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US FX Market Open – Tuesday, November 15, 2016: EUR/GBP 1.1% rally a stand-out

Posted by Marge Maresca on Nov 15, 2016 9:26:15 AM

 

eurgbp2828.png

Overnight Events

• USD/JPY -0.18%, EUR/USD +0.5%, GBP/USD -0.55%
• EUR/GBP lifts from 0.8603 to 0.8707
• DXY -0.16%, DAX +0.17%, Brent +2.3%, Iron -6.0%
• British Govt has no overall plan for Brexit due to cabinet divisions-BBC
• UK- The govt says it "does not recognise" a leaked memo
• BoE’s Carney says will leave at end of 2019
• SA’s main opposition has filed criminal complaint against Pres. Zuma
• DE Flash Q3 GDP 1.5% y/y vs 3.1% prev, 1.8% exp
• DE Nov ZEW Econ Sentiment 13.8  vs 6.2 last, 8.1 exp
• DE ZEW Nov Current Conditions 58.8 vs  59.5 prev, 61.5 exp
• EZ Sept Trade NSA E26.5bln vs 18.4 bln prev, 22.5 bln exp
• EZ Flash Q3 GDP  y/y vs 1.6% prev, 1.6% exp
• UK Oct CPI y/y +0.9% vs 1.0% prev, 1.1% exp
• UK Oct Core CPI +1.2% y/y vs 1.5% prev, 1.4% exp
• UK Oct Core Output Prices +1.9% y/y vs 1.4% prev, 1.7% exp
• CFTC IMM CTA data – Spec USD net longs at 9 ½-month high
• China PBOC to continue with net FX sales in October – Xinhua
• China FinMinistry – France to encourage Panda bonds – Reuters
• RBA- November meeting minutes – Risks broadly balanced
• RBA- inflation returning to  “normal”, growth nearing potential
• IMF – Australia economy resilient, more government spending needed
• Statistics NZ halts economic data releases after quake

Currency Summaries

EUR/USD  
• EUR/USD higher from 1.0747 to 1.0816 in Europe
• Follows Asia's 1.0735-81 consolidation after Nov 14 1.0709 low
• Buying today largely influenced by 1% EUR/GBP rally
• Nov ZEW 13.8 vs 8.1 f/c. Sep EZ trade surplus EUR 26.5bln from 18.4bln
• US Oct retail sales the main event risk, control eyed 0.3%
• Support @ 1.0700 barriers. Nov 14 high 1.0840/23.6% retr Trump move 1.0848

USD/JPY  
• USD/JPY has seen a range of 107.77-108.44, circa large 108.00 expiry
• 1B 108.00 strikes set to expire at the NY cut, could attract early NY
• Solid bids said to be begin close to 107.70 and are trailed down
• Slight 108.52 fibo breach Mon, but needs daily close above
• 5yr UST/JGB spread continues to trade in tandem with USD/JPY
• 30/60-day correlation between 5yr UST/JGB spread & USD/JPY is +0.72/+0.63

CHF
• EUR/CHF stages strong rebound out of 1.0688 Mon low
• Cross plays 1.0705-1.0748 as EM/risk recover
• Yield developments keeping the market active
• USD/CHF peaked just above parity Mon; reverses to 0.9931
• Hard to get a real feel for the drivers but focus is on U.S yields
• Chart: 1) http://reut.rs/2gcObqS  2) http://reut.rs/2gcHlBB

GBP/USD
• GBP/USD elicited support circa 1.2468 after heading south on greenback gains
• 1.2468 = Ichimoku cloud top. 1.2510 = Asia low. 1.2673 = Friday high after shorts squeezed
• EUR/GBP has traded a half-penny range thus far Monday, 0.8585-0.8635
• Loss consolidation is big-picture story, amid enhanced US-UK “special relationship” hopes
• Farage met Trump in NY Saturday. May speech in pipeline (Monday)

USD/CAD
• USD/CAD fell to a European am low of 1.3490 as oil prices rose
• WTI £44.50/barrel at 6.10am ET vs 3mth low of $42.20/barrel Monday
• Large 1.3500 option expiry for NY cut, $632mn strike
• Huge 1.3500 expiry Friday, $2.3bn strike

AUD/USD   
• AUD/USD met European am headwind just shy of 0.7582 after rising from 0.7535
• 0.7582 = Asia high. More offers tipped near 0.7600 (0.7594 = 100DMA)
• Cumulative yard of 0.7600 option expiries later this week (Thursday-Friday)
• 0.7535 was early Europe low. 0.7524 = Monday’s 1mth low. 0.7510 = 200DMA

NZD/USD
• NZD/USD threatened 0.7150 in Asia after extending north from 0.7070
• 0.7070 = Monday’s 1mth low following major NZ earthquake
• Fonterra auction result expected circa 1430GMT, 5% WMP rise mooted

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 rally has peaked for now, vols falling back from highs
• 1mth expiry rolled over Dec FOMC today, related vols slower to ease
• EUR/USD 1mth spiked 9.2-10.5 Fri-Mon and sold 10.6-9.9 today
• USD/JPY 1mth 11.0-12.8 since election, currently back at 12.4
• AUD/USD vol bulls needed 0.7500 breach,  1mth now 11.2 from 12.1

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

• 13:30 Retail Sales Oct mkt +0.6% m/m, prev +0.6%
• 13:30 Retail Sales ex-Autos Oct mkt +0.5% m/m, prev +0.5%
• 13:30 Control Grp Retail Sales Oct mkt +0.3% m/m, prev +0.1%
• 13:30 Empire State Mfg Index Nov mkt -2.50, prev -6.80
• 13:30 Import Prices Oct mkt +0.4% m/m, prev +0.1%
• 13:30 Export Prices Oct mkt +0.2% m/m, prev +0.3%
• 13:55 Redbook Wkly Same-Store Sales Index prev +0.7%
• 15:00 Business Inventories Sep mkt +0.2% m/m, prev +0.2%

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

• 12:30 FRB Boston's Rosengren at Portland Chamber of Commerce; Portland
• 16:45 FedTrade 30-year Fannie Mae / Freddie Mac max $2.500 bln
• 18:30 Fed Vice Chair Fischer bkg rules and cap mkts liquidity; Washington

 

Topics: US FX Market Open

 

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