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US FX Market Open – Tuesday, November 29, 2016: Reduced activity ahead of month-end

Posted by Marge Maresca on Nov 29, 2016 9:13:38 AM

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Overnight Events

• USD/JPY +0.5%, EUR/USD -0.10%, GBP/USD +0.45%
• DXY +0.16%, DAX -0.04%, Brent -1.9%, Iron -6.3%, Gold -0.5%
• DE Oct Import Prices -0.6% y/y vs rvsd -0.6% prev, -0.8% exp
• CH Q3 payrolls 4.918 mln vs 4.903 mln prev
• UK Oct BoE Consumer credit GBP1.618 bln, vs rvsd 1.484 bln prev, 1.5 bln exp
• UK Oct Mtg Apps 67.518k vs rvsd 63.594 k prev, 65k exp
• EZ Nov Bus Climate 0.42 vs rvsd 0.56 prev, 0.57 exp
• EZ Nov Econ Sent 106.5 vs rvsd 106.4 prev, 107.00 exp
• EZ Nov Final Cons Conf -6.1 vs -8.0 prev, -6.1 exp
• SE Q3 GDP 2.8% vs rvsd 3.6% prev, 3.1% exp, Riksbank est 2.8%
• Sky N 'have our cake and eat it' note. ' suggests no single mkt for UK after Brexit'
• SA Zuma reportedly wins own party vote of confidence: ZAR sold hard
• Trump fiscal impact negative for U.S creditworthiness over medium-term
• Fund managers cut S&P 500 futures net long positions in latest week – CFTC
• Foreigners rush to buy into not-Abenomics narrative – Financial Times
• Israel CB Gov – Small countries bracing for protectionist turn – Nikkei
• UK consumer morale edges up but worry about finances – YouGov, CEBR.
• China CB branches said to ask bks to step up mortgage controls – Bloomberg

Currency Summaries

EUR/USD  
• Quiet session sees EUR/USD in tight range 1.0582-1.0612
• Some traders happy to sit the day out avoid risk of month-end flows
• Pressure from bonds unrelenting with UST/Bund spreads near wides
• Less stress evident in slightly tighter euro zone spreads
• Many traders await big US data later this week, PCE ISM and NFPs due
• German state CPIs ease slightly but EZ inflation expectations rise
• EZ biz climate, economic, industrial & service sentiment deteriorate

USD/JPY  
• USD/JPY has sustained a bid tone throughout trading today
• Spot has risen steadily from 111.62 to 112.72
• Narrowing 5yr UST/JGB yield spreads have stopped narrowing
• 5yr UST/JGB spreads 30/60-day log correlation with USD/JPY +0.61/+0.57
• EUR/JPY has been propped up by 200-DMA currently @118.58
• Cross has bounced with USD/JPY up from 118.58 to 119.45

CHF
• EUR/CHF maintaining a bull bias but held just below Mon’s 1.0770 high
• SNB still has work to do in keeping cross pointing north
• EUR/CHF plays to the top of a 1.0742-1.0762 range into NY
• USD/CHF bid but unable to shake off damage from Frid/1.0124-1.0158 range
• Spot trades 1.0124-1.0158 range and holds just above 10DMA
• Swiss Q3 Non-Farm payrolls up slightly: Little mkt impact
• Chart: 1) http://reut.rs/2fLvMjm   2) http://reut.rs/2fLs1u9

GBP/USD
• GBP/USD has risen to threaten 1.25 amid talk of month-end demand for GBP
• 1.2398 was early Ldn low. 1.2388 was Asia low (1.2385 was Monday low)
• Pre-1.25 offers kept lid on cable Nov 24-25. 1.2532 = 2wk high Monday
• EUR/GBP has dropped to 0.8592 amid talk of month-end demand for GBP
• 0.8549 was early Europe high. 0.8560 was Asia high (0.8365 was Monday high)

USD/CAD
• USD/CAD rose to test 1.3455 during the European am as oil prices eased
• 1.3455 was Nov 25 low. 1.3401 was Asia low (1.3397 = six-day low Monday)
• Large 1.3400 option expiry for NY cut, $634mn strike. OPEC meeting Thursday

AUD/USD   
• AUD/USD eased to a European am low of 0.7455 after threatening 0.75 in Asia
• Retreat influenced by Chinese iron ore futures falling 6%

NZD/USD
• NZD/USD has risen to test Monday’s 11-day high of 0.7101
• Short-covering aided Monday gains (0.6970 = 4mth low last week)
• Break through 0.7110 could spur further squeeze on shorts
• AUD/NZD has fallen to 1.0513 as NZD outperforms AUD (reverse of last week)
• 1.0513 = six-day low. 1.0610 was Black Friday 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)

• NFP Friday, but Italy referendum Sunday proving more of a vol prop
• 1 week EUR/USD vol 13.25 vs 10.0 Friday – break even now 155 pips
• EUR/JPY 1 week is 15.5 from 10.0 Friday – break even 204 vs 132 pips
• USD/CAD 1 week vol ever firmer over OPEC/NFP – 11.0 or 165 pips
• USD/JPY vol setbacks minimal – gamma support aided by intraday spot

 Economic Data (GMT) - (Source:ThompsonReuters)

• 13:30  Real GDP Q3, 2nd estimate mkt +3.0% q/q,  prev +2.9%
• 13:30  CA Q3 C/A mkt –C$ 16.8 bln, -19.86 bln prev
• 13:30  Real Final Sales Q3, 2nd estimate mkt +2.5% q/q, prev +2.3%
• 13:30  Core PCE Deflator Q3, 2nd estimate mkt +1.8% q/q, prev +1.7%
• 13:55  Redbook Same-Store Sales Index prev +1.0% y/y
• 14:00  S&P/Case-Shiller Index Sep mkt +5.2% y/y, prev +5.1% y/y
• 15:00  Consumer Confidence Nov mkt 101.2, prev 98.6
• 15:30  Dallas Fed Texas Services Sector Outlook Nov prev 3.0

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

• 13:15  FRB NY's Dudley P.Rico econ growth; San Juan, P.R
• 16:45  FedTrade operation 30-yr F.Mae/Fr.Mac max $2.500 bln
• 17:40  Fed Gov Powell  on the economic outlook; Indianapolis, IN
• 19:00  Discount Rate Meeting Minutes

Topics: US FX Market Open

 

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