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US FX Market Open – Monday July 10, 2017: USD/JPY pullback ahead of Yellen testimony

Posted by Marge Maresca on Jul 12, 2017 9:08:04 AM

 

yen-1134.png

Overnight Events

• EUR/USD -0.06%, USD/JPY -0.44%, GBP/USD +0.08%, EUR/GBP -0.11%
• DXY +0.05%, DAX +0.66%, FTSE +0.96%, Brent +1.47%, Gold +0.09%
• EZ May Industrial production y/y, 4.0% vs f'cast 3.6%, prev 1.4% rvsd 1.2%
• GB May ILO unemployment rate, 4.5% vs f'cast 4.6%, prev 4.6%
• GB Average weekly earnings 3m y/y, +1.8% vs f’cast 1.8%, prev 2.1%
• BoE's Broadbent says not ready to hike rates - Press and Journal newspaper
• DE Jun Wholesale price index y/y, 2.5%, prev 3.1%
• Germany tightens rules to shield businesses from foreign takeovers
• Trump Jr. emails suggest he welcomed Russian help against Clinton
• Top US diplomat faces tough Gulf talks on ending Qatar row
• Bank of Canada seen raising rates, first to follow the Fed higher
• China's battle against debt to slow Q2 GDP growth to 6.8 pct
• China June new yuan loans rise, but credit growth seen slowing
• Saudis to cut Aug oil exports to lowest level this year - source
• Global sovereign credit cycle seen improving - Fitch
• Oil rises above $48 as API reports drop in U.S. fuel stocks
• Gold edges higher as investors await Fed testimony
• Japan June domestic CGPI unch m/m, +2.1% y/y, May +0.2% and +2.1%
• Fearing leaks, Japan to set new rules on foreign investment - Nikkei
• Japan retailers’ profit growth slows to 0.6% in March-May – Nikkei

Currency Summaries

EUR/USD
• EUR/USD eases from 1.1484 to 1.1442 ahead key Yellen testimony
• Natural to see some profit-taking given traders are long EUR
• Shallow dip is sign that bullish sentiment is alive and well
• 1.1500 barriers define next resistance. 21-DMA 1.1302 is key below
• Small dips will also give defenders a limited chance to reload
• May 3 high @ 1.1616 target of a break then Aug 2015 high at 1.1715

USD/JPY
• Narrowing UST/JGB spreads weigh coinciding with falling USD/JPY
• 5 & 10yr UST/JGB spreads have most significant correlation with USD/JPY
• USD/JPY has fallen from 113.97 to reach 113.32
• Minor stops were hit below 113.50, but decent bids trail down
• Support located @113.28 pivot point with more bids likely circa 113.11 tenkan
• In Asia there was some talk of stops being sub 113.00

EUR/CHF
• Pullback in EUR/CHF offers up better buying opportunities. 1.1057-27 today
• Previous resistance at 1.10 is now support and bids are likely there
• Cross almost reached 76.4% of the 2016 range at 1.1063 yesterday
• Intraday easing tests close to upper 30-d bolli at 1.1023
• USD/CHF fail 0.9687 61.8% of Jun 0.9770-0.9554 drop & closed below Tues
• Falls from 0.9696 (Tues high) to threaten the 10-day MA by 0.9620 today
• Unlikely to see any significant break ahead Yellen testimony @ 14GMT
• Swiss Producer & Import Prices on Thurs the next local data

GBP/USD
• Profit-taking on GBP shorts helped inflate cable to 1.2865 after UK data
• Ex-bonus earnings +2.0% vs +1.9% f/c, jobless rate 4.5% vs 4.6% f/c
• 4.5% = lowest rate since 1975. Employment rate 74.9%, record high
• 1.2812 was 2wk low pre-UK data after dovish steer from Broadbent
• 1.2842-1.2865 was Asia range

USD/CAD
• USD/CAD rose from 1.2894 to 1.2930 during the European am
• BoC rate decision 1400GMT, 25bp hike to 0.75% expected
• Accompanying statement of prime interest unless unchanged shock
• Quarterly BoC MPR also due 1400GMT. Poloz briefing starts 1515GMT
• 1.2944 (Tuesday high) & 1.3000 are USD/CAD resistance levels

AUD/USD
• AUD/USD based at 0.7643 during European am after retreating from 0.7664
• 0.7664 = eight-day high in Asia. 0.7643 was Tuesday's high
• Yellen testimony on US monetary policy at 1230GMT/1400GMT
• 1.0562 = low water-mark for AUD/NZD since 6wk peak of 1.0594 in Asia

NZD/USD
• NZD met headwind just shy of 0.7245 after rising from 0.7216 (Asia low)
• 0.7245 was last week's low. 0.7224 = low since 0.7245 threatened
• 0.7202 = 19-day low Tuesday after NZD longs liquidated
• AUD/NZD extended north to threaten 1.06 in Asia (Wednesday)

Chart - (Source:ThompsonReuters)

CHF/JPY overbought, risk tilted lower
Overbought technicals, including the slow stochastic, coupled with Monday's Doji reversal signal, point to a lower CHF/JPY. If the signals are correct then a correction of the June to July 112.50 to 118.60 rise is likely. The 38.2% retrace is the minimum technical requirement for a correction and those that sold at the highs are hopeful of a move below that Fibo at 116.27 to confirm a retracement is underway. A close under the 38.2% could then bring the respective 50% and 61.8% Fibos into play at 115.55 and 114.83. The 21-DMA at 116.14 is close to the aforementioned 38.2% Fibo and a break would reinforce the bearish structure. Current intraday easing sees the cross threaten 117.58 after probing back below the weekly Bolli at 117.87 which reinforces the weakening view. Chart http://reut.rs/2tHjorE   

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.  

• EUR/USD: 1.1300 (630M), 1.1360 (398M), 1.1375 (356M), 1.1400 (659M), 1.1425-30 (930M)
• AUD/USD: 0.7525 (353M), 0.7595 (400M), 0.7625 (249M)
• USD/CHF: 0.9525 (365M). GBP/USD: 1.2700 (444M), 1.3000 (430M)
• EUR/GBP: 0.8860 (331M), 0.8805-10 (350M)
• USD/JPY: 113.00 (326M), 114.00 (242M)
• EUR/SEK: 9.6850 (294M)

Economic Data (GMT) - (Source:ThompsonReuters)

• 14:00 Atlanta Fed Business Inflation Expectations (Jul) (prev +2.0% y/y)
• 14:30 US EIA Weekly Petroleum Status Report
• 15:00 US TR/IPSOS Primary Consumer Sentiment Index (Jul) (prev 62.77)
• 15:00 CA TR IPSOS PSCI (prev 53.43)
• 16:00 CA BoC rate decision (mkt +0.75%, prev 0.50%)


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

• 12:30 Chair Yellen speaks at the 2017 Monetary Policy Report to the Congress
• 14:00 Yellen delivers semi-annual monetary policy testimony before House Fin Svcs Cmte
• 18:00 Beige Book
• 18:15 Fed's George speaks on the economic outlook and Fed's balance sheet

 

Topics: US FX Market Open

 

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