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US FX Market Open – Tuesday, April 11, 2017: Risk aversion pushes EUR/JPY under 117.00

Posted by Marge Maresca on Apr 11, 2017 7:30:35 AM


Overnight Events

• EUR/USD -0.1%, USD/JPY -0.2%, EUR/JPY -0.1%, DXY -0.1%
• DAX -0.2%, FTSE -0.5%, Brent -0.3%, Copper +0.3%, Gold +0.2%
• EUR/JPY falls to 4-month low at 116.88, recovers to 117.30s
• Yen gains as N. Korea, Syria spark geopolitical jitters - Rtrs
• EZ Feb Ind production -0.3% m/m, 1.2% y/y vs prev 0.3%/0.2% rvsd. 0.1%/2.0% f/c
• DE Apr ZEW Economic sentiment 19.5 vs prev 12.8. 14.0 f/c
• DE Apr ZEW Current conditions 80.1 vs prev 77.3. 77.7 f/c
• UK Mar CPI +0.4% m/m, +2.3% y/y vs prev 0.7%/2.3%. 0.3%/2.3% f/c
• UK Mar PPI core output +0.3% m/m, +2/5% vs prev 0.0%/2.4%. 0.2%/2.5%  f/c
• UK Mar BRC Retail sales -1.0% y/y vs prev -0.4%
• Swedish Mar CPIF 1.5% y/y vs +1.7% y/y f/c
• German GDP growth seen topping estimates in 2017, 2018 - sources - Rtrs
• Explosion rocks southeastern Turkish city of Diyarbakir - witness - Rtrs
• Melenchon ahead of Fillon in new Ifop first round French election poll - Rtrs

Currency Summaries
• EUR/USD above Mons 1.0607 peak, to 1.0613 vs 1.0582 Asia low
• EUR/JPY 117.42 vs 116.88, EUR/GBP 0.8545 vs 0.8522 early lows help
• Resistance 1.0601-22 hourly cloud, Daily cloud 1.0585-1.0615, 10DMA 1.0623
• US yields middle of the Fri-Mon recovery range. Little effect from DE ZEW
• Volumes light as Easter holidays loom. Next day vol break even just 35 pips
• 1.0605 expiry today (396mln). Wednesday sees 1.8bln between 1.0640-55
• Yen demand dominating early Europe trade: Stocks off and risk off
• EUR/JPY weakness a key driver too as French politics lean on EUR
• Much touted 110.00 barriers back in the frame: Bids ahead, stops below
• Talk bids 110.30-109.90: 110.30 200WMA: Chart:
• 110.17 post NFP low and 110.13/11 the Apr 7 and Mar 27 lows behind
• EUR/JPY Fibo bear tgt @ 116.58 50% 109.30-123.87: Chart:
• Surprising yen safety play given geographical proximity to N.Korea

• EUR/CHF lower to 1.0668, lowest since Mar 3. Swift bounce. 1.0682 recovery high
• SNB bids upper 1.06s, hard at work to keep CHF from strengthening
• 3rd break below 76.4% Fibo at 1.0677 Feb-Mar 1.0631-1.0825 rise, no close under
• USD/CHF lower from Mon's 1.0108 peak. Extends farther into the cloud
• Cloud base is at 1.0053. Supported by 100-HMA at 1.0065 intraday
• 1.0090-1.0067 European range. 1.0094 Asia high
• USD/CHF may have seen its peak. Monday Doji reversal, CHF safe haven flow

• GBP/USD rose to threaten 1.2450 after 4.30am ET release of UK Mar inflation data
• Annualized CPI came in at 2.3%, as per Feb. CPI is expected to rise in Apr (data due May 16)
• 1.2450 is a former support turned resistance level (1.2451 was post-NFP high)
• EUR/GBP rose to threaten 0.8550 after matching 0.8522 after the UK inflation data
• 0.8522 = early Europe low (0.8517 = Asia low). 0.8550 was Monday’s early Europe low

• USD/CAD revisited 1.3315 during European am as CAD continued to benefit from higher oil
• 1.3315 = 8-day low in Asia. $53.23/barrel = 5wk high for WTI in Asia

• AUD/USD met fresh headwind just shy of 0.7515 after firming from 0.7494 (Asia low)
• 0.7515 option expiry for NY cut, A$399mn strike. Another 0.7515 expiry Wednesday
• 0.7516 = 100DMA. 0.7514 was Asia high. 0.7476 was Monday’s 12wk low

• NZD/USD has tested 0.6942 (Asia low) after retreating from 0.6955 (early Europe high)
• 0.6921 (Monday’s 4wk low) & 0.6900 are support levels. 0.6969 was Asia high


Timing could be everything for Q2 BoE rate votes
Sterling could get a boost if one or more MPC members join Forbes in voting for a BoE rate hike in May and/or June. The release dates for April and May UK ONS inflation statistics suggests there is greater probability of a 7-2 or 6-3 vote in June than May. April's annualized UK CPI inflation number is expected to come in higher than the 2.3% for February and March. However, the number will not be revealed until five days after the May 11 BoE monetary policy announcement. In contrast, May's UK inflation data will be released on June 13--two days before the next-but-one BoE MPA. Saunders and/or McCafferty are the most likely MPC members to join Forbes in voting for a rate hike before she exits the MPC mid-year. McCafferty last month said "don't know" when asked if he would vote for a rate rise in May.

Today’s events

Option Expirations(Source:ThompsonReuters)

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.  

• Syria and N/Korea woes keep make for more risk averse trading
• Vols not too dissimilar on the week – French risk the major prop
• 2wk gets first round, 1mth 2nd round – big premium for EUR vols/puts
• EUR/JPY 1mth extends post Brexit high to high 17’s, weaker spot helps
• AUD and NZD vols remain propped – NZD 1mth gets RBNZ now

Economic Data (GMT) - (Source:ThompsonReuters)

• 11:00  NFIB Small Business Optimism Index (Mar) prev 105.3
• 13:55  Redbook Weekly Same-Store Sales Index prev +1.3% y/y
• 15:00  JOLTS (Feb) prev job openings level 5.626 mn
• 18:00  Small Business Credit Survey: Report on Employer Firms (2016)

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

• 16:45  FedTrade 30-year Fannie Mae/Freddie Mac securities (max $1.275 bn)
• 18:45  FRB Minneapolis's Kashkari Q&A session at Minnesota Business Partnership meeting; Minneapolis, MN
• 19:00  Discount Rate Meeting Minutes


Topics: US FX Market Open


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