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US FX Market Open – Wednesday, April 5, 2017: FX majors steady ahead of U.S. ADP

Posted by Marge Maresca on Apr 5, 2017 7:30:13 AM


Overnight Events

• EUR/USD -0.05%, USD/JPY +0.1%, EUR/JPY +0.1%, GBP/USD +0.3%
• DAX -0.3%, FTSE +0.2%, Brent +1.0%, Gold -0.2%, Copper +1.1%
• DE Mar Markit Services PMI 55.6 vs prev 55.6. 55.6 f/c
• DE Mar Markit Comp final PMI 57.1 vs prev 57.0. 57/0 f/c
• EZ Mar Markit Serv final PMI 56.0 vs prev 56.5. 56.5 f/c
• EZ Mar Markit Comp final PMI 56.4 vs prev 56.7. 56.7 f/c
• UK Mar Markit/CIPS Serv PMI 55.0 vs prev 53.3. 53.5 f/c
• UK economic productivity +0.4% in Q4 2016
• UK productivity grows at fastest rate since mid-2015 - ONS - Rtrs
• N.Korea test-fires missile into sea ahead of Trump-Xi summit - Rtrs
• BOJ likely to cut inflation forecast this month-ex-BOJ official - Rtrs
• Turkey sees 2017 growth exceeding previous year's - finmin - Rtrs
• S.A ANC won't be part of movement to remove Pres Zuma-secgen Mantashe
• Rand extends losses vs dollar after ANC comments, S.A govt bond yields edge up
• Greek PM urges deal on bailout review on Friday - Rtrs

Currency Summaries

• EUR/USD quiet again just 1.0662-1.0689 and 1.0636-89 this week
• EZ March composite final PMI 56.4 from flash 56.7 (f/c 56.7)
• Italy and France weaker spots of PMIs
• EUR 1.5bln 1.0650 vanilla option expiries
• US ADP next focus eyed 187k in March from 298k in February

• USD/JPY has risen but has so far been capped by supply at 111.00
• Market has gone up from 110.54 to 110.99, now hovers below 111.03 pivot
• 111.01: 38.2% Fibo 112.21 to 110.27 fall.
• Stops above recent 111.08 hourly highs
• Tech outlook bearish tilt. 110 barrier test remains on cards
• Talk is that there is Japan pension fund interest to buy on dips
• Steady UST/JGB interest rate differentials, correlation with spot high

• EUR/CHF sellers are relentless above 1.0700. Spike to 1.0706 brief
• 1.0693-1.0706 range Europe above Tues 1.0669 base (lowest since Mar 3)
• Cloud twist by 1.0690 Apr 13 helpng to keep ranges tight
• USD/CHF sideways ahead of U.S ADP. Plays 1.0013-1.0024
• Tech focus remains on cloud base & 61.8% at 1.0034

• GBP/USD rose half-a-cent to threaten 1.2493 after UK service PMI beat at 4.30am ET
• 1.2493 was Tuesday’s high. 1.2423 was early Ldn low (1.2419 was Tuesday’s low)
• EUR/GBP dropped to threaten 0.8438 (Tuesday’s low) on the UK service PMI beat
• 0.8488 was early Europe high, after another solid Macron performance in tv debate

• USD/CAD extended south to threaten 1.3384 as oil prices added to Tuesday gains
• 1.3384 = 21DMA. WTI scaled 1mth peak of $51.70/barrel during European am
• USD/CAD scaled 3wk peak of 1.3455 Tuesday before WTI rallied from $50/barrel

• AUD/USD met headwind at 0.7587 after extending north from 0.7545
• 0.7587 = former support level (Mar 28 low). 0.7545 was Monday’s 3wk low
• More offers expected near 0.76: large 0.7600 expiry Thursday, A$1bln strike

• NZD/USD plumbed a 3wk low of 0.6966 in early European trade
• 0.6966 = 61.8% of 0.6890 to 0.7090 (Mar 21 high). 0.6970 was Tuesday’s low
• Recovery rally from 0.6966 topped out at 0.6984 (Asia high)


S.African rand has room for further falls
A S.African rand that has been a preferred buy for foreign investors likely has further to fall. In the past ZAR quickly rebounded after political shakeouts revolving around ex-finmin Gordhan. But, in those days speculators were betting on a lower rand and that was at the root of the currency's ability to recover. After a 15-month rally things have significantly changed with traders long rand and foreign investors long S.African assets. S&P's cut to non-investment grade is sufficient to send those long SA scuttling for cover. Liquidity is poor and waiting for action from other rating agencies could be folly. A close over the 200-DMA at 13.7408 will trigger more USD/ZAR buying. Despite closing under the 200-DMA Tuesday, those top-picking the level most likely got stopped on the run to 13.9400. A lot less resistance is likely at the second time of asking and follow-through to 38.2% of the 2016-17 drop at 14.4832 minimum requirement for a technical correction.

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.  

• Risk has improved, USD/JPY vols back by Mon’s lows, 110 holds
• EUR/JPY vols slower to ease, French risk remains a prop, EUR/USD too
• AUD, NZD and CAD vols all heavy – close to 2 year lows
• Cable vols and downside skew at long term lows as ranges hold
• ADP, FED mins today, Xi/Trump Thur, NFP Fri, but tame risk premium

Economic Data (GMT) - (Source:ThompsonReuters)

• 12:00  MBA Weekly Mortgage Application Indices
• 13:15  ADP National Employment Report (Mar) mkt +185k, prev +298k
• 14:45  Markit Services PMI (final Mar) flash 52.9
• 14:45  Markit Composite PMI (final Mar) flash 53.2
• 15:00  ISM Nonmanufacturing PMI (Mar) mkt 57.0, prev 57.6
• 15:30  EIA Weekly Petroleum Status Report

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

• 14:45  FedTrade 30-yr Fannie Mae/Freddie Mac securities (max $1.275 bn)
• 19:00  FOMC Minutes (from March 14-15 meeting)
• 01:00  FRB Dallas's Kaplan participates in moderated Q&A at U of Kansas; Lawrence, KS


Topics: US FX Market Open


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