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US FX Market Open – Monday, November 28, 2016: Equity re-balance leaning on USD

Posted by Marge Maresca on Nov 28, 2016 7:29:15 AM

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Overnight Events

• USD/JPY -0.85%, EUR/USD +0.45%, GBP/USD -0.45%
• DXY -0.1%, DAX -0.75%, Brent -0.15%, Iron +4.5%, Gold +0.6%
• EZ Nov Bus. Climate vs 0.55 prev, 0.57 exp
• EZ Nov Econ. Sent. Vs 106.3 prev, 107.00 exp
• EZ Nov Ind. Sent vs -0.6 prev, -0.5 exp
• EZ Noc Cons. Conf. Final vs -8.0 prev, -6.1 exp
• EZ Oct y/y M3 4.4% vs 5.0% Rtrs poll, 5.0% prev
• Swiss sight depos increase in latest week: Both total and domestic
• Swedish Oct R.Sales surprise topside: +2.4% y/y vs +0.6% prev
• US crowds pick up slightly on Black Friday, online sales jump – Reuters
• BoE’s Carney wants lengthy Brexit transition for UK firms – Sunday Times
• Renzi faces pressure to stay in office as Italy referendum defeat looms–Rtrs
• Fears mount of multiple bank failures if Renzi loses referendum – FT
• ECB Coeure – Vital that Greece bailout succeeds, fourth not an option – Rtrs
• Saudi EnergyMin – Oil market would balance even without output cuts –Rtrs

Currency Summaries

EUR/USD  
• EUR/USD corrects higher to 1.0686 in Asia
• Gives a little of that rally back in Europe which trades 1.0632-69
• Strong month-end buying of EUR/GBP reported
• Today is spot value month-end, often a source US corp USD buying
• Month-end selling of dollars is eyed due to equity related rebalancing
• Big US data week. Forecasts suit a market long USD into the event
• 1.0500 or 1.0850 break needed to shake things up.

USD/JPY  
• USD/JPY tumbled from 113.01 session high to hit 111.36, before stabilising
• Support found ahead of rising tenkan line @111.23
• Fall being blamed on position adjustments due to month-end spot date
• Japanese exporters said to be heavy sellers as fiscal year-end looms
• 5yr UST/JGB yield spreads narrowed, but not same magnitude as USD/JPY fall
• Hourly hammer shows fight back by bulls

CHF
• USD/CHF off 1.0% fm Thurs 1.0192 hi: EUR/CHF up nr 1.0% since Nov 18
• Yield plays/US Dollar moves still dictating terms for CHF with SNB in the mix
• Latest sight depo data hints at SNB FX activity
• Good news out of Italy and less dovish ECB needed to aid SNB mission
• EUR/CHF off 1.0770 hi but supp @ 1.0725-35: Chart: http://reut.rs/2gy9vTT
• USD/CHF supp.1.0068 Nov 22 low:  Chart: http://reut.rs/2fHEkrq

GBP/USD
• GBP/USD fell more than a cent to threaten 1.2402 during Ldn am
• 1.2402 = Nov 24 low. 1.2515 = early Ldn high. 1.2532 = 2wk high in Asia
• Think tank call for judicial review of UK govt’s EEA position latest Brexit uncertainty
• EUR/GBP tested 0.8561 after tripping stops above 0.8540 during European am
• 0.8561 = 76.4% of 0.8592 (Nov 23 high) to 0.8460 (Nov 24, 10wk low)
• Month-end demand mooted as factor in rise through 0.8540 (Asia high)

USD/CAD
• USD/CAD held sub-1.35 thru European am after sliding from 1.3537 to 1.3460 in Asia
• Third recent failure pre-1.3540 (prior failures on US Thanksgiving & Black Friday)
• Option barriers tipped at 1.36. Large 1.3600 expiry Tuesday, $890mn strike

AUD/USD    
• AUD/USD ran into resistance pre-0.75 after extending north from 0.7434
• 0.7500 = Nov 17 high. 0.7493 = European am high. 0.7434 = Asia low
• AUD gains influenced by higher commodity prices: zinc 9yr high Monday
• 0.7523 (200DMA) resistance beyond figure. 0.7524/25 = Nov 11/14 lows

NZD/USD
• NZD/USD topped out circa 0.71 after probing above 0.7096 (Asia high)
• 0.6985 was Black Friday low, before profit-taking on shorts boosted NZD

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)

• 1 week EUR/USD vol propped by Italian referendum risk – 12.0 or 141 pips
• USD/JPY off sharply since Friday, gamma and downside strikes bid
• USD/CAD 1 week vols 10.0 or 150 pips break even over OPEC/Jobs data
• GBP vols heavy as broader ranges hold  - 1wk propped by events
• Stand out expiries EUR  1.0650 (1.4BLN), 1.0700 (2.8BLN). JPY 112.00 (534M)

Looking Ahead - Economic Data (GMT) - (Source:ThompsonReuters)

• 15:30  Dallas Fed Texas Mfg Outlook prev -1.5

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

• 14:45  FedTrade 30-yr F.Mae/Fr.Mac max $2.500 bln
• 19:30  FedTrade 30-yr Ginnie Mae max $1.225 bln

 

Topics: US FX Market Open

 

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