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US FX Market Open – Tuesday, December 6, 2016: EUR consolidating Monday rally

Posted by Marge Maresca on Dec 6, 2016 7:22:23 AM

eurstrong.png

Overnight Events

• USD/JPY +0.22%, EUR/USD +0.07%, GBP/USD +0.25%
• DXY -0.1%, DAX ~+0.06%, Brent -0.33%, Iron +3.4%, Gold +0.05%
• DE Oct Ind. Orders 4.9% vs rvsd -0.3% prev, +0.6% exp
• CH Nov CPI -0.3% y/y vs -0.2% prev, -0.2% exp
• EZ rvsd Q3 GDP 1.7% y/y vs 1.6% prev, 1.6% exp
• UK Nov BRC LFL Retail Sales +0.6% y/y, Oct +1.7%
• China and Egypt  concluded an 18 bln yuan ($2.62 bln 3-year bilateral currency swap
• EU’s Barnier says EU ready to receive UK withdrawal notification
• Monte Dei Paschi to hold talks with ECB in Frankfurt Tues-Rtrs sources
• Australia at risk of GDP contraction after disappointing data – Rtrs
• Japan won't recognize China as WTO market economy – Nikkei
• Japan tax reform to ease up on overseas shell companies – Nikkei
• RBA leaves OCR as is at 1.5% as eyed
• Rogue Chinese Renminbi rate raises eyebrows, apparently erroneous
• Renminbi  quote on Google would have represented an 8% deval – FT

Currency Summaries

EUR/USD  
• EUR/USD creeps higher in Europe reaching 1.0785 vs Asia's 1.0739-70
• Monday's 1.0797 peak and stops over 1.0800 remain near-term focus
• 1.0809 38.2% drop since Trump win. 1.0851 Oct low before spike to 1.1300
• 1.0820-50 area drawing many recommendations to pick tops
• Q3 EZ GDP rev up to 1.7% yy. Biggest US factory orders this year f/c 2.6%
• Might revitalize rates: http://reut.rs/2gKurdu http://reut.rs/2geWCAE

USD/JPY  
• USD/JPY range has been 113.50-114.18
• Bullish cycle remains intact for 115.00 despite intra-day setbacks
• Large option barriers situated @115.00. Spot got to 114.77 on Mon
• Japanese exporters have offers concentrated ahead of 115.00
• Japanese importers and investors have bids close to rising tenkan line
• Tenkan line currently comes in @113.09

CHF
• Massive EUR/CHF dip & rebound after Italy referendum, Renzi resignation
• EUR/CHF undoes November's uncertainty
• Cross plays 1.0698-1.0853 Mon and 1.0820-13.0845 so far today
• Seems many a Trump bull were bears on election day
• Austria and Italy risk events pass but some risks remain
• Perhaps EUR/CHF an attractive sell against the daily cloud 1.0843/81
• Late Oct/early Nov highs 1.0861, 1.0864 and 1.0865 in the resistance mix
• SNB backed off last week: 1.0880 stop might be a cheap hedge
• Spot loss consolidation wthin a tight but heavy 1.00495-1.00815 range
• Swiss Nov CPI edges lower: -0.3% y/y vs -0.2% prev

GBP/USD
• GBP/USD offers around 1.2771 (Oct 5 high) kept a lid on European am gains
• More offers expected near 1.28 (1.2796 = 100DMA, 1.2798 = July low)
• EUR/GBP traded a 40 pip range thru the European am, 0.8414-0.8454
• Gain consolidation from Monday’s 5mth low of 0.8305 is big-picture story
• PM faces Commons rebellion Wednesday over refusal to publish Brexit plans

USD/CAD
• USD/CAD topped out a pip shy of 1.3286 after firming from 1.3236 (6wk low Monday)
• 1.3286 = Dec 2 Asia low (1.3280/87 = early Asia lows Monday)
• Canada Oct trade data due 8.30am ET, Nov Ivey PMI due 10am ET

AUD/USD     
• AUD/USD eased to 0.7431 during the European am pre-Australian Q3 GDP data
• ABS figures suggest risk of negative Oz GDP for only 4th time in past 25 years
• Number will be revealed at 7.30pm CET. +0.3% is consensus f/c (Reuters poll)
• Pre-0.75 offers capped AUD/USD gains Monday, as per last week (Nov 28-30)

NZD/USD
• NZD/USD gapped from 0.7160 to 0.7096 in Asia, algo account blamed
• Ensuing climb topped out 9 pips shy of 0.7170 (Nov 30 high)
• 20 pip range through European am, 0.7122-0.7142

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)

• Implied vols lower since Italy referendum, especially short dated EUR
• ECB and FOMC risk maintain an underlying bid tone for now however
• Vols covering French elections retain decent demand post 6 month
• USD/JPY vols ease as 115 barriers hold. GBP /USD vol flow limited
• AUD vols lower – 1 month back at post US election lows as range holds

Economic Data (GMT) - (Source:ThompsonReuters)

• 13:30  International Trade Oct mkt -$39.9 bln, prev -$36.4 bln
• 13:30  CA  Oct Trade Bal. Mkt –C$ 2.0 bln, -4.08 bln prev
• 13:30  Productivity rvsd Q3 mkt +3.3% q/q, prev +3.1%
• 13:30  Unit Labor Costs rvsd Q3 mkt +0.2% q/q, prev +0.3%
• 13:55  Redbook Same-Store Sales Index prev +2.2% y/y
• 14:00  Factory Orders Oct mkt +2.2% m/m, prev +0.3%
• 14:00  Factory Orders ex-Trans Oct prev +0.6% m/m
• 14:00  IBD/TIPP Economic Optimism Dec prev 51.4
• 15:00 CA Nov Ivey PMI 56.5 prev, SA 59.7 prev

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

• 19:30  FedTrade operation 30-year Ginnie Mae (max $1.500 bn)

 

Topics: US FX Market Open

 

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