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US FX Market Open – Monday May 8, 2017: Buy rumor sell fact on French polls

Posted by Marge Maresca on May 8, 2017 7:28:32 AM


Overnight Events

• USD/JPY -0.23%, EUR/USD -0.5%, GBP/USD -0.15%
• DAX -0.3%, DXY+0.1%, Brent -0.33%, Iron -0.20% Gold +0.18%
• Macron wins French presidency, to sighs of relief in Europe
• Winning margin of 66.06-33.94 percent wider than predicted
• Macron will certainly not want to punish Britain- Econ advisor Rtrs
• UK ICM poll for Sun implied  Tories may get 132 seat majority on Jun 8 polls
• UK Rallings/Thrasher in Sunday Times tipped a more modest 60 seat majority
• China exp/imp below expectations, trade surplus slightly higher – no reaction
• Merkel’s party thumps rivals in weekend regional elections
• Dutch paint co Akzo Nobel rejects 3rd t/o call frm U.S.PPG Ind. valued at E26.9 bln
• DE mar Ind. Output 1.0% vs rvsd 3.5% prev, 1.0% exp
• UK Apr Halifax Hse px 3m-y/y +3.8% vs 3.8% prev, 3.6% exp
• EZ May Sentix idx 27.4 vs 23.9 prev, 25.0 exp
• NO Mar Manufacturing Output -1.1% vs 0.0% prev, 0.5% exp

Currency Summaries

• EUR/USD just 1.1024 on break of 1.1000 options in Asia
• Traders long EUR into the event:
• Buy rumor sell fact reaction follows French election
• Support @ 100/200-HMAS 1.0943/20 & May 5 low 1.0875
• Gap after 1st round 1.0788-1.0821 could yet to be filled
• ECB Mersch says recovery gaining more traction
• German indus orders +1% March, EZ sentix 27.4 May from 23.9 March

• USD/JPY sees a 112.47-113.14 range
• EUR/JPY rose to 124.58 before relapsing to 122.99
• USD/JPY has been taking its cue from EUR/JPY as French election led
• USD/JPY moved higher in pre Sydney trading on back of EUR/JPY buying
• Asia to advantage higher levels to sell EUR/JPY & USD/JPY
• Macron victory should ensure risk assets remain in demand
• As yen favoured as funding currency should cap its rise

• Run into French election saw EUR/CHF on the rise: Up 0.67% fm Tues low
• Swiss sight depo data suggests SNB might have had some influence
• Last wk's reserve data also fits with SNB action: new soft 1.08 floor possible
• EUR/CHF trades a new 1.0865 high early Asia-1.0851-1.0881 in Europe
• Looks to hold a bid through early New York
• Macron widening lead into weekend polls underpinned: Adds supp. Monday too
• Swiss jobless and CPI data due this week
• Chart: forex

• GBP/USD met fresh headwind pre-1.30 during the European am
• 1.2987 = European am high. 1.2990 = 8mth high in Asia. 1.2984 = Friday high
• 1.3000 is an option barrier level. Stops tipped above 1.3010/20
• EUR/GBP scaled 12-day peak of 0.8517 in Asia after Macron win
• Profit-taking on EUR longs influenced ensuing fall: 0.8434 = European am low

• USD/CAD elicited fresh support pre-1.3643 during the European am
• 1.3646-1.3683 = European am range. 1.3644-1.3680 was Asia range
• On Saturday, Wilbur Ross said Canadian trade threats ‘inappropriate’

• AUD/USD topped out 3 pips shy of 0.7428 after firming from 0.7386
• 0.7428 was pre-weekend rally high from Friday’s 4mth low of 0.7368
• 0.7386 was Asia low after weak Australian building approvals data

• NZD/USD firmed to a five-day high of 0.6945 during the European am
• Kiwi benefitting from conjecture ahead of RBNZ OCR verdict/MPS Wednesday
• NZD could gain if RBNZ brings forwards hike expectation to 2018 from 2019
• US name is long NZD/JPY as its trade of the week, stop 76.90, target 79.50

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.  

• Risk premiums pared after French elections – vol curves hit
• Many curves now at long term lows – Cable, EUR, JPY vols
• 1mth expiry rolls over ECB to limit EUR related 1mth vol setbacks
• Light sales of Cable topside pre 1.30 barriers as spot gains falter
• AUD and USD/CAD vols have been slower to ease so far

Economic Data (GMT) - (Source:ThompsonReuters)

• 13:15  CA Apr Hse Starts, mkt 210k, 253.7k prev
• 15:00  Employment Trends Index Apr
• 15:00  Labor Market Conditions Index Apr

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

• 13:30  FRB St. Louis's Bullard low rate environment;  FL
• 13:45  FRB Cleveland's Mester on the economy; Chicago, IL
• 16:45  FedTrade Ops 30-yr Fannie Mae/Freddie Mac max $1.6 bln
• 19:30  FedTrade Ops 15-yr Fannie Mae / Freddie Mac max $525 mln


Topics: US FX Market Open


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