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US FX Market Open – Monday, December 19, 2016: FX markets treading water

Posted by Marge Maresca on Dec 19, 2016 7:56:24 AM



Overnight Events

• USD/JPY -0.4%, EUR/USD -0.1%, GBP/USD -01.4%
• DXY +0.04%, DAX +0.08%, Brent  -0.65%, Iron -7.2%, Gold +0.33%
• DE Dec IFO Bus Climate 111.00 vs 110.4 prev, 110.7 exp
• DE Dec IFO Curr Cond 116.6 vs 115.6 prev, 115.9 exp
• De Dec IFO Expectations 105.6 vs 105.5 prev, 10.6 exp
• EZ Q3 Labour Costs 1.5% y/y vs 1.0% prev
• EZ Q3 wages 1.6% vs 0.9% prev
• Sweden's SCA to acquire Germany's BSN medical for 2.7 bln euros - Reuters News
• S.Times-BAT preparing to add cash sweetener in attempt to secure $47bn Reynolds bid
• Paddy Power-2/5 Scotland votes for independence via next binding referendum
• Swiss Sight Depos w/e Dec 16 Domestic and total rise
• Foreign appetite for Canadian securities shows no signs of fading – Rtrs
• BoJ sees weak-yen effect of yield curve control well worth the trouble –Rtrs
• As CNY weakens, Chinese rush to open foreign currency accounts – Rtrs
• Fitch – Australia budget forecasts consistent with AAA ratings
• NZ Nov BNZ/BNZ PSI +1.3 point to 57.9, strong despite earthquake
• NZ Q4 W-pac/MM cons conf 113.1, Q3 107.9, largest rise in  four years

Currency Summaries

• European EUR/USD range 1.0438-80, mainly 1.0440-50
• German IFO 111.0 in December beating 110.7 f/c and prior 110.4
• EZ labour costs jump. Q3 1.5% from 1.0 in Q2
• Seems traders intent to sit on hands after booking profits
• EUR/USD shorts pared a fair bit:

• USD/JPY fell from 118.00 but bulls regrouped circa 117.00
• USD/JPY off due long liquidation ahead of BoJ on Tues (expect no change)
• Found decent support at 116.97 by 116.96 pivot point
• 116.96 was also an hourly low registered last Wed
• UST/JGB spread needs to be closely watched, moving in tandem
• Direction of cross tied up with USD/JPY more so than EUR/USD
• EUR/JPY range has been 122.33-123.19.

• EUR/CHF remains heavy and bounces drawing supply
• Another long upper wicked candle last wk and lost traction into cls near lows
• Swiss depo data shows increases for domestic/total deposits
• SNB support in the data but seems more smoothing than driving
• Cross a buy near 1.07 but risk increasing for a return to 1.0623 Brexit low
• On balance, moving into Christmas week, the cross likely sideways/firmer
• USD/CHF tight just off Friday’s 1.0243 low: Said to be very thin
• Chart: 1) 2)

• GBP/USD offers around 1.25 kept lid on pair before drop to 1.2428
• 1.2501 = Asia high. 1.2498 = Ldn am high (1.2510 = Friday’s high)
• Drop to 1.2428 influenced by GBP/JPY losses. 1.2404 = NY low Friday
• EUR/GBP has risen by a quarter-penny an intra-day high of 0.8400
• Half-yard 0.8400 option expiry Tuesday

• USD/CAD rose to 1.3371 during the European am after revisiting 1.3320 in Asia
• 1.3320 was Friday’s low. Offers expected near 1.34 (1.3392 was Friday’s high)
• Poloz frets about protectionism, via Globe & Mail interview

• AUD/USD has fallen by nearly half-a-cent from 0.7313 to threaten 0.7267
• 0.7313 was Asia high. 0.7267 was Friday’s 6mth low
• Cumulative 3 yards of 0.7200 option expiries Tuesday-Friday (pre-Xmas)

• NZD/USD revisited 0.6956 (Asia low) during the European am
• 0.6975 option expiry for NY cut, NZ$ 332mn strike

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)

• Market slowing down/volumes lighter in to year end holidays
• Near term event risk BoJ, but modest 120pt’s  break even o/n USD/JPY
• 1mth expiry EUR related vols propped by 19 Jan ECB capture
• USD/JPY and EUR/USD curves retain firm levels for now
• AUD vols peak as spot finds a floor – 1mth from 2yr low 9.1 to 10.65
• Good size 1.0500 EUR/USD expiries this week – near EUR 6bln

Economic Data (GMT) - (Source:ThompsonReuters)

• 14:45  Markit Services PMI flash Dec prev 54.7

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

• 16:45  FedTrade Ops 30-yr Fannie Mae/Freddie Mac max $2.150 bln
• 18:30  Fed Chair Yellen speaks on "The State of the Job Mkt"; Baltimore, MD
• 19:30  FedTrade Ops 15-yr Fannie Mae/Freddie Mac max $825 mln


Topics: US FX Market Open


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