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US FX Market Open – Tuesday, April 18, 2017: British PM May calls for early election

Posted by Marge Maresca on Apr 18, 2017 8:26:23 AM


Overnight Events

• EUR/USD -0.1%, USD/JPY -0.2%, GBP/USD -0.1%, EUR/GBP +0.2%
• DXY -0.1%, DAX -0.7%, FTSE -1.2%, Copper +0.7%, Gold +0.15%
• British PM May calls for early election on June 8
• Sterling recovers after BBC reports UK PM May wants early election June 8
• Copper slips on geopolitical tensions, aluminium sees China boost
• SNB domestic deposits rise to 480.63bln w/e Apr 14vs prev 476.198
• Japan, US did not discuss currencies in economic talks - gov't official - Rtrs
• Japan ratings affirmed at 'A+/A-1' outlook remains stable - Rtrs
• Trump promised Turkey's Erdogan close cooperation on Syria, Iraq, PKK - Turkish sources - Rtrs
• Japan's Aso: Japan, U.S. agree to combat unfair trade practices - Rtrs
• Swiss see no fallout from U.S. currency manipulation list inclusion - Rtrs

Currency Summaries

• EUR/USD inches higher to 1.0660 in Europe (1.0642-60 range)
• Risk aversion in financial markets one likely underpinning for EUR
• Macron edges ahead Le Pen in polls for 1st round French election
• Leads slight narrowing EZ vs bund spreads, less stress helps EUR
• EUR 6.4bln vanilla 1.0600-50 expiries widely seen anchoring spot today

• USD/JPY up in early Europe to 109.16
• Risk-off mood leads to subsequent drift back below 100-HMA 108.92
• Risk aversion intensifies on news UK PM announcement
• USD/JPY falls back onto hourly Ichimoku cloud (108.76-42)
• Stocks dive, Nikkei futs -100in Europe, FTSE -1.1%, E-mini -0.4%
• 108.00 barriers back on the radar scope as risk aversion dominates

• Cross remains stuck in a tight range below SNB's previous 1.07 soft floor
• Plays 1.0694-1.0679 today. 1.0660 Friday low, 1.0658 lower Bolli supports
• Latest Swiss depo data highlights SNB action
• USD/CHF 1.0047-1.0023. Risk aversion keeps pressure on the downside

• GBP/USD rose to 1.2595 after UK PM May called snap election for June 8
• 1.2515 was low on May statement event risk. 1.2608 = early Ldn high
• EUR/GBP plumbed 8wk low of 0.8451 pre-May statement event risk
• 0.8512 was high on statement event risk. 0.8462 = low on snap election news

• USD/CAD has risen to 1.3369 under the influence of softer oil prices
• 1.3369 = 8-day high. 1.3334 was Asia high

• AUD/USD fell to 0.7533 after Dalian iron ore closed down 6.5% Tuesday
• 0.7555 was Asia low. 0.7596 was Asia high

• NZD/USD has risen to 0.7022 as AUD/NZD slides to 1.0735
• Fonterra dairy auction result expected circa 9am ET

Chart - (Source:ThompsonReuters)

200-DMA key for USD/JPY direction   
USD/JPY technicals are arguing for an adjustment higher, eyeing a test of the falling Tenkan at 109.86. Monday's price action formed a Doji signal on the candlesticks and spot made a higher high at 109.22 in Asia. The rebound from the lower 30-DMA and a close back above the 200-DMA Monday coupled with oversold oscillators help strengthen expectations of a further rise. While the underlying trend remains lower, better selling levels look likely. Intraday USD/JPY has drifted away from its high and the 200-DMA at 108.85 has come back under threat. A close back below the average today would negate the adjustment theory.

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

• Risk aversion remains main vol support
• French risk still the biggest prop – 1wk captured 1st round yesterday
• Big premiums for 1wk and 1mth EUR vols/puts, but gains peak
• EUR/JPY 1wk vol break even 340 pips. 1mth vol new post Brexit hi 20.0
• Cable vols garner support amid PM may announcement of UK election
• EUR/USD huge 1.06, 1.0650 and 1.07 expiries. 1blmn AUD/USD 0.7550

Economic Data (GMT) - (Source:ThompsonReuters)

• 13:30  Housing Starts (Mar) mkt 1.250 mn SAAR, prev 1.288 mn SAAR
• 13:30  Building Permits (Mar) mkt 1.250 mn, prev 1.216 mn SAAR
• 13:55  Redbook Weekly Same Store Sales Index prev +1.6% y/y
• 14:15  Industrial Production (Mar) mkt +0.5% m/m, prev +0.1% m/m
• 14:15  Factory Output (Mar) mkt +0.1% m/m, prev +0.5% m/m
• 14:15  Capacity Utilization (Mar) mkt 76.2%, prev 75.9%  

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

• 14:00  FRB Kansas City's George addresses Hyman Minsky conference; NY
• 16:45  FedTrade operation 15-yr Fannie Mae/Freddie Mac (max $600 mn)


Topics: US FX Market Open


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