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US FX Market Open – Monday, September 26, 2016: Nervous calm ahead of presidential debate

Posted by Marge Maresca on Sep 26, 2016 7:56:44 AM

debaters.png

Overnight Events

• USD/JPY -0.52%, EUR/USD +0.16%, GBP/USD -0.23%
• DXY -0.03%, DAX -1.4%, Brent +1.45%,  Iron +0.12%
• DE Sept IFO Bus Climate 109.5 vs rvsd 106.3 prev, 106.4 exp
• DE Sept IFO Curr Conditions 114.7 vs rvsd 112.9 prev, 113.00 exp
• DE Sept IFO Expectations 104.5 vs 100.1 prev, 100.2 exp
• UK Aug BBA Mtg Approvals 36.997k vs 37.662k prev
• IT Jul Retail Sales -0.2% y/y vs +0.8% prev
• BoJ Kuroda – deepening negative rates, lowering l/t rate main easing means
• BoJ official- BoJ not sending message that it has done enough
• BoJ’s Kuroda- G7, G20 countries should work together for FX stability
• Kuroda – closely watching how FX moves affect Japan’s economy
• BoJ’s new framework faces test as market to scrutinize bond ops – Rtrs
• Japan has most to lose from global trade backlash – Rtrs
• Asia cull makes Goldman Sachs look rattled – Rtrs BreakingNews
• CFTC IMM CTA data - Specs cut USD longs for second week

Currency Summaries

EUR/USD   
• EUR/USD very slightly higher (1.12225-44) in Europe after a big IFO beat
• IFO hits a 28-month high at 109.5 (106.3 f/c) & prior 106.2
• Expectations 104.5 vs 100.2 f/c. Current conditions 114.7 vs 113.0 f/c
• Limited reaction has much to do with a lack of speculation
• Trendless for months EUR/USD vols have sunk to 2-year lows
• DAX weighed (-1.6%) as Trump draws levels with Clinton before head-to-head

USD/JPY  
• USD/JPY lower in Ldn after lacklustre Asia
• Spot has fallen from 101.17 to 100.44 so far today
• Nothing Japanese policymakers have done so far has curbed yen strength
• Outside of MoF intervention, a temporary shock, hard to see what Japan can do
• Japanese policymakers clearly nervous above 100.00 and 99.00 breaking
• Market short gamma below these levels, below could be messy

EUR/CHF
• EUR/CHF Marginally softer after Friday’s strong 1.0855-1.0914 rally
• Swiss economy seen expected to grow 1.5% 2016-IMF
• SNB's Moser says IMF shares view exchange rate overvalued
• Little to take away from Jordan speech:  http://bit.ly/2dvwr8J
• EUR/CHF holds just below 55DMA @ 1.0896 and abv cloud top @ 1.0870
• USD/CHF also softer and reflecting late Friday slide from 0.9743 high
• U.S presidential debate keeping things tight but nervous
• Chart: http://reut.rs/2cZwpY1

GBP/USD  
• GBP/USD dropped to threaten 1.2915 during the European am
• 1.2915 was 5wk low Friday. 1.2958-1.2987 was Asia range
• GBP continues to suffer on Brexit uncertainty/risk of ‘hard’ Brexit
• EUR/GBP rose to a fresh 5wk high of 0.8699 during the European am
• Brexit uncertainty/risk of ‘hard’ Brexit & IFO beat aids rise

USD/CAD  
• USD/CAD has risen to 1.3200 on risk aversion pre-Clinton-Trump debate
• 1.3149-1.3180 was Asia range. 1.3250/55 key resistance beyond figure
• USD/CAD topped out pre-1.3250 before recent slide to 1.3000

AUD/USD      
• AUD/USD elicited fresh support pre-0.7600 during the European am
• 0.7603 = European am low. 0.7606 was Asia low. 0.7609 = Friday low
• Risk of break below 0.7600 will increase if Trump outperforms in debate
• Trump/Clinton debate starts 9pm ET. 0.7630 = Asia high
 
NZD/USD
• NZD/USD broadly respected its 0.7221-0.7251 Asia range thru the European am
• Break below 0.7200 could spur some stop-loss selling
• AUD/NZD elicited support pre-1.0500 after retreating from 1.0540
• 1.0540 = Asia high. 1.0541 = pre-weekend 5wk 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)

• O/n vols underpinned in to tonight’s Trump/Clinton debate
• USD/JPY lower again, concerns over 100.00-99.00 breach
• JPY calls bid on riskies (1wk 1.4, 1mth 1.1), vols meet demand
• GBP vols up as Pound suffers – EUR/GBP eyes post Brexit peak
• EUR/USD vols still languish near 2yr lows as ranges hold
• CAD vols up again with spot – 1.3255 break would fuel demand

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

• 14:00 New Home Sales Aug mkt 597k,  prev 654k
• 14:30 Dallas Fed Texas Mfg Outlook Survey Sep prev -6.2

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

• 13:30 FRB Minneapolis's Kashkari  Symposium on "Ending Too Big to Fail"
• 15:45 FedTrade operation 30-yr Fannie Mae/Freddie Mac max $2.550 bln
• 17:30 FRB Dallas's Kaplan Q&A at independent bkrs assoc; S. Antonio

 

Topics: US FX Market Open

 

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