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US FX Market Open – Monday, April 10, 2017: U.S. yield reversal stalls but FX steady

Posted by Marge Maresca on Apr 10, 2017 7:30:41 AM


Overnight Events

• EUR/USD -0.1%, USD/JPY +0.2%, GBP/USD +0.2%, DXY +0.05%
• DAX -0.3%, FTSE -0.2%, Brent +0.8%, Copper -0.8%
• Strong U.S 10s yield reversal Friday from 2.2690 but stalls at 2.3950 today
• EUR/USD holds near 1-month 1.0570 low as French election nerves grow
• DXY extends Friday gains to new 101.34 top, highest since Mar 15
• EZ Apr SENTIX Index 23.9 vs prev 20.7. 21.0 f/c
• SNB domestic deposits rise to 476.198bln w/e Apr 7 vs prev 475.149bln
• EU should consider billion-euro investment boost for Greece - Austrian finmin - Rtrs
• Greek PM says debt relief is a condition for more austerity - Rtrs
• Fillon, Melenchon seek last-gasp boost in French presidential election - Rtrs
• Czech cbank governor sees rate hikes turn of 2017/2018 -Hospodarske Noviny - Rtrs
• Czech crown at 26.52 vs eur, strongest since FX cap exit - Rtrs

Currency Summaries

• FED Dudley comments Fri helps USD and Yields
• US 2yr  1.1980 to 1.2980, 10yr 2.2690 to 2.3950, DXY 100.52 to  101.34
• Yields and DXY peak for now. EUR/USD decline stalls 1.0570 in Asia
• Resistance now Daily cloud 1.0585-1.0614/100DMA 1.0623
• Next support 1.0555 – 61.8% retracement of the 1.0340-1.0906 gains
• Overnight vol 8.25/36 pips break even in to Yellen tonight

• Bid in Asia with U.S yields pushing higher: Chart:
• U.S yields softer in Europe 10s @2.3730%, 2s @1.2822% but USD has slim advantage
• Asia high 111.59 and 111.20 pullback in Europe: Bids ahead of 111.00
• Offers from @111.50 up to 117.70 help limit move up, USD690 mln 111.50-60 option exps.
• 200HMA @ 111.10 and cloud twist 110.75: Chart:
• Dailies positive and potential for a 50% Fibo off 115.51-110.11@ 112.81
• Looking for a close abv daily Tenken @ 111.17 to strengthen bull argument
• Mkt more risk on on lack of Trump/Xi friction: Chart:
• EUR/JPY turns lower having peaked at 118.07 into Europe: 117.63 low Asia 117.52

• EUR/CHF remains offered, below 1.07 at start of wk. 1.0677-86 range
• Bearish structure on tech but no close under cloud/76.4% Fibo yet
• Downside support from C/bank buying. 1.07 is SNB's perceived soft floor
• Sight depo data highlighted SNB activity last week
• USD/CHF Bullish sentiment remains. Working higher toward Asia 1.0104 peak
• Late Asia/early Europe pullback shallow, 1.0086 base
• Close above cloud top at 1.0098 required. 1.0170 Mar peak then key

• GBP/USD firmed to a European am high of 1.2405 after threatening 1.2365 in Asia
• 1.2365 was pre-weekend low vs 1.2451 post-NFP high. 1.2368 = 30DMA
• EUR/GBP eased to a European am low of 0.8530 amid French election fears
• Kantar Sofres poll published Sunday said far-left candidate Melenchon third
• Euro could fall sharply if shock Melenchon vs Le Pen election run-off May 7

• USD/CAD retreated to 1.3385 during the European am from 1.3425 Asia high
• 1.3425 = 76.4% of 1.3451 (Apr 6 high) to 1.3343 (post-NFP low)
• BoC is expected to keep interest rates at 0.5% on Wednesday

• AUD/USD plumbed a fractionally fresh 12wk low 0.7476 during the European am
• 0.7478 was Asia low after soft commodity prices weighed on AUD
• Dalian iron ore closed down 2.7% Monday after a 7% fall Friday
• 0.7495 (pre-weekend low) is now a resistance level. 0.7508 was Asia high

• NZD/USD plumbed a 4wk low of 0.6921 in Asia with risk aversion helping weigh
• 0.6948 marks the intra-day high (early Europe)


Melenchon/Le Pen run-off would be euro nightmare
The euro could take a heavy hit if the first round of the French presidential election tees up a shock Melenchon versus Le Pen run-off May 7. Far-left candidate Melenchon, who aims to take France out of NATO and hold a referendum on France's EU membership, is quoted at 7/1 by Paddy Power to finish in the top two April 23. The uncertainty generated by an unexpected Melenchon vs Le Pen run-off could depress EUR/USD to/through 1.00 for the first time since 2002. Far-right candidate Le Pen wants France to ditch the euro and hold a referendum on its EU membership. Polls suggest centrist candidate Macron and Le Pen will get the most votes out of the 11 candidates standing in the first round. If odds-on favourite Macron reaches the run-off, all polls suggest he would easily beat Le Pen. Chart:

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.  

• Short dated vols depressed by impending Easter weekend holidays
• 2 week vols higher after rolling over first round of French elections
• 1mth vols captured 2nd round Thur, most EUR pairs at post Brexit highs
• Lack of supply for post election EUR vols/puts drive demand further out
• Still an air of risk aversion, maintains underlying bid tone to vols

Economic Data (GMT) - (Source:ThompsonReuters)

• 15:00  Labor Market Conditions Index (Mar) prev change +1.3
• 15:00  Employment Trends Index (Mar) prev 131.4
• 16:00  NY Fed Survey of Consumer Expectations (Mar)

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

• 16:45  FedTrade 30-yr Ginnie Mae securities (max $850 mn)
• 21:10  Fed Chair Yellen participates in discussion at "Gerald R. Ford School of Public Policy: Policy Talk Series"; MI
• 22:00  Fed Chair Yellen speaks at Univ of Michigan and takes questions from students and Twitter


Topics: US FX Market Open


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