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US FX Market Open – Monday May 15, 2017: U.S. Dollar on the back foot

Posted by Marge Maresca on May 15, 2017 7:24:22 AM


Overnight Events

• EUR/USD +0.23%, USD/JPY 0.07%, GBP/USD 0.29%, EUR/GBP -0.08%
• DXY -0.21%, DAX -0.21%, FTSE +0.18%, Gold +0.3%
• U.S Dollar retreats on Friday data fallout and N.Korea tensions
• Russia/Saudi agreement boosts oil: Brent up 2.9% at $52.3
• Putin says correct to extend oil output cut deal for nine-months
• China's economy loses momentum as policymakers clamp down on debt risks
• Behind China's Silk Road vision: cheap funds, heavy debt, growing risk
• IT Apr Consumr prices yy 1.9% vs revsd 1.9% prev 1.8%
• IT Apr CPI final yy 2.0% vs prev 2.0%

Currency Summaries

• EUR/USD firmer since Fri's weak US infl' data hurt US yields
• DXY broke 200DMA 99.30 Fri for 99.164, hits 99.027 today but finds a base
• CFTC data shows EUR long for first time since May 2014
• EUR extends Fri's 1.0935 high to 1.0947. 2bln 1.0950 expiry today
• Sellers tipped 1.0950-75 as well as that option delta hedging to cap
• Little tech resistance now until 2017 high 8 May 1.1024

• USD/JPY range has been 113.12-113.73 so far this session
• Bulls setback due to weekly failure to close above 113.40
• 113.40 - 50% of the 118.66 to 108.13 fall
• Decent amount of bids have built up around 113.00 near the 100-DMA
• Stops likely to remain clustered above last week's 114.38 peak
• Speculative accounts increasingly bullish on USD/JPY
• USD/JPY 30/60-day correlation significant across UST-JGB curve

• EUR/CHF retracement risk remains. 38.2% Fibo of Apr-May rise at 1.0913
• Off Friday's 1.0921 pullback low, tight 1.0950-1.0938 in play in Europe
• Swiss domestic sight deposits rise to 484.541bln w/e May 12 vs 480.512
• Total also up. Data suggests SNB activity despite softer CHF
• Friday's USD/CHF retreat and bear close weigh into a new week
• 0.9996 low fm 1.0020 today. 0.9988 Fri low. 200-DMA key sppt at 0.9965
• 50% & 61.8% Fibos of the May rise are supports at 0.9982/0.9954
• Swiss producer/import prices up 0.8% yr/yr in April

• DXY off a touch at the European open and Sterling worked a little higher
• Net USD longs down in latest wk: USD longs at lowest point since October
• Cable short contracts nearly halved: Chart: forex
• USD knocked by Friday's U.S sales data: Stg recovers from BoE 7-1 vote
• Techs showing candle hammer Friday and confirmation so far today
• Cable looks contained 1.2850-1.30 but data might provide fresh direction
• 1.30 key, barriers noted, 1.2870 supp. Chart: forex
• U.K Inflation, jobless, sales and CBI order numbers due this week

• Solid gains for oil after Saudi/Russia push to extend cuts
• Light crude up 2.5% today, tests high from 02 May at 49.28 but peaks now
• USD/CAD drops to 1.3626, bounce falters 1.3658 and heavy since
• Support 21dma 1.3609. Early Asia/days high 1.3720 resistance, but looks safe
• 2 week USD/CAD vol up 1.0 since capturing OPEC last week - costs 150 pips

• AUD extends Fri's 0.7421 recovery high to 0.7426. 4 May 0.7430 high/resistance
• Commods finding a floor now to help AUD amid softer USD/Yields
• Little in the way of resistance after 0.7430 until 21dma 0.7469
• Today/Fri lows 0.7386/69 support. CFTC data shows AUD longs cut for 6th week
• 1mth risk reversals by long term lows for AUD puts at 0.75 (2.0 pre US election)
• Option vol curve just a few ticks above 2.5 year lows. 1mth propped by FOMC

• 0.6853/0.6879 range in Asia, extends to 0.6910 early London
• Early leg-up on strong Q1 retail sales volumes data
• Next resiatance 21/30DMA's 0.6931/43, daily cloud 0.6987-0.7133
• Support after todays low comes in at Fri's 0.6827 low

Chart - (Source:ThompsonReuters)

Good chance of a EUR/USD 1.10 break
Last week's EUR/USD 1.1024 peak is in sight once more following the rebound from 1.0839 Thursday. The rise has seen spot break back inside the weekly cloud at 1.0941 and there is a good chance for a move toward the cloud top at 1.1067. The 76.4% Fibo of the November to January 1.1300-1.0340 drop is close by at 1.1073 and a viable target for long trades. A break of that Fibo would increase expectations of a full retracement to the November 1.1300 high. Friday's close above the 10-DMA is encouraging for EUR/USD bulls and the average now provides support, close by session lows today at 1.0920. The 21-DMA at 1.0862 continues to rise tracking the market higher. Only a break back under there would deter the bulls. Charts 1)  2) 

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.  

• 1mth vols now capture June FOMC to aid support, but premiums tame
• 1mth also gets UK elections/June ECB - the former not attracting much interest
• Huge EUR/USD expiry 1.0950 focal, sellers above, 1wk vol stays low 5.9/72 pips
• AUD 1mth fair value vs realised. CAD vols propped as spot moves/oil gains
• USD/JPY vols heavy as spot drops back to middle of last weeks range

Economic Data (GMT) - (Source:ThompsonReuters)

• 12:30 Empire State Manufacturing Survey (May) (mkt 7.0, prev 5.2)
• 14:00 NAHB Housing Market Index (May) (mkt 68, prev 68)

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

• 15:45 FedTrade Operation 15-year Fannie Mae / Freddie Mac (max $525 mn)
• 15:30 Treasury auctions $39 bn 13- and $33 bn 26-week bills


Topics: US FX Market Open


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