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US FX Market Open – Monday, August 29, 2016: Fed policy outlook supporting further USD gains

Posted by Marge Maresca on Aug 29, 2016 7:47:38 AM

 

usop1.png

Overnight Events

• U.K markets closed for August Bank Holiday
• USD/JPY +0.31%, EUR/USD -0.16%, GBP/USD -0.22%
• DXY +0.11%, DAX -0.7%, Brent -1.6%, Iron -3.45%
• IT Aug Bus. Conf. 101.1 vs rvsd 102.9 prev, 102.5 exp
• IT Aug Cons. Conf. 109.2 vs rvsd 111.2 prev, 110.5 exp
• SE Jul R.Sales 1.9% y/y vs 3.2% prev, -0.9% m/m vs -0.6%
• Central bankers, stuck at zero, unite in plea for help from govts – Rtrs
• Harvard paper- Fed should keep trillions in bonds to provide stability –Rtrs
• Ricardo Reis - Fed could use reserves payments to stimulate US economy –Rtrs
• BoJ Gov Kuroda – Data suggests inflation expectations not yet anchored
• ECB Coeure – Rates to stay low unless other policy areas contribute
• German FinMin Schaeuble – ECB’s low interest rates harmful – FAZ
• BoJ, GPIF biggest stakeholders in quarter of Japan’s listed firms - Nikkei
• Orders recovering for Japanese chip-making gear – Nikkei

Currency Summaries

EUR/USD   
• USD gains hit EUR/USD to 1.1180 Fri, 1.1171 today, recovery limited to 1.1208
• DXY 94.25-95.594 Fri, peaked 95.60 today, high since 16 Aug (95.66)
• Daily cloud supports - 1.1171-1.1115. Kijun-sen/30DMA 1.1159, 55DMA 1.1153
• 200DMA down at 1.1116 to underpin. Capped by 21/100DMA 1.1211/21
• Expiries 1.1150 (301M), 1.1175-90 (577M), 1.1200 (327M), 1.1240-55 (577M)
• NFP gets more credence since Fri' - 1wk vol 8.5/105 pips break even

USD/JPY  
• Break higher reached 101.94 Fri', extends to 102.39 today
• USD 618mln 102.25-40 expiries today, 1.3bln 102.40 tomorrow
• 30DMA 102.41 and daily highs 9/8 Aug 102.53/66 resistance. Exporters 102.50
• Support Fri's 101.94 high, today's 101.84 low/Fri's 101.82 close
• Nikkei closed up 2.3%, Futures down 0.24%. USD peaks vs G10 for now
• EUR/JPY 113.10-114.13 Fri', peaks 114.69 today before setback to 114.26
 
EUR/CHF
• Near 1% gains last week and early Monday action smacks of adjustment
• Sight deposits show back to back weekly gains
• SNB CHF vigil continues: EUR/CHF now up 3%+ since 1.0623 Jun 24 low
• 200DMA breached Frid at 1.0924 and now supporting at same level today
• June 24 1.1010 high a natural bull target but feel we see 1.0870-1.09 first
• Chart: http://reut.rs/2btq8TQ

GBP/USD  
• Early Monday low of 1.3087 and nearly 190-points off Friday's high
• Fed policy barometer swinging deeper into Hawkish zone [nN9N15G008]
• Fed hike odds Sept 67% vs 79% and Dec 41% vs 48%-CME Fedwatch
• Sterling had showed post Brexit resilience but policy differentials hit home
• EUR/GBP steady and supported but dampened by recent UK data pep
• Cable has a 1.3040 look early in the wk: Chart: http://reut.rs/2btaxU6

USD/CAD  
• Choppy post Yellen - 1.2950-1.2832, then up on USD bounce post Fischer
• Reached 1.3013, ended 1.2995 Fri' and marginal extension to 1.3025 today
• Weak commodities and firmer USD help limit setbacks, 30DMA 1.3029 caps
• Close in relation to 1.2949-1.3007 daily cloud eyed – Above cloud build gains
• Initial support 21hour and daily MA's 1.2989, before today's 1.2975 low

AUD/USD   
• Fell .7692-0.7551 Fri on Yellen/Fed Speakers boosting USD
• 0.7525 today's low, recovers mid 0.75's. 0.7525-0.7411 daily cloud props
• 100DMA next support below cloud top at 0.7500, then 2 Aug low 0.7486
• Little thereafter until 27 July 0.7420 low and cloud base 0.7411
• Falling 21HMA resistance 0.7572. Weaker commod's firm USD tone cap
• Almost AUD 1bln 0.7500 expiries today and near 1bln 0.7600 Tuesday

NZD/USD
• NZD came off Friday amid the post Yellen/Fed speakers USD boost
• Hit 0.7221 from initial 15mth hi 0.7380 (22 May 2015 high 0.7396 capped)
• Matched 22 Aug 0.7210 low today before moving back to 0.7246 (21HMA)
• Next resistance 10DMA 0.7274, 200HMA 0.7280, Daily tenkan 0.7292
• Sub 0.7210 opens 30DMA 0.7174, Kijun 0.7168 and daily cloud top 0.7137

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)

• Event risk pared post Yellen and vols came lower
• Losses limited as Fischer comments gave USD a boost out of ranges
• More credence now attached to US data, related dates bid – NFP focal
• 1mth vols remain underpinned by a plethora of CB rate meetings through Sept
• 1mth USD/JPY risk reversals have now fully erased recent downside bias

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

• 12:30 Personal Income Jul mkt +0.4% m/m, prev +0.2%
• 12:30 Consumption Exp. Jul mkt +0.3% m/m, prev +0.4%
• 12:30 Core PCE Deflator Jul prev +0.1% m/m, +1.6% y/y
• 14:30 Dallas Fed Texas Mfg Outlook Survey Aug prev -1.3

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

• n/a   Atlanta Fed Q3 GDPNow update prev +3.4% q/q

Topics: US FX Market Open

 

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