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US FX Market Open – Wednesday, April 12, 2017: Quiet markets with an eye on risk

Posted by Marge Maresca on Apr 12, 2017 7:43:57 AM


Overnight Events

• EUR/USD flat, USD/JPY +0.1%, EUR/JPY +0.1%, DXY -0.05%
• DAX +0.15%, FTSE +0.3%, Brent +0.6%, Copper -0.9%, Gold -0.05%
• Sterling firms after UK wage growth beats expectations - Rtrs
• Brent oil rises for 8th day on possible extension to supply cut - Rtrs
• Gold hits 5-mth peak as geopolitical tensions drive flight to safety - Rtrs
• World trade seen growing 2.4 percent in 2017, uncertainty weighs - WTO - Rtrs
• EU's Juncker says Italy going in right direction - newspaper - Rtrs
• IMF's Lagarde: protectionist 'sword' hangs over firming growth - Rtrs
• US policy uncertainty, Brexit cloud German outlook -economic institutes - Rtrs
• UK Mar Claimant count +25.5k vs -3.0K f/c. Largest increase since July 2011
• UK ILO jobless -45,000 in 3 mths to Feb to 1.559mln, unemployment rate 4.7%
• UK Avg weekly earnings +2.3% y/y in 3 mths to Feb vs 2.2% f/c
• DE Mar Wholesale price index 0.0% m/m, 4.7% y/y vs prev 0.5%/5.0%

Currency Summaries

• EUR/USD 1.0603-24 in Europe, 1.0595-1.0622 Asia, 1.0600-30 NA
• Very quiet trade with high vols due French election hedges/bets
• One-month realised EUR/USD vol just 7.2 compared 12.5 implied
• Realised vols better reflect the reality of a static spot price
• EUR 2.3bln vanilla expiries 1.0600-55 will help contain spot

• USD/JPY in a quiet 109.38-76 range in Europe
• Majority view bearish following 110.00 break
• Likely more JPY shorts to purge:
• Strong demand tipped ahead 109.00 and 108.50 options
• 200-DMA @ 108.72 adds to likelihood strong support
• Risk on/off leading JPY. Nikkei futs +60 @ 18590, 18 750/450 drop Asia

• Risk aversion keeps EUR/CHF under 1.07. 1.0681-1.0694 range Europe
• As the franc benefits from risk-off flows SNB have their work cut out
• Scope remains to EUR/CHF 1.0632/23 Feb/Brexit lows on the charts
• close under the 76.4% Fibo of Feb-Mar rise at 1.0677 still required
• USD/CHF sideways below Mon's 1.0108 peak, 1.0060 to 1.0077 in Europe

• GBP/USD rose to 1.2520 after higher than expected UK earnings at 4.30am ET
• 1.2501 was pre-UK data high.  Cloud for GBP bulls: 25.5k rise in claimant count
• EUR/GBP dropped to threaten 0.8480 on the back of the UK earnings beat
• 0.8480 was Mar 31 low. 0.8505 was early Europe high (pre-UK data)

• USD/CAD dropped to threaten 1.3311 during European am on fresh oil price gains
• WTI up to $53.74/barrel, highest level since early March. 1.3311 = Tuesday’s low
• BoC rate decision & MPR 10am, Poloz briefing starts 11.15am ET

• AUD/USD respected its 0.7484-0.7509 Asia range through the European am
• Asia low plumbed on 3% fall in Dalian iron ore. 0.7475 was Tuesday’s 12wk low
• 0.7500 option expiry for NY cut (closest-to-market), A$327mn strike
• Australian Mar jobs data is due at 9.30pm ET, employment f/c +20k

• NZD/USD has dropped to threaten 0.6921 amid risk aversion
• 0.6921 was Monday’s 4wk low. 0.6960 was Asia high

Chart - (Source:ThompsonReuters)

EUR/GBP on track for further weakness  
EUR/GBP techs continue to favor a deeper retreat towards 0.8400 after the cross dropped to threaten March's 0.8480 low in the European morning. The fall takes the price below the previously broken 76.4% Fibo of the February-March rise at 0.85493. If the break holds, then a full retracement to February's 0.8403 low is likely. Trend studies and moving averages are pointing to lower levels and reinforce the bear view. Could see better levels to sell into as the lower 30-DMA Bollinger at 0.8475 may provide a stalling point for the bears. The falling 10-DMA, at 0.8534 today, has been providing a cap to the market since mid-March and is a good entry level for fresh shorts. A break of 0.8405 puts last November's 0.8305 base in view. Chart

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.  

• EUR/USD:1.0500 (851M), 1.0545-50 (497M), 1.0600-05 (431M), 1.0640-45 (1.1BLN)
• 1.0655 (805M), 1.0675 (647M), 1.0700 (2BLN)
• GBP/USD: 1.2500 (432M) . EUR/GBP: 0.8450 (325M). EUR/JPY: 118.00 (640M)
• AUD/USD: 0.7400 (419M), 0.7500 (327M), 0.7515 (322M), 0.7550-60 (903M), 7600    (436M)
• USD/CAD: 1.3400 (390M), 1.3430 (352M), 1.3500 (383M)  
• USD/JPY: 109.00 (602M), 110.00 (1.475BLN), 112.00 (538M)

Economic Data (GMT) - (Source:ThompsonReuters)

• 13:30  Import Prices (Mar) mkt +0.1% m/m, prev +0.2% m/m
• 13:30  Export Prices (Mar) mkt +0.1% m/m, prev +0.3% m/m
• 15:00  TR/ Ipsos PCSI (Apr) prev 58.84
• 15:00  Atlanta Fed Business Inflation Expectations Index (Mar) prev +2.1% y/y
• 15:30  EIA Weekly Petroleum Status Report
• 19:00  Federal Budget (Mar) prev Mar $108.043 bn

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

• 15:00  FRB Dallas's Kaplan in moderated Q&A session at credit union event; Fort  Worth, TX
• 16:45  FedTrade 15-yr Fannie Mae/Freddie Mac securities (max $525 mn)


Topics: US FX Market Open


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