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US FX Market Open – Wednesday, January 11, 2017: USD in demand ahead Trump 16GMT press call

Posted by Marge Maresca on Jan 11, 2017 7:19:43 AM

 

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Overnight Events

• USD/JPY +0.45%, EUR/USD -0.3%, GBP/USD -0.4%
• DXY +0.27%, DAX +0.3%, Brent _1.0%, Iron +3.62%, Gold +0.01%
• 1.2091 = fresh 11wk low for cable after 1.2100 option barrier erased
• France needs immigration quotas, presidential election frontrunner Fillon said on Wed
• UK Nov Ind. Output +2.0% y/y vs rvsd -0.9% prev, +0.6% exp
• UK Nov Mfg Output +1.2% y/y vs rvsd -0.5% prev, +0.4% exp]
• UK Nov Trade Bal. Non-EU –GBP3.577 bln vs rvsd -2.116 prev, -3.0 exp
• UK Nov Trade Bal. –GBP12.16 bln vs rvsd -9.885 bln prev, -11.2 bln exp
• DoubleLine’s Gundlach – Trouble for equity mks if Tsy 10 yield  hits 3% - Rtrs
• Senior BoJ off’l – Central banks have considerable impact on yields – Rtrs
• Japan end-Dec foreign reserves $1.2169 trln, end-Nov $1.2193 trln
• ANZ prices Y114 bln 7/10-year samurais, MUFJ and Mizuho leads
• Banks forced to cover tracks of China’s FX regulator – Rtrs
• France Pres-candidate Macron – Euro may not exist in ten years – Rtrs

Currency Summaries

EUR/USD  
• Dollar in demand ahead Trump press conference at 16GMT
• EUR/USD eases through European session to reach 1.0516
• Opened 1.0550. High 1.0567. Jan 9 low (post NFP) 1.0511
• EUR 1.5bln 1.0550 expiries. EUR 700mln @ 1.0500
• No US data of note until PPI and retail sales Friday
• Barrage Fed speak Jan 11/12 incl Yellen starts with Dudley 16.20GMT  

USD/JPY  
• USD/JPY envelope pushed to 116.46 peak from 115.67 low
• Earlier talk was that there are stops clustered above 116.35
• Those stops were mixed in with offers so reaction was muted
• Japanese importers need to buy USD/JPY, exporters don't as fully hedged
• Natural demand for USD/JPY but technical outlook mixed
• Recent 118.60/67 double top weighs, but failing to get much below 115.08
• 115.08 - 61.8% retrace of 112.87-118.66 rise above 115.00 barriers

CHF
• EUR/CHF beginning to turn over: Tech warning given Tuesday
• Doji star last session and potential for the same today
• All quiet on the Swiss fundamental front: Market waiting for Trump
• Cross plays 1.0721-1.0737 and trades back on its 1.0730 open into NY
• USD/CHF reflecting broader USD gains and reaches 1.0203 recovery high
• Chart: 1) http://reut.rs/2ii7wqy  2) http://reut.rs/2ieXBPa

GBP/USD
• GBP/USD threatened 1.2082 during Ldn am after erasing 1.2100 option barrier
• 1.2082 = Oct 25 base, low since GBP flash crashed (1.1491 = 31yr low Oct 7)
• Drop from 1.2165 to threaten 1.2082 spurred by higher than f/c UK trade deficit
• 1.2165 = knee-jerk high after UK IP data beat alongside UK trade data 4.30am ET
• EUR/GBP rose to 0.8706 intra-day high after the higher than f/c UK trade deficit
• 0.8664 = ensuing low. 0.8658 was Asia low, base since Tuesday’s 0.8763 2mth top

USD/CAD
• USD/CAD retreated to 1.3219 after threatening 1.3257 (Tuesday top) in Asia
• 1.3272 (100DMA) & 1.33 resistance beyond 1.3257. Two yard 1.33 expiry Friday

AUD/USD     
• AUD/USD threatened 0.74 during European am after vaulting 0.7385 (Tuesday top)
• 0.7396 = 4wk peak, quarter-cent retreat ensued. 0.74 expiry for NY cut, A$328mn strike
• Stops were recently tipped above 0.7405. Asia low was 0.7354

NZD/USD
• NZD/USD Option-related selling mooted as factor in 32 pip retreat from 0.7023
• 0.7023 = European am intra-day high. Near half-yard 0.7020 expiry for NY cut
• Three-quarter yard 0.7040/65 expiries for NY cut too. 0.6971-0.7000 = Asia 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)

• Cost of Trump cover via O/n vols
• O/n (next day) expiry vol premiums give break evens over Trump speech
• O/n EUR/USD around 14.0 - a break even of 62 pips
• O/n JPY 22.0/106 pips. AUD/USD by far the cheapest at 13.5/41 pips
• USD/CAD is 12.0 or 66 pips and NZD/USD 15.0/44 pips
• O/n Cable also gets BoE Gov’ Carney - 17.0 vol or 86 pips 

Economic Data (GMT) - (Source:ThompsonReuters)

• 12:00  MBA Weekly Mortgage Application Indices
• 15:00  Atlanta Fed Business Infl. Expectations Jan prev +2.1% y/y
• 15:30  EIA Weekly Petroleum Status Report

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

• 14:15 BoE's Carney to talks to Tst Select Committee
• 16:00 Pres. Elect Trump Press Call
• 18:00  Treasury auctions $20 bn reopened 10-year notes

 

Topics: US FX Market Open

 

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