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US FX Market Open – Tuesday, November 22, 2016: Options help to anchor EUR/USD

Posted by Marge Maresca on Nov 22, 2016 7:21:40 AM

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Overnight Events

• USD/JPY +0.01%, EUR/USD +0.02%, GBP/USD -0.4%
• DXY +0.09%, DAX +0.7%, Brent +0.8%, Iron +6.0%, Gold +0.3%
• CH Oct Trade Bal. CHF 2.678 bln vs rvsd 4.325 bln prev
• UK Oct PSNB GBP4.301 bln m/m vs 9.24 bln prev, 5.9 bln exp
• UK Oct PSNCR –GBP3.413 bln m/m vs 18.929 bln prev
• UK Nov CBI Trends Orders -3  vs -17 prev, -9.0 exp
• OPEC discussing 6mth duration for oil output-limiting agreement-Nigeria
• SA Unemployment 27.1% in Q3, worst since 2003
• UK’s Farage-in good position with U.S Pres. Elect to help build ties
• Trump to spell out TPP exit on first day in office – FT
• BoJ  Kuroda – Will continue to buy large amount of JGBs under new policy
• BoJ Amamiya – Prepared to use fixed-rate operations in future – Reuters
• Magnitude 6.3 earthquake hits NZ North Island
• EU to retaliate against US bank capital rules- Financial Times
• CASS/ex-PBOC Yu, Xiao– PBOC should accelerate yuan depreciation
• Yu, Xiao – PBOC should abandon FX intvn before Trump in office – SS News

Currency Summaries

EUR/USD
• Minor EUR/USD correction reaches 1.0658 in Europe
• Hourly Ichi cloud caps: http://reut.rs/2gbJmKh
• EUR/USD shorts trade small retreat for UST yields
• But bund yields match the pullback: http://reut.rs/2gx9fbU
• Few options to be found on downside: http://reut.rs/2fXJC0j
• Large expiries may dominate tomorrow, EUR 4bln 1.0600-50

USD/JPY
• Dips shallow as Japanese importers & investors forced to buy
• Range has been 110.27-111.24, performed a sharp intra-day recovery in Asia
• Met a headwind @111.24 in London when Japanese exporters sold
• Japanese exporters were joined by profit takers ahead of 111.27 pivot
• 783M worth of 111.00 strikes set to expire at the NY cut

EUR/CHF
• EUR/CHF edges higher again through early Europe
• Cross plays 1.0721 to 1.0746 and bid holding into NY
• Look for  close abv 10DMA, 1.0724, to strengthen bull case
• Expect profit taking ahead of 1.0755-57 dble day highs Nov 15/16
• USD/CHF on the climb after Monday pullback but consolidation risk
• Spot plays 1.0069-1.0118 just below Friday’s 1.0123 high
• Swiss trade data surplus narrows in Oct: Exports off 6.1%
• Chart: 1)  http://reut.rs/2gbHZLL  2) http://reut.rs/2fXWEe8

GBP/USD
• GBP/USD fell to 1.2424 during European am after fresh failure pre-1.2515 in Asia
• 1.2515 = Nov 15 NY high. 1.2514 was Asia high. 1.2513 was Monday’s high
• EUR/GBP rose 62 pips to a high of 0.8558 during the European am
• 0.8558 = high water-mark since Monday’s 9wk low of 0.8489

USD/CAD
• USD/CAD fell to a European am low of 1.3378 as WTI rose to 49.20/barrel high
• 1.3378 = 13-day low. 1.3433 was early Europe high. 49.20 = 5 bucks above Nov 14 low
• Large 1.3400 option expiry Wednesday, $851mn strike
• Canada Sept retail sales data due 8.30am ET, +0.6% f/c

AUD/USD     
• AUD/USD met headwind pre-0.7421 after rallying off 0.7370 (early Europe low)
• 0.7421 = 23.6% of 0.7778 (Nov 8 high) to 0.7311 (Monday’s 5mth low)
• More offers tipped pre-0.7450. Large 0.7450 option expiry Thursday, A$857mn strike
• Profit-taking on USD longs prime factor in AUD/USD rise from 0.7311

NZD/USD
• NZD/USD topped out 3 pips shy of 0.7086 after rallying off 0.7049 (early Europe low)
• 0.7086 = Asia high. 0.7077 was Monday high, 0.7040 = subsequent pullback low
• Stops tipped above 0.7110 (0.7108 = 10DMA, 0.7109 = Nov 17 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 consolidation hits related vols. Japan/US holidays Wed/Thurs add weight
• 1mth EUR/USD vol 1.2 vols below Fri’s 11.7 peak. 1yr down 0.6 to 10.2
• USD call bias also faded – 1mth risk rev 1.1 vs 1.4 EUR puts, 1yr 2.3 vs 2.6
• USD/JPY 1mth is 13.0 from 14.0. AUD/USD 1mth 11.2 vs 12.2 yesterday
• GBP vols already heavy but propped by recent intraday spot moves
• Event risk underpins 1mth vols – Dec FOMC, BoJ, BoE MPC etc

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

• 13:30  Philadelphia Fed Non-Mfg Survey Nov prev 16.3
• 13:30 CA Sept R.Sales m/m mkt 0.6%, -0.1% prev
• 13:55  Redbook Wkly Same-St Sales Index prev +0.9% m/m
• 15:00  Existing Hse Sales Oct mkt 5.47 mln, prev 5.47 mln
• 15:00  Richmond Fed Composite Index Nov prev -4
• 15:00  Richmond Fed Services Index Nov prev 7

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

• 14:45  FedTrade 30-yr Fannie Mae/Freddie Mac max $2.500 bln
• 16:45  FedTrade 30-yr Ginnie Mae max $1.225 bln

 

Topics: US FX Market Open

 

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