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US FX Market Open – Wednesday, December 7, 2016: EUR/USD sidelined ahead of Thurs ECB

Posted by Marge Maresca on Dec 7, 2016 7:29:00 AM

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Overnight Events

• USD/JPY +0.02%, EUR/USD +0.01%, GBP/USD -0.7%
• DXY +0.07%, DAX +1.52%, Brent +0.22%, Iron +6.53%
• DE Oct Ind. Output 0.3% m/m vs rvsd -1.6% prev, +0.8% exp
• UK Oct Ind. Output -1.1% y/y vs 0.3% prev, 0.5% exp
• UK Oct Mfg Output -0.9% y/y vs 0.2% prev, 0.8% exp
• UK Nov Hamifax Hse Px +6.0% y/y vs 5.2% prev, 6.0% exp
• UK Tide turning : HSBC pulls 0.99% Mtg2-yr deal-Guardian
• Riksbank Dep. Gov. Jansson-Sounds more hawkish in speech
• Turkey’s Erdogan – Econ being targeted through FX speculation
• BoJ DepGov Iwata – Won’t hesitate to ease more if needed
• Iwata - approach of  powerful ease via asset purch/rates working
• Jpn Dec Rtrs Tankan mfg idx   +16, high since Aug ’15, +14 Nov
• Australia Q3 GDP -0.5% q/q, +1.8% y/y, +0.3%/+2.5% eyed
• NZ Nov job ads +2.9% m/m, best pace in almost 2-years, +18% y/y

Currency Summaries

EUR/USD  
• EUR/USD grinds to a halt ahead tomorrow's ECB meet
• Europe 1.0710-33, Asia 1.0711-27 after 1.0698-53 in NA
• Options price EUR/USD @ 130 pips for the ECB meeting (ON ATM Straddle)
• Proximity to Fed's Dec 14 meeting likely to suppress a reaction
• 200/100-HMAs 1.0648/1.0683 support
• Resistance @ 38.2% Nov/Dec drop 1.0809 & Oct low @ 1.0851

USD/JPY  
• Recovered/holds above hourly cloud since Monday, base currently 113.82
• USD/JPY 114.40-113.90 today. Support y/days 113.50 low, 200HMA 113.41
• Topside 100WMA 114.73, Mon's high 114.77, Huge 115 option barriers
• Market long gamma from those barriers which is helping to contain spot
• Long gamma apparent when looking at sales/weight on shorter dated vols

CHF
• Massive CHF 18bln rise in Swiss FX reserve in November
• CHF 73bln added to reserves in 2016: http://reut.rs/2h1S4Mg
• EUR/CHF calm in 2016 just 1.0623-1.1200 and Nov 1.0686-1.0858
• US stocks added 1000 pts in Nov and commodities were buoyant (SMI unch)
• SNB holds 33% of its reserve in USD and 58% non-EUR
• Huge intervention likely creating wider distortions in Nov

GBP/USD
• GBP/USD slid to a European am long of 1.2578 as more GBP longs were jettisoned
• 1.2611 was low before very weak UK industrial/mfg output data at 4.30am ET
• 1.2578 was low following big UK data miss. 1.2650 was Asia low
• EUR/GBP tripped stops above 0.8480 en route to 0.8525 during the European am
• 0.8525 = 1wk high. 0.8478 was Monday’s high (after drop to 0.8305 5mth low)

USD/CAD
• USD/CAD has traded a 29 pip range thus far Wednesday, 1.3263-1.3292
• Parameters within 1.3253-1.3311 Tuesday range
• BoC expected to keep Target for the Overnight Rate at 0.5% at 10am ET
• Tone of accompanying statement in focus

AUD/USD   
• AUD/USD threatened 0.7417 early Europe as continent digested big Oz Q3 GDP miss
• 0.7417 was Asia low after GDP came in down 0.5% vs +0.3% f/c. 0.7414 was Monday low

NZD/USD
• NZD/USD firmed to a high of 0.7139 during European am. 0.7103-0.7129 was Asia range
• RBNZ Wheeler speech about New Zealand’s economic expansion at 3pm ET

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)

• Vols lower since Italy referendum, but losses slowing now
• Near term, focus shifts to ECB Thurs and next week’s FOMC
• O/n EUR/USD vol 25.0 or 130 pips. EUR/JPY 26.0 or 133 pips
• USD/JPY long gamma from 115 barriers, short dated vols weighed
• AUD/USD 1mth vol nearing value/2yr lows at 9.15 from August

Economic Data (GMT) - (Source:ThompsonReuters)

• 12:00  MBA Weekly Mortgage Application Indices
• 15:00  JOLTS (Oct) (mkt 5.500 mn job openings, prev 5.486 mn)
• 15:00  Help-Wanted OnLine (Dec) (prev -115.3k)
• 15:30  EIA Weekly Petroleum Status Report
• 20:00  Consumer Credit (Oct) (mkt +$19.00 bn, prev +$19.29 bn)
• 20:00  Treasury STRIPS (Nov)

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

• 15:00 CA BoC Rate decision: Unchanged 0.5% expected
• 16:45  FedTrade operation 30-year Fannie Mae / Freddie Mac max $2.500 bln

 

Topics: US FX Market Open

 

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