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US FX Market Open – Thursday, April 21, 2016:EUR/USD TIGHT AHEAD OF ECB MEET

Posted by Marge Maresca on Apr 21, 2016 7:20:57 AM




Overnight Events

• EUR/USD +0.07%, USD/JPY -0.1%, GBP/USD +0.3%, AUD/USD +0.25%
• DAX -0.2%, Brent +0.6%, DXY -0.05%, Gold +1.34%
• Riksbank unchanged rates but QE extended SEK 45bln H2
• EUR/SEK dips to 9.1150 vs 9.1750 into the CVB decision
• CH Mar Trade Bal. CHF2.163bln vs rvsed 4.022bln prev
• FR Apr Business Climate 104 vs 102 prev, 101 exp
• UK Mar PSNB Ex-Bks GBP4.769bln vs 6.937bln prev, 6.0bln exp
• UK Mar PSNB GBP4.165bln m/m vs 6.333bln prev, 5.5bln exp
• UK Mar PSNCR GBP 16.598bln vs -381mln prev
• UK Mar R.Sales +2.7% y/y vs 3.6% rvsd prev, 4.4% exp
• Ex-BoJ Iwata – BoJ must cut key rate to -1.0% to put away deflation
• Japan's ruling bloc eyeing summer parliamentary session – Nikkei
• Moody’s – Rated China property developers credit quality to remain weak
• NZ April ANZ/RM consumer confidence index 120.0, March 118.0

Currency Summaries

• EUR/USD 1.1282-1.1310 ahead of the ECB meeting
• One-month EUR/USD vol sinks to lowest since Dec 2014
• Options price moves on ECB today at just 80 pips
• Positive environment raises risk of more Fed tightening
• 4bp rise last 24 hours to price +28bp from Fed next 12 months
• Commodity & stock gains may boost interest in EUR funded carry

• USD/JPY in a holding pattern below 110.00
• Lags the rise in Nikkei Index up 2.7%
• Range has been 109.52-109.90 so far today
• Lag highlights decent offers ahead of 110.00 capping spot, stops above 110.00
• Japanese back buying foreign bonds according to data
• USD/JPY 1wk vol gets BoJ, topside sought
• Important tech levels to watch: 108.77, 109.90, 110.00 & 110.28
• NY cut expiries @108.75-90 (660M), 109.50 (1B) and 110.00 (771M)
• EUR/JPY has seen 123.76-124.16

• EUR/CHF on cusp breaking over daily cloud:
• Last similar move in early Jan saw pair gain 3.5%
• Cross plays 1.0964-1.0985 and just edging lows into NY
• One month vol back to levels last seen when 1.20 floor in place
• Dearth of option interest in EUR/CHF:
• EUR/CHF break could see little opposition, risk vacuum, rapid CHF drop
• GBP/USD fell to 1.4308 shortly before release of very weak UK ONS retail sales data
• 1.4300 was traded low after official 4.30am ET data release. 1.4376 = ensuing high
• Sterling eliciting support from 5 good news polls for anti-Brexit campaign this week
• Latest of 5 was ComRes poll showing 51% of Brits want to remain in EU vs 40% leave
• EUR/GBP has dropped to test 0.7864 (Weds 3wk low) from 0.7910
• E1bn 0.7865 expiry Friday. 0.7910 was knee-jerk high on weak UK retail sales data

• USD/CAD was helped off 1.2628 (early Europe low) by profit-taking on shorts
• 1.2670 = European am peak & high water-mark since Wednesday’s 1.2593 9mth low
• Offers expected near 1.2700: there are 1.2700 option expiries today & Friday

• AUD/USD threatened 0.7830 during the European am amid higher commodity prices
• 0.7830 was Wednesday’s 10mth high. 0.7827 was Tuesday’s high
• AUD/NZD rose to threaten 1.1240 (last week’s high) during the European am
• Huge 1.1200 option expiry Friday, AUD 4.4bn strike

• NZD/USD has eased to 0.6951 under the influence of an article
• ‘English ramps up pressure on RBNZ board over Wheeler’ is headline of article
• 0.6951 = low water-mark for NZD/USD since Tuesday’s 10mth peak of 0.7055
• Interest rate futures suggest 47% chance of 25bp RBNZ OCR cut next week

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)

• EUR/USD: 1.1240-45 (1bln), 1.1320 (383mln), 1.1400-15 (1.3bln)
• USD/JPY:  109.50 (1bln), 110.00 (771mln)
• AUD/USD: 0.7800 (875mln) , AUD/JPY:  84.50 (438mln)
• USD/CAD: 1.2700 (315mln) 

Chart -  NZD/USD likely to see deeper correction (Source:ThompsonReuters)
NZD/USD reached a 2016 peak at 0.7055 on Tuesday, which was above the 30-day upper Bollinger-band signalling an overbought market. Subsequent correction and close back below the 30-day upper Bollinger-band highlights the near-term risk for continued weakness. Scope is for a spiral lower through 0.6888 – 23.6% retrace of the 0.6348-0.7055 (January-April) rise - a close below which will unmask the rising 30-DMA which is currently at 0.6825. Bulls might take comfort for the continued fourteen-day momentum positive readings, but the risk is growing for negative numbers in coming sessions which would also signal a further shift in risk to the downside. A test but failure to close below the Fibo 0.6888 level will be a decent sign that medium-term bulls are re-emerging.

Economic Data(Source:Bloomberg)Apr21data.png


Topics: US FX Market Open


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