• 0.7568 = 100DMA. 0.7579 was Asia low. 0.7582 was Thursday low
• AMP takes A$1.1bn hit (Reuters). AMP is Australia’s biggest life insurer
• Near half-yard 0.7600 option expiry for NY cut (closest-to-market strike)
• 55 of 60 economists polled by Reuters expect RBA to keep cash rate at 1.5% next week

NZD/USD
• NZD/USD is trading within strike of large 0.7140/50 option expiries
• Cumulative size of the strikes for NY cut is NZ$730mn
• AUD/NZD extended south to a 1wk low of 1.0611 during the European am
• Profit-taking on longs has helped deflate cross since Wednesday’s 1.0755 high

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)

• USD/JPY 105.25 (870M), 105.00 (1.2BLN), 104.75 (460M), 104.50 (641M), 104.00 (921M)
• EUR/USD: 1.0950 (878M), 1.0940 (401M), 1.0900 (684M), 1.0880/85 (927M),
• 1.0870/75 (626M), 1.0800 (1.5BLN), 1.1000 (657M), 1.1050 (526M)
• NZD/USD: 0.7140 (399M), 0.7150 (331M), 0.7200 (300M)
• AUD/USD: 0.7500 (345M), 0.7550 (282M), 0.7600 (483M), 0.7650 (380M), 0.7700 (394M)
• USD/CAD: 1.3300 (1.9BLN), 1.3350 (232M), 1.3400 (227M), 1.3450 (421M)
• USD/CHF: 1.0000 (265M), 0.9900 (225M)
• EUR/NOK: 8.90 (340M), 8.93 (430M), 8.98 (165M), 9.05 (198M), 9.15 (546M)

Looking Ahead - Economic Data (GMT) - (Source:ThompsonReuters)

• 12:00 DE Oct CPI, mkt 0.8% y/y, 0.7% prev
• 12:00 DE Oct HICP mkt 0.6% y/y, 0.5% prev  
• 12:30 BLS Strike Report (Oct)
• 12:30 Employment Cost Index Q3 pre 0.6% q/q
• 12:30 Real GDP Q3 mkt +2.7% q/q, prev +1.4%
• 12:30 Real Final Sales  Q3 prev +2.6% q/q
• 12:30 Core PCE Deflator Q3 prev +1.8% q/q
• 14:00 U of Michigan Cons Sent final Oct prev 87.9
• 14:00 Current Conditions final Oct prev 105.5
• 14:00 Expectations final Oct prev 76.6
• 17:00 Baker Hughes Oil Rig Count

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

• 15:45 FedTrade operation 30-year Ginnie Mae (max $1.375 bln)

 

Topics: US FX Market Open

 

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