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US FX Market Open – Monday, April 25, 2016: DOUBTS OVER BOJ PLANS FOR NEG RATES FOR BKS

Posted by Marge Maresca on Apr 25, 2016 7:38:20 AM



Overnight Events

• EUR/USD +0.3%, USD/JPY -0.6%, GBP/USD +0.35%, AUD/USD -0.05%
• DAX -0.75%, Brent -1.15%, DXY -0.2%, Gold -0.22%
• DE Apr IFO Business Climate 106.6 vs 106.7 prev, 107.00 exp
• DE Apr IFO Current Cond. 113.2 vs 113.8 prev, 113.8 exp
• DE Apr IFO Expectations 100.4 vs 100.00 prev, 100.8 exp
• U.K Apr CBI Trends Orders vs -14.00 prev, -15 exp
• SNB sight deposits rise for 6 straight weeks
• Japan Abe Adviser Honda: More BOJ easing needed - DJN
• Honda: Not sure if this week is best time to ease - DJN
• Honda: Don't feel BOJ needs to offer loans to banks at negative rates - DJN
• CFTC IMM CTA data - Specs have net USD shorts for first time since May
• Japan’s life insurers stung by negative rates, look abroad for assets - NEN
• Obama boosts UK’s remain camp and infuriates the Brexiteers
• US-style  credit crunch/Jpn-style grinding malaise increasingly likely – FT
• ECB/Austria CB Nowotny – Neg rates necessary to avoid deflation – Rtrs

Currency Summaries

• EUR/USD sidelined just 1.1231-62 in Europe
• Static trade weighs on vols, may promote EUR sales as funding ccy
• IFO slightly below f/c has no impact
• EUR 46bln French bond redemptions and coupons today
• Softer DAX (0.6,)led by weaker commodities, may underpin EUR
• Ranges within 21/55-DMA 1.1328/1.1194 very likely ahead FOMC

• USD/JPY range has been 111.03-111.90
• Capped by 111.91 – 61.8% retrace of 114.56-107.63
• Downside risk due to emerging doubts above BoJ NIRP lending
• In Asia, Japanese retail & exporters sold near to 111.90 top
• Bids returned ahead of 111.00
• Stops are said to be layered below 110.60
• EUR/JPY trades 124.85-125.52 so far on Mon

• The cross nudged above the daily cloud Thurs/Frid but failed to close abv
• Weak Friday close and softer bias into the Monday session
• Risk mkts weaker and CHF sucking in flow: Scope to 1.0945 cloud base
• Latest SNB sight depo data shows another increase
• Deposits again registering a record high and again pointed to SNB action
• EUR/CHF Res. 1.1005, Supp. 1.0953: Chart:
• GBP/USD elicited support just shy of mooted bids at 1.4400 during the European am
• 1.4475 = 5wk high in Asia, after Obama banged anti-Brexit drum during UK visit
• Stops tipped above 1.4505 (1.4514 was Mar 18 high)
• EUR/GBP topped out at 0.7812 after pushing recovery envelope from 0.7752
• 0.7752 = early Asia 6wk low amid hopes Britain will vote to remain in EU on June 23
• Bookies quoting longer than 2/1 odds for Brexit. 0.7812 = 1.28 in EUR/GBP

• USD/CAD met headwind pre-1.2720 during the European am
• Rise to threaten 1.2720 influenced by WTI oil drop to $42.81/barrel low
• 1.2653-1.2693 was Asia range

• AUD/USD topped out 2 pips shy of 0.7728 after firming from 0.7690
• 0.7728 = 10DMA. 0.7690 was Asia low. 0.7693 was pre-weekend low
• Australian Q1 inflation data due Tuesday 9.30pm ET. RBA seen on hold next week

• NZD/USD met headwind at 0.6878 after pushing recovery envelope from 0.6836
• 0.6836 = pre-weekend low & early Asia low (NZ markets closed for ANZAC Day)
• 0.6878 is 21DMA & Friday’s Ldn am low. 0.6900 resistance beyond
• RBNZ OCR verdict Wednesday 5pm ET, three hours after FOMC statement
• Interest rate futures suggest 54% chance of another 25bp RBNZ OCR cut this week

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)

 • Not much priced in for FOMC Wed’ but big premium for BoJ vol
• Thursday USD/JPY vol trades 26.0 – Break even 1.8%/210 JPY pips
• Premium for JPY puts over BoJ – 1wk risk rev 1.5 JPY puts today
• RBNZ Thursday vol also 26.0 or 130 pips. 1wk 17.25 or 135 pips
• 2mth Cable should jump 5.0 vols to 16.0 on Brexit capture Tuesday
• EUR/USD vol slide stalls, 1wk 8.5 in to events. 1mth 8.0 vs 7.55 Friday

Economic Data – (Source:Bloomberg)


Topics: US FX Market Open


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