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US FX Market Open – Thursday, May 5, 2016: DOLLAR BETTER BID AND EM KNOCKED

Posted by Marge Maresca on May 5, 2016 7:25:23 AM

 

 flodo.jpg

Overnight Events

• USD/JPY +0.3%, EUR/USD -0.5%, GBP/USD -0.3%, AUD/USD +0.1%
• DXY +0.5%, Brent +2.00%, Gold +0.05%, Iron -5.3%, Copper -1.5%
• UK Apr Service PMI 52.3 vs 53.7 prev, 53.5 exp-Low since Feb 2013
• Fitch in Asia: Japan's NIRP struggling to find traction - Rtrs
• ECB-Economic recovery to proceed but risks remain tilted downside Rtrs
• Australian Treasurer says Lowe to replace retiring RBA Gov Stevens
• Turkey may have to consider whether  TRY is overvalued- Presidential adviser
• China Caixin April Services PMI Falls to 51.8 (March 52.2)
• Australia March Retail Sales 0.4% M/M S/Adj (Reuters Poll +0.3%)
• Moody's: Budget Constraints Leave Australian Public Finances Vulnerable

Currency Summaries

EUR/USD  
• EUR/USD sideways in Asia 1.1480-94, lower to 1.1433 in Europe
• No obvious trigger but USD solid since spike on soft ADP data
• Strong labour costs a possible influence yesterday
• Today perhaps event risk with a USD bid natural ahead Friday's payrolls
• Weakening techs also undermining recent EUR/USD longs
• 100-HMA @ 1.1492 now resistance. 200-HMA @ 1.1400 a target

USD/JPY
• Solid supply persists at 107.45, which was Wed's high
• 107.40 has been the peak posted in London today, up for the 106.89 Asia low
• If spot breaks 107.45, this will put pressure on the upside
• 107.98 is an important Fibo which should limit gains
• Large 2.1B NY cut option expiry likely to attract in early NY
• EUR/JPY sees a range of 122.69-123.10 so far today
• Limited trading in Asia on last day of Japanese "Golden Week" holiday

EUR/CHF
• EUR/CHF again banging into the daily cloud top at 1.1005
• 11-day assault on the cloud top and again stalling seen
• Despite the cloud holding the cross looks supported
• SNB presence on dips adds weight to the eventual bull break call
• USD/CHF bid and extending Tues strong reversal
• Spot plays 0.9573-0.9619: Resistance thick to 0.9650
• Chart: 1)  http://reut.rs/23rfz1r 2) http://reut.rs/23rk8Jc
 
GBP/USD   
• GBP/USD elicited support pre-1.4460 after UK service PMI miss
• 1.4460 was Wednesday’s low. UK service PMI 52.3 vs 53.5 f/c
• Real money demand aided half-cent rise from pre-1.4460 low
• EUR/GBP fell to a European am low of 0.7882 amid EUR/USD losses

USD/CAD
• USD/CAD elicited support at 1.2815 in early European trade
• 1.2815 is 38.2% of Wednesday’s rise from 1.2699 to 1.2886
• 1.2853 = rally high from 1.2815. Ensuing retreat based just shy of 1.2815

AUD/USD     
• AUD/USD met headwind pre-0.7517 after extending north from 0.7447
• 0.7514 = early Europe high. 0.7467 = ensuing low. 0.7517 = Wednesday high
• Slide from 0.7514 influenced by lower iron ore & copper prices
• 0.7447 was 7wk low Weds. Lowe to succeed Stevens as RBA chief in Sept

NZD/USD
• NZD/USD elicited support pre-0.6861 in early European trade
• 0.6861 was Wednesday’s 1wk low. 0.6911 = intra-day high

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 vols a touch softer but still wary of 105 barrier breach (shorts below)
• No change to EUR/USD vols despite spot setback  – 1mth propped by ECB
• AUD vols firm since RBA. CAD vols and RR gain with spot up 400+pts
• USD/TRY 4% rally lifts 1wk by 10.0 vols to 18.0 and 1mth by 4.0 to mid 14’s
• O/n options not pricing much for NFP – EUR 77 pips, JPY 94 pips, AUD 57 pips
• GBP volatility keeps vols bid – 1wk gets MPC and inflation rpt – cost 185 pips

Economic Data(Source:Bloomberg)

May5.png

Topics: US FX Market Open

 

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