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US FX Market Open – Thursday, April 12, 2017: EUR/USD offered again after Trump rally

Posted by Marge Maresca on Apr 13, 2017 7:26:34 AM


Overnight Events

• EUR/USD -0.2%, USD/JPY -0.15%, EUR/JPY -0.2%, EUR/GBP -0.2%
• DXY -0.5%, DAX -0.25%, FTSE -0.5%, Copper +1.1%, Gold +0.1%
• EUR/JPT hits 5-month low at 115.91. EUR/GBP 6-week  low at 0.8476
• UK 10-year gilt yield falls to lowest since Oct 13 at 1.027pct
• DE Mar CPI final 0.2% m/m, 1.6% y/y vs prev 0.2%/1.6%. 0.2%/1.6% f/c
• CH Mar Producer/Import price 0.1% m/m, 1.3% y/y vs prev -0.2%/1.3%
• Putin told Tillerson why U.S.-Russian ties in bad state: Kremlin - Rtrs
• Do more to support infrastruture projects in Balkans, Germany's Gabriel tells EU - Rtrs
• Japan's Suga: FX stability vital, watching market closely - Rtrs
• IEA says global oil market now close to balance - Rtrs
• OECD endorses Japan's monetary easing, urges caution against risks - Rtrs

Currency Summaries

• Asia 1.0677-60 EUR/USD after 1.0597-1.0675 on Trump USD too strong
• Lack of follow-through encourages sellers in Europe
• EUR/JPY takes the strain thanks to a fairly risk averse environment
• European range just 1.0638-77, low just ahead 200-HMA 1.0636
• 21-DMA an influential pivot above @ 1.0713

• USD/JPY stages weak bounce to 109.24 from 108.73 low in Asia
• Govt adviser Suga says watching FX with sense of urgency
• EUR/JPY trades 5-month low @ 115.90
• European range 108.85-109.24. 200-DMA 108.75
• Sell-off modestly exceeds 50% retrace major 99.00-118.66 rise @ 108.83

• EUR/CHF little changed. Stuck in tight range under 1.07. 1.0666 Wed low
• 1.07-1,0679 today. 1.0699-1.0700 tops last 3 sessions so far
• French election event risk weighs, keeps downside in focus
• Still no close under 76.4% Fibo at 1.0677 despite recent breaks
• USD/CHF new 1.0009 low in Asia but beter bid through Europe. 1.0014-1.0043

• GBP/USD rose to 1.2575 in Asia after Trump’s USD “getting too strong” view
• 1.2575 = Apr high (1.2574 = Mar 31 high). 1.2533 = European am low
• EUR/GBP elicited fresh support pre-0.8475 during the European am
• 0.8475 = 1.18 GBP/EUR. 0.8476 = 6wk low. 0.8478 was Wednesday’s low

• USD/CAD eased to threaten 1.3223 (200DMA) during the European am
• Weakness courtesy of Trump’s USD “getting too strong” view in WSJ interview
• USD/CAD was trading at 1.3325 when Trump interview published Wednesday
• Poloz/Wilkins before Senate banking, trade & commerce committee 10.30am ET

• AUD/USD extended north to threaten 0.76 early Europe as Trump/Oz jobs digested
• Australian Mar employment +60.9k vs +20k f/c. Stops tipped above 0.7600 (30DMA)
• AUD/USD was trading at 0.7475 when Trump’s WSJ interview published Wednesday

• NZD/USD extended north from 0.6910 to a high of 0.7009 during the European am
• 0.6910 was 4wk low Wednesday, just before Trump’s WSJ interview published


Positions are key to USD/JPY's direction
USD/JPY is probably only a bearish trade until those short JPY have covered their positions. Once that point is reached, and certainly if speculators get short USD/JPY, then it's likely only a matter of time before the elastic that is higher U.S. rates snaps back and takes USD/JPY back up. Speculators have remained resolutely short JPY this year but USD/JPY has spent the whole year heading down from the 118.60 peak traded Jan 3. Yet there has been very little change in 2017 to the interest rate divergence behind the surge in bullish USD/JPY positions. UST-JGB yield spreads are still far wider than they were before President Trump won the November election. The Fed says it will hike further and Japan has been a stalwart defender of its super low rate policy. USD/JPY has reached its 200-DMA which is often supportive of a currency pair's trend. A reverse in yen's fortunes may be close but positioning is key.
Chart UST/JGB vs JPY:

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

• EUR/USD: 1.06 (270M), 1.0650 (432M), 1.0550 (214M), 1.05 (938M), 1.07 (930M)
• USD/JPY: 110.00 (646M), 110.45 (300M), 111.30 (255M), 112.00 (482M)
• GBP/USD: 1.2500 (222M), 1.2475 (123M), 1.2430 (159M)
• EUR/GBP: 0.8550 (170M). EUR/SEK: 9.55 (180M)
• AUD/USD: 0.7495 (120M), 0.7600 (230M). NZD/USD: 0.7000 (200M)
• USD/CAD: 1.32 (575M), 1.3280 (726M), 1.33 (602M), 1.3435-45 (500M), 1.35 (241M)

Economic Data (GMT) - (Source:ThompsonReuters)

• 13:30  Initial Jobless Claims (Apr 8 week) mkt 245k, prev 234k
• 13:30  Continued Claims (Apr 1 week) mkt 2.028 mn, prev 2.028 mn
• 13:30  PPI-Final Demand (Mar) mkt 0.0% m/m, +2.4% y/y; prev +0.3% m/m, +2.2% y/y
• 15:00  U of Michigan Consumer Sentiment Index (pApr) mkt 96.5, prev 96.9
• 15:00  U of Michigan Current Conditions Index (pApr) mkt 112.4, prev 113.2
• 15:00  U of Michigan Expectations Index (pApr) mkt 86.0, prev 86.5

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

• 19:00  SIFMA recommends early close


Topics: US FX Market Open


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