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US FX Market Open – Thursday, December 1, 2016: Markets are steady ahead of Friday’s NFP data

Posted by Marge Maresca on Dec 1, 2016 7:45:29 AM

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Overnight Events

• USD/JPY -0.2%, EUR/USD +0.35%, GBP/USD +0.25%
• DXY -0.3%, DAX -0.5%, Brent +1.0%, Iron +5.1%, Gold -0.5%
• Oil extends Wed rally: Brent hits  52.73 high before relaxing
• UK Nov N/Wide hse px +4.4% y/y vs 4.6% prev, 4.6% exp
• CH Oct Retail Sales -0.5% y/y vs -2.3% prev
• IT Nov Mfg PMI 52.2 vs 50.9 prev, 51.8 exp
• DE Nov Mfg PMI 54.3 vs 54.4 prev, 54.4 exp
• EZ Nov Mfg PMI 53.7 vs 53.7 prev, 53.7 exp
• UK Nov Mfg PMI 53.4 vs rvsd 54.2 prev, 54.5 exp
• Riksbank DepGov Skingsley – Will intervene in SEK if necessary
• Japan Nov mfg PMI – final 51.3, flash 51.1, Oct final 51.4
• China Nov Caixin mfg PMI 50.9, 50.8 eyed, Oct 51.2, output-input up
• China Nov official mfg PMI 51.7, best in two years, 51.0 eyed, Oct 51.2
• BoI - Italy’s top three banks systemically important, need buffer – Rtrs

Currency Summaries

EUR/USD  
• EUR/USD in grip option expiries EUR 4.8bln 1.0600, EUR 1bln 1.0630-50
• Quiet day widely expected anyway given NFPs tomorrow
• Tier one US data to come @ 15GMT ISM f/c 52.2 from 51.9
• Construction spending f/c 0.5 Oct after dismal -0.4% Sept
• Recent good US data largely ignored. NFP may spark big reaction
• Lots of potential fuel: http://reut.rs/2fUcUyB  

USD/JPY  
• USD/JPY took a swipe @115.00, but only managed to get to 114.83
• Decent sized barriers allegedly @115.00, large offers ahead
• Big stops are said to be clustered above 115.00
• Overall expectation is for eventual gains through 115.00
• Japanese importers and investors below, low has been 113.83
• 5yr UST/JGB spread has widened, corresponding with rise in USD/JPY
• 30/60-day log correlation between UST/JGB & USD/JPY +0.58/+0.56

CHF
• EUR/CHF comes of its 1.0816 high and consolidates losses at 1.0770
• Month-end fizz calms as we move into December
• Cross plays 1.0768-1.0785 but looks reluctant to fall further
• USD/CHF also backing away from Wed 1.0205 trend high
• Plays 1.0131-1.0174 and stalled by 10DMA at 1.0135
• Swiss Nov Mfg PMI improves to 56.4 and Oct R.Sales pick up to -0.5%
• Chart: 1)  http://reut.rs/2fUAYSb  2) http://reut.rs/2fUlopx

GBP/USD
• GBP/USD quick to recoup small losses that followed UK PMI data
• November manufacturing PMI 53.4 from 52.2 and vs 54.5 f/c
• GBP/JPY tops just short key 200-DMA: http://reut.rs/2gNCm6H
• GBP/AUD over 100-DMA-Weak OZ data adds fuel: http://tmsnrt.rs/2gBuJB1
• EUR/GBP maintains downward trend evident since GBP flash crash
• Italy referendum risk currently weighs but traders now widely short

USD/CAD
• Huge gains for oil after OPEC deal but CAD gains tempered by firmer USD
• 1.3357 low but recovered to 1.3462 by EOD Wed's. 1.3379-1.3439 today
• 76.4% fib of the 9-14 Nov 1.3265-1.3589 rally next support at 1.3341
• 55dma underpins at 1.3311. Resistance 21DMA 1.3450 then Wed's high
• Vols ease post OPEC as broader ranges hold. 1wk gets BoC now

AUD/USD     
• 0.7497-0.7374 Wed's - Good US data driving USD up
• Weak capex largely ignored. 930mln .7400-10 expiry contains today
• 0.7378-0.7420 range thus far, decent bids touted by Wed's low
• 24 Nov low 0.7364 before 21 Nov low 0.7311 then 24June  at 0.7305
• Ongoing resistance/sellers in upper 0.74's

NZD/USD
• 0.7170-0.7071 Wed’s, tight  0.7074-0.7105 today
• Hourly cloud resistance for now. 21dma above there at 0.7137
• Yesterday's and Tues's lows support 0.7170/67, then 200dma 0.7045

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)

• Short dated vols mega bid, especially EUR pairs in to Italy referendum
• 1wk also gets ECB, 2wk FOMC.  1mth rolls over new year to cap
• 1wk EUR/USD up 8.0 since Friday to 18.0 or 210 pips break even
• USD/JPY gamma bid as spot moves. Setback fears prop JPY call bias
• AUD vol demand limited while 0.7300 holds. Cable vols sidelined

Looking Ahead

Economic Data (GMT) - (Source:ThompsonReuters)

• 12:30  Challenger Job Cuts Nov prev 30,740
• 13:30  Initial Claims Nov 26 wk mkt 253k, prev 251k
• 13:30  Cont Claims Nov 19 wk mkt 2.040 mln, prev 2.043 mln
• 14:45  Markit PMI final Nov flash 53.9
• 15:00  ISM Mfg PMI Nov mkt 52.2, prev 51.9
• 15:00  Constr Spending Oct mkt +0.5% m/m, prev -0.4%
• n/a    Light Vehicle Sales Nov mkt 17.70 mln , prev 18.02 mln
• n/a    Domestic Car Sales Nov mkt 5.10 mln, prev  5.12 mln
• n/a    Domestic Light Truck Sales mkt 8.90 mln,  prev 9.18 mln
• n/a    Chain Store Sales

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

• 13:00  FRB Dallas's Kaplan moderated Q&A session; San Antonio, TX
• 13:30  FRB Cleveland's Mester at financial mkts conf; Washington, DC
• 14:45  FedTrade ops 30-yr Fannie Mae/Freddie Mac max $2.500 bln

 

Topics: US FX Market Open

 

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