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US FX Market Open – Monday, October 3, 2016: Sterling heavy on hard Brexit fears

Posted by Marge Maresca on Oct 3, 2016 7:40:53 AM

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Overnight Events

• USD/JPY -0.04%, EUR/USD -0.08%, GBP/USD -0.009%
• DXY -0.04%, Brent +1.12%, Gold +0.14%, FTSE +1.12%
• CH Sep Retail Sales -3.0% vs -2.2% prev
• CH Sept Mfg PMI 53.2 vs 51.0 prev, 51.5 exp
• DE Sept Markit/BME Mfg PMI  54.3 vs 54.3 prev, 54.3 exp
• EZ Sept  Markit/BME Mfg PMI 52.6 vs 52.6 prev, 52.6 exp
• UK Sept Markit/BME Mfg PMI 55.4 vs 53.3 prev, 52.1 exp
• Britain’s May says to trigger EU divorce by end of March – Rtrs
• May on collision course with Tory backbenchers over hard Brexit – Guardian
• UK Finmin Hammond- in favour if getting Brexit done ASAP Rtrs
• BoJ Gov Kuroda – Lot of room left to ease policy – Rtrs
• BoJ Tankan – Big mfg DI +6, non-mfg +18,  +7/+18 eyed
• Japan Sept mfg PMI 50.4, flash 50.3, Aug 49.5, first expansion in 7-mths
• Moody’s – Japan policy stimulus to support growth, challenges remain
• Deutsche Bank, US DOJ continue to discuss mortgage-securities settlement
• China Sept official mfg PMI 50.4, as eyed, Aug 50.4; services 53.7, Aug 53.5
• Clinton leads Trump by five points in US presidential race – Rtrs
• Hungarian PM Orban loses his migrant quota referendum

Currency Summaries

EUR/USD   
• EUR/USD 1.1221-41 in Europe mostly influenced by EUR/GBP
• EZ manufacturing activity accelerates to 53.4 Sep from 53.0
• Italy bests 50.3 f/c @ 51.0. France a 7-month high yet still contraction
• UST/Bund spreads push wider, weighing EUR/USD: http://reut.rs/2dlnZHg
• EUR 611mln expiries @ 1.1200. US ISM last 49.4 f/c 50.3 @ 14GMT

USD/JPY  
• Cloud & falling TL weighs on spot
• Cloud base is at 102.08, while falling TL @102.15
• Subdued trading with a tight 101.21-101.67 range so far
• Bids said to be clustered in size ahead of 101.00
• Option Expiries: 100.90 (891M), 102.00-05 (1.6B)

EUR/CHF
• Bid despite speed/magnitude of Frid rally: Chart: http://reut.rs/2dJV6XV
• Latest Swiss sight depo numbers fit with SNB action but not significant
• Total deposits CHF 517,318 vs CHF 517.138
• Rumours were swirling the Friday mkt of SNB support for EUR/CHF
• SNB declined to comment on intervention talk: Usual SNB response
• USD/CHF retraces some of Friday’s rally but tighter range
• Technicals highlight inability to close abv daily cloud top at 0.9737
• Swiss Sept PMI high since May @ 53.2 in Sept

GBP/USD  
• GBP/USD extended south to a 3mth low of 1.2845 pre-UK mfg PMI beat
• Losses fuelled by UK PM May’s Q1 2017 A50 trigger tip and hard Brexit risk
• 1.2902 was Asia low. 1.2894 = high after UK mfg PMI beat at 4.30am ET
• EUR/GBP rose to 0.8748 early Europe on the A50 trigger news/hard Brexit risk
• 0.8748 = 38mth high. 0.8705 = Asia high. 0.8709 = low after UK mfg PMI beat
 
USD/CAD  
• USD/CAD fell half-a-cent to 1.3080 during the European am as oil prices rose
• 1.3048 (Sept 29 low after OPEC deal) & 1.3000/30 are support levels
• Paddy Power quotes 5/2 for Trump to win US election vs 2/1 Friday
• CAD could get relief rally boost if Clinton wins: Trump very critical of NAFTA

AUD/USD      
• AUD/USD was helped to a European am high of 0.7681 by AUD-positive M&A news
• Bradken recommends A$688mn cash takeover offer from Hitachi
• 0.7641-0.7665 was Asia range. Large 0.7640 expiry for NY cut, A$814mn strike
 
NZD/USD
• NZD/USD met fresh headwind pre-0.73 after rising from 0.7254 (early Europe low)
• 0.7290 = European am high. 0.7286 was Asia high. 0.7298 was Friday high

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)

• Cable vols higher as GBP broke 1.2900-1.2850 barriers – 1mth paid 9.75-10.1
• Plenty of exotic positions still reside below post Brexit 1.2798 low
• EUR/USD vols sought as risk cover, due to low levels – 1mth 7.1 vs 5.4 realised
• JPY vols stagnate, as markets awaits clearer direction, minimal BoJ risk premium
• AUD/USD vols off highs, little premium for RBA tonight. NZD vol favored
• Most vol interest centered around 2mth-3mth expiry – US election and Dec’ Fed

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

• 12:30 CA Sept RBC Mfg PMI 51.1 prev
• 13:45 Markit Manufacturing PMI final Sep prelim 52.0
• 14:00 ISM Manufacturing PMI Sep mkt 50.5, prev 49.4
• 14:00 Construction Spending Aug mkt -0.2% m/m, prev 0.0%
• n/a   Light Vehicle Sales Sep mkt 17.10 mln,  prev 16.98 mln
• n/a   Domestic Passenger Car Sales Sep prev 4.91 mln
• n/a   Domestic Light Truck Sales Sep prev 8.52 mln

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

• 15:45 FedTrade ops 30-yr Ginnie Mae max $1.725 bln
• 18:30 FedTrade ops 15-yr Fannie Mae/Freddie Mac max $675 mln

Topics: US FX Market Open

 

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