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US FX Market Open –Thursday, July 21, 2016: YEN RALLIES HARD AFTER KURODA LATEST

Posted by Marge Maresca on Jul 21, 2016 9:36:51 AM



Overnight Events

• USD/JPY -1.0%, GBP/USD +0.1%, EUR/USD +0.07%, NZD/USD -0.5%
• DXY -0.25%, DAX -0.15%, Brent +0.15%, Iron +5.65%
• Kuroda-No need, no possibility of helicopter money - BBC Radio
• Kuroda- Don’t think any significant limit on further easing
• Swiss authorities indications laundering safeguards insufficient
• FINMA referring to 1MDB probe
• CH Jun Trade Bal. CHF3.546 vs 3.782 bln prev
• UK Jun R.Sales +4.3%   y/y vs 6.0% prev, 5.0% exp
• UK Jun PSNB GBP7.31 bln m/m vs 9.412 bln prev, 9.2 bln exp
• UK Jun PSNCR GBP14.855 bln m/m vs 4.688 bln prev
• Japan govt planning at least Y20 trln to support economy – Kyodo
• BoJ could wipe out bets on July easing – Reuters.
• BoE MPC Forbes – No need to rush on UK rate cuts
• Forbes- Brexit adjustment to take   time – Telegraph
• German FinMin – Economy in good shape but risks up post-Brexit – Rtrs
• Australia Q2 biz confidence index +2, conditions +11, Q1 +4, +10.
• RBNZ – NZD decline needed, inflation outlook lower
• RBNZ policy to remain accommodative, further easing likely reqd - Rtrs
• Moody’s - Emerging market debt triples since ’05, poses threat

Currency Summaries

• Short-covering has lifted EUR/USD 1.0980 Wed low to 1.1047 so far
• ECB today-no change expected but dovish Draghi the draw
• Traders are shorter EUR than they were before the March ECB
• Then ECB delivered supposed "shock and awe" policy measures
• EUR/USD went up 1.0821-1.1218 on the day, 1.1342 within a week
• ECB action today a pea-shooter in comparison to March's Bazooka
• Yet specs are even short EUR:

• USD/JPY saw a substantial drop on Kuroda headlines
• USD/JPY has fallen from 107.49 to 105.42
• Stops triggered on way down
• Some USD/JPY stops from those bid up on stimulus hopes
• Japanese exporters are said to have been ahead of 107.50
• EUR/JPY fell from 118.44 to 116.15

• USD/CHF Intraday shorts caught by 0.4% rally off 0.9844 low: FINMA probe cited
• Offers have been touted to the 0.9905 Wed high and price held at 0.9885
• Swiss authorities (FINMA) round on lax money laundering controls
• Banks linked to the scandal rocked Malaysian State Fund cited
• FINMA in May found priv-bk BSI in breach of laundering regs
• USD/CHF tough call but looks to go higher  n/t Chart:

• GBP/USD plays 1.3157 to 1.3275 and just in the 1.32s into NY
• Massive GBP/JPY move on Kuroda exacerbated impression GBP reaction to data
• As expected mixed data leads to GBP/USD short-covering
• But cause to pick tops with stops over 21-DMA @ 1.3284
• Traders are long and wrong GBP/JPY, scope for 21-DMA @ 137.59
• EUR/GBP has scope to rise as players short EUR & expect too much from ECB
• US/UK rates firmly back GBP/USD top-picking:

• USD/CAD rose from 1.3014 (early Europe low) to 1.3072 amid softer oil prices
• 1.3072 = 1wk high. 1.3037 = ensuing pullback low (1.3017-1.3044 = Asia range)
• Canadian inflation/retail sales data later this week (Friday)

• 0.7452-0.7514 range. Flirts with 0.7491 cloud top Wed/Thurs
• Yesterday's close below bearish, but cloud thick/supportive to 0.7360
• Resistance 21DMA 0.7514. Little support until 6 July low 0.7408

• 0.7017 to 0.6952 since economic assessment heightened rate cut expectation
• Recoveries capped at 0.7000. Todays high/Wed' 0.7017 low resistance
• Support daily cloud 0.6967-12, 8 June low 0.6944, 100dma 0.6917

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 EUR/USD vol prices just 75 pips over ECB. 3bln 1.10 expiry contains
• 1 week USD related vols opened higher on FOMC capture
• USD/JPY vols peak. JPY calls off lows as Kuroda comments hit spot
• Cable O/n vol prices 120 pips break even over Fri’s flash UK PMI
• AUD/USD vols drift back toward last weeks 2016 lows
• Profits booked on NZD spot and vols now. 1mth NZD vs AUD 2.0 vs 3.0

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

• 12:30 CA May W/Sale Trade mkt 0.2%, prev 0.1%
• 12:30 Initial Jobless Claims 16 Jul mkt 265k, prev 254k
• 12:30 Cont Clms 09 Jul mkt 2.130 mln, prev 2.124 mln
• 12:30 Philadelphia Fed Mfg Idx Jul mkt 5.0, prev 4.7
• 12:30 Chicago Fed Natl Activity Index Jun prev -0.51
• 13:00 FHFA House Price Index May prev +5.9% y/y
• 14:00 Existing Home Sales Jun mkt 5.47 mln, prev 5.53 mln
• 14:00 Lead Econ Ind Idx Jun mkt +0.2% m/m, prev -0.2%

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

• 15:45 FedTrade ops 30-yr F.Mae/Fr.Mac max $2.550 bln
• 11:45 ECB policy meet-Deposit Rate expected unchanged at -0.4%

Topics: US FX Market Open


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