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US FX Market Open – Thursday, April 7, 2016: YEN RACKS UP GAINS ACROSS THE BOARD

Posted by Marge Maresca on Apr 7, 2016 7:23:48 AM



Overnight Events

• Japan ground zero for NIRP's global distortions – FX  Buzz
• Ex-MoF/IMF Shinohara: Intervention unlikely, would be ineffective – RTRS
• Shinohara: Intervention unlikely to gain G7 consent, USD/JPY fall in line with fundamentals – RTRS
• BOJ's Nagoya head: No damage to auto exports from strong yen - RTRS
• Senior Japan MoF official: Recent FX moves one-sided, will take steps if needed - RTRS
• Senior Japan MoF official: Closely watching FX market moves – RTRS
• BoJ Gov Kuroda: Will ease more via quantity-quality-rates if necessary - RTRS
• Kuroda: Trend for moderate economic recovery but output-exports weak – RTRS
• Kuroda: Inflation likely near zero for now but will accelerate towards 2% - RTRS
• MoF flow data w/e Apr 2 – Japan sell net Y50.1bn foreign stocks, Y1.5551tn bonds, buy Y65.1bn bills
• MoF flow- Foreigners buy net Y415.2bn Japanese stocks, Y30.2bn bonds, sell Y3.7700tn bills
• Japan end-March foreign reserves $1.262tn, +$7.95bn from end-Feb
• China end-March FX reserves $3.21tn vs $3.20tn from end-Feb
• Australian iron ore & steel group Arrium enters administration – RTRS
• ECB Constancio: Helicopter money not on the table – RTRS
• ECB Praet: Helicopter money “not on the table” - RTRS
• Dutch voters reject EU-Ukraine treaty, 32% turnout - RTRS
• UK Mar Halifax house prices +2.6%m/m vs -1.4% prev, 0.7% exp
• UK Mar Halifax house prices +10.1%y/y vs 9.7% prev, 9.5% exp
• UK PM Cameron urges young Britons to vote against Brexit – RTRS
• UK Govt to send anti-Brexit leaflet to every UK household - RTRS

Currency Summaries

• EUR/USD ramped through 1.1450 barriers in early Europe
• Trades 1.1454 and then comes off sharply led by GBP/USD
• Europe then focuses on a broader JPY rise
• EUR/JPY down 125.29-123.17 on the day weighing on EUR/USD
• Bullish techs favour longs into 200-HMA EUR/USD 1.1337
• French C/A deficit much wider EUR 3.9bln. Trade def -5.1 bln from 3.9bln

• Market has been piling into the yen, emboldened by Shinohara comments in Asia
• Yen strong across the board, specs eyeing trades towards 105.00
• No expectation of intervention while FX orderly
• USD/JPY has fallen from 109.90 to hit 108.02
• Resumption USD/JPY decline timed with turn in Japan inc flows
• Barriers are said to be at 108.00, this could have limited further losses

• EUR/CHF entrenched in familiar tight ranges 1.0880-1.0908 in Europe
• Rough 1.0850-1.0950 for 2 weeks now
• SNB expected to underpin EUR/CHF weakness below that range
• Influential 200-DMA @ 1.0848
• CPI/employment data tomorrow. Both more likely to spur CHF bears to action

• GBP/USD elicited support at 1.4050 after sliding from 1.4156 (early Europe high)
• More bids expected near 1.4000, inclusive of corporate interest
• 1.4006 was Wednesday’s 5wk low (early NY), before ascent to 1.4170
• EUR/GBP was helped to a European am high of 0.8117 by leveraged name buying
• 0.8117 = new 22mth high. 0.8065-0.8080 was Asia range

• USD/CAD fell to a 3-day low of 1.3019 in early European trade
• Ensuing climb to 1.3117 influenced by CAD/JPY losses
• Cross fell to a 6wk low circa 82.50 from 83.50 early Europe high

• AUD/USD has fallen by nearly a cent from 0.7637 (early Europe high)
• Drop influenced by AUD/JPY losses: cross was trading on 83 handle early Europe
• Bids expected near 0.7500 (0.7511 was Tuesday low & Mar 29)
• AUD/NZD fall to 1.1092 influenced by Arrium news: 1.1165 was Asia high

• NZD/USD has fallen from 0.6864 to 0.6793 under the influence of NZD/JPY losses
• 0.6864 = early Europe high. NZD/JPY dropped to 6wk low close to 73.50

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)

 • USD/JPY extends lows, Vols still gaining but no major panic
• 1mth up 3.0 to 13.1 since Monday, 1mth RR is 1.5 from 0.75 JPY calls
• Extremes in Feb were 16.25 in 1mth atm and 3.1 JPY calls for risk rev
• Still see buyers post BoJ topside - 3wk + expiry. JPY cross vols gain
• Vols up elsewhere. GBP short dates bid as gamma performs
• EUR/USD around large 1.14 expiries. 1.15 barriers key topside
• AUD/USD  and CAD vols stay firm but flow limited.

Chart - USD/JPY bearing down on major levels  (Source:ThompsonReuters)
USD/JPY has breached 110.35 - 61.8% retracement of 100.76 to 125.86 (2014-2015) rise and has convincingly broken below major psychological support at 110.00. Bears are now turning their attention to 106.68 - 76.4% retrace of the same 100.76-125.86 rise. Another important level is 106.55 – 50% retrace of the 75.31-125.86 (2011-2015) rise. A monthly close below 106.55/106.68 will put levels close to 100.00 at risk. Fourteen-month momentum remains negative; recovery attempts will likely prove to be merely corrective. Only a close at the end of April above 110.35 will ease pressure on the downside medium-term. Chart:

Economic Data(Source:Bloomberg)


Topics: US FX Market Open


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