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US FX Market Open – Wednesday April 26, 2017: EUR/USD specs pare longs ahead of U.S. tax plans

Posted by Marge Maresca on Apr 26, 2017 7:25:51 AM

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Overnight Events

• EUR/USD -0.2%, USD/JPY +0.2%, GBP/USD -0.1%, AUD/USD -0.5%
• DXY +0.2%, DAX -0.05%, FTSE -0.05%, Brent -0.15%, Iron ore +0.2%
• AUD/USD hit 2-week low at 0.7490 in early Europe
• EUR/USD pulls back from 5-1/2 month high. 1.0951-1.0903
• Oil price slips on bulging U.S. crude stocks, ample global supplies - Rtrs
• FR Apr Consumer Confidence 100 vs prev 100. 100 f/c
• CH Apr Investor Sentiment 22.2 vs prev 29.6
• Swedish Apr Consumer Confidence 103.4pts vs prev 102.6
• Swedish inflation expectations one year ahead fell to 2.4% fm 2.5%
• UK not seeking divide and rule approach in Brexit talks - Rtrs
• EU tightens Brexit demands on residence, banks -document - Rtrs
• Higher exports to lift German growth, investments -econ ministry - Rtrs

Currency Summaries

EUR/USD
• EUR/USD 1.0951 high shortly after the European open
• Then heads south fairly quickly to reach 1.0892 before NA open
• Profit-taking behind pullback as specs pare longs ahead US tax plans
• ECB tomorrow, eyed unchanged but players will seek signs for June change
• Supports @ 23.6% 1.057-1.0951 @ 1.0861, 38.2% 1.0806, 50% 1.0761
• Also 100-HMA 1.0826 & 200-HMA 1.0748. 1.1000 options central to resistance

USD/JPY
• Japanese importer demand again Tokyo fix help spot break weekly cloud top
• Grapples with weekly cloud top which is currently @111.39
• Risk-on mood, Trump tax plan & US-Japan free trade talk supportive
• Japanese exporter, amongst others, have so far capped market
• Correlated with UST-JGB yield spread across the curve
• Offers remain around the 111.52 high, below April 111.59 matching highs
• Recall 110.97 was the session low

EUR/CHF
• EUR/CHF taking its lead fm a lower EUR/USD, 1.0867-1.0835 in Europe
• -0.3% from Tues's 1.0869 peak. 1.0836 was Mon's high, now support
• Buy interest expected in lower 1.08s. Hourly cloud support at 1.0818
• USD/CHF quiet 0.9920-52 in Europe, tracking EUR/USD. 100-HMA @ 0.9957
• CHF/JPY retains its bid tone, higher high Wed at 112.28 vs 111.92
• Techs are bullish, thin daily cloud attracts. 112.67-78 zone targeted

GBP/USD
• GBP/USD elicited fresh support pre-1.28 after falling from 1.2839 (early Ldn high)
• Drop influenced by half-cent+ EUR/USD retreat from 1.0951 (early Europe high)
• 1.2805 was cable’s European am low. 1.2802 was Tuesday’s NY low
• Near quarter-yard 1.2800 option expiry for NY cut. Half-yard+ 1.2800 expiry Friday
• EUR/GBP fell to 0.8496 after meeting early Europe headwind pre-0.8530
• 0.8530 was Tuesday’s 2wk peak after EUR boosted by Reuters ECB piece

USD/CAD
• USD/CAD has traded a 27 pip range thus far Wednesday, 1.3558-1.3585
• Range base approximates to Tuesday’s late NY low after oil prices rallied
• USD/CAD offers tipped near 1.36: large 1.3600 option expiry Thursday
• 1.3626 (Tuesday’s 14mth high) above-figure resistance
• Canada Feb retail sales data due 1230GMT, -0.1% f/c

AUD/USD
• AUD/USD extended south to test 0.7492 (last week’s low) in early European trade
• 0.7506-0.7557 was Asia range, peak scaled immediately after Australian inflation data
• Annualized trimmed mean 0.1% above f/c but two other measures 0.1% below f/c

NZD/USD
• NZD/USD extended south to threaten 0.6890 (last month’s low) in early European trade
• 0.6922 was Asia low, 0.6943 was Tuesday low. US tax plan expected this afternoon (ET)

Comment

Riksbank's growth versus inflation dilemma
The Riksbank faces a dilemma as Sweden's inflation trend remains fragile but the economy is performing. Improved labour market data and a healthy pick up in April manufacturing confidence, to a 20-year high, suggest growth estimates may be too conservative. The c.bank meets Thursday and given the data run there is an outside chance of a hawkish tone. There's also room for the SEK to appreciate on the strengthening growth argument. EUR/SEK rose ahead of the French elections but with the pollsters proving accurate the SEK recovered into the new week. There's talk in the market that real money and leverage accounts have stepped up their demand for the SEK in recent days and this is helping the cross to rein in the 9.5525 April 12 low. If growth improves further, the fairly tight SEK forecasts may also prove too conservative.

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.  

• Vols stage a small comeback after Mons post round 1 French sell off
• Firmer EUR and weaker JPY help vols off lows in those pairings
• EUR puts and JPY calls remain heavy. Sub 2wk EUR risk revs bid EUR calls
• O/n vols propped in to BoJ, ECB and Trump Tax reforms
• AUD vols by 2 year lows. CAD vols up from 2 year lows with spot this week

Economic Data (GMT) - (Source:ThompsonReuters)

• 12:00  MBA Weekly Mortgage Application Indices
• 13:30  Revised Building Permits (Mar) prev 1.260 mn SAAR
• 15:30  EIA Weekly Petroleum Status Report

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

• 14:45  FedTrade operation 30-yr Fannie Mae/Freddie Mac (max $1.450 bn)
• 15:00  Commerce Department issues annual benchmark revisions to retail sales
• 16:45  FedTrade operation 15-yr Fannie Mae/Freddie Mac (max $600 mn)

 

Topics: US FX Market Open

 

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