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US FX Market Open – Monday, March 27, 2017: US FX OPEN - Dollar in need of healthcare

Posted by Marge Maresca on Mar 27, 2017 7:19:26 AM

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Overnight Events

• USD/JPY -1.0%, EUR/USD +0.65%, GBP/USD +1.0%
• DXY -0.27%, DAX -0.85%, Brent -0.25%, Iron -5.25%, Gold +1.10%
• DE Mar IFO Bus Climate 112.3 vs 111.1 prev, 111.00 exp
• DE Mar IFO Curr Cond 119.3 vs 118.4 prev, 118.3 exp
• DE Mar IFO Expectations 105.7 vs 104.2 prev, 104.3 exp
• EZ Feb M3 annual growth 4.7% vs 4.9% prev, 4.9% exp
• CH Domestic sight depos w/e Mar 24 CH476.34 bln vs 470.893 bln prev
• Merkel’s conservative CDU comes first in German Saarland state vote –Rtrs
• OPEC, non-OPEC committee recommends extending output cut by 6 months – Rtrs
• CFTC IMM CTA data – Specs boost net long USD bets for third straight week
• S.A Finmin Gordhan recalled from UK visit by Pres. Zuma - Rtrs
• Japanese mfg braces for possible US import tax, plan lower pay hikes – Rtrs poll
• BoJ March 15-16 minutes – Will take time for inflation   to get to 2% target
• Toshiba’s Westinghouse may file bankruptcy Tuesday, seeks Kepco aid – Nikkei
• Advisor Fan Gang – PBOC wants smooth transition to less reserves – Rtrs

Currency Summaries

EUR/USD
• EUR/USD rallies 1.0844-74 in Europe
• Strong IFO data fails to spur break Dec 8 2016 peak at 1.0875
• March IFO 112.3 from 111.0 both current conditions & expectations improve
• 200-DMA @ 1.0882 provide additional topside focus
• Huge long positions now in evidence: http://reut.rs/2nVVvuo
• S-term techs positive with support @ Mar 24 lows & 200-HMA circa 1.0760-70

USD/JPY
• USD/JPY bias remains on downside but 110.00 is huge
• There are said to be large bids on EBS between 110.00/10
• Range has been 110.12-111.25 so far
• Large option barriers @110.00, messy trading likely below
• Important tech level is 109.93 - 50% retrace of the 101.19 to 118.66 rise
• Good stops eyed on 110.00 and 109.90 breaks
• Dollar weaker after Trump healthcare failure and German CDU Saarland win

EUR/CHF
• Latest Swiss sight depo numbers suggest SNB increasingly active
• CHF intervention running at a higher level than risk off period a year ago
• How the SNB would handle a significant stock mkt turnaround open to debate
• Domestic depos CHF 476 bln vs CHF470 bln
• EUR/CHF held within a falling cloud but likely sideways to 1.0690 Apr 13 twist
• Bid from open but seen toppy @ 1.0714 cloud top; Chart: http://reut.rs/2nmpPeY
• USD/CHF now clear below 200DMA on Trump healthcare failure
• Sub-0.9800 calling while below 0.9927 200DMA: Chart: http://reut.rs/2nEgEJb

GBP/USD
• GBP/USD shorts have been squeezed en route to a 7wk high 5 pips shy of 1.26
• Friday’s IMM data showed fractional rise in net GBP short position to new 22yr high
• 1.2475 was Asia low. Large 1.2600 expiry for Friday’s month-end NY cut, £1.1bln strike
• EUR/GBP has fallen to 0.8632 under the influence of GBP position adjustments
• 0.8695 was early Asia high after EUR rose on CDU’s Saarland win. 0.8661 = Friday’s high

USD/CAD
• USD/CAD tested 1.3324 (Asia low) during the European am amid soft US equity futures
• Friday’s IMM data showed CAD longs slashed in week to March 21
• Move fuelled flip to net CAD short positions from net CAD long position
• First new CAD short position for 9 weeks/biggest net CAD short for 12 months
• Soft oil prices are lending support to USD/CAD: WTI $47.55/barrel at 6.15am ET

AUD/USD     
• AUD/USD revisited 0.7638 (Asia high) during the European am
• Bids are tipped at 0.7600-10, corporate interest mooted. 0.7610 = 55DMA
• 0.7610 was early Asia low. 0.7604 = Friday’s low. Stops tipped sub-0.7590

NZD/USD
• NZD/USD has gravitated towards 0.7070 since plumbing an early Asia low of 0.7002
• Large 0.7070 option expiry for NY cut, NZ$851mn strike
• AUD/NZD revisited 1.0809 during the European am
• 1.0809 was 3wk low in Asia after stops below 1.0830 were tripped

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.  

• 1 month expiry vols propped since rolling over 1st round French vote last week
• Risk aversion boosting Cross/JPY vols and JPY calls higher today
• USD/JPY 1mth vol 2.0 above daily realised and 2.5 above post FOMC (14mth) low
• 110.00 barriers key for further vol gains/sustaining current highs
• GBP/USD vols near recent/long term lows, as is the 1mth GBP put bias
• Short covering of EUR/USD topside as we near key resistance upper 1.08’s

Economic Data (GMT) - (Source:ThompsonReuters)

• 15:30  Dallas Fed Texas Mfg Outlook Survey Mar prev 24.5

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

• 16:45  FedTrade 30-year Ginnie Mae securities max $1.125 bln
• 18:15  FRB Chicago Evans at Global Interdependence Center event Madrid, Spain
• 23:30  FRB Dallas Kaplan on econ conditions/monetary policy; College Station, TX

Topics: US FX Market Open

 

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