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US FX Market Open – Wednesday May 10, 2017: Dollar shrugs off Trump-FBI news

Posted by Marge Maresca on May 10, 2017 7:25:14 AM



Overnight Events

• EUR/USD -0.1%, USD/JPY -0.1%, GBP/USD +0.1%, EUR/GBP -0.2%
• DXY -0.1%, FTSE +0.2%, DAX flat, Gold +0.1%, Copper -0.3%
• EUR/USD hits 2-week low of 1.0858
• Dollar slips initially after Comey firing news then recovers
• Gold edges off 8-week low as Comey firing weighs on risk appetite - Rtrs
• Copper vulnerable, signs of weak China demand weigh - Rtrs
• FR Mar Trade balance -5.353bln vs prev -6.432bln rvsd. -6.00bln f/c
• Norway's economy "has turned the corner" -central bank's Nicolaisen - Rtrs
• Dovish Swedish cbank says too early to change policy direction-minutes - Rtrs
• France's Hollande to hand presidential powers to Macron on Sunday - Rtrs
• BoJ Gov Kuroda: Not thinking now of changes to policy mix, YCC main focus - Rtrs
• Kuroda: Too early to talk on specific exit strategies - Rtrs
• Kuroda: Monitoring FX impact on economy - Rtrs

Currency Summaries

• Asia bought a little EUR/USD 1.0871-98, Europe sells some 1.0859-98
• The major influence has been EUR/USD's surprise failure over 1.10
• Long liquidation has been evident since and proving most influential
• Gap after 1st round French vote 1.0788-1.0821:
• High probability gap is filled. Low option vols back trendless markets
• Vols suggest 1.05-1.10 range reasserted or perhaps small rise 1.06-1.11

• USD/JPY range has been 113.63-114.13
• Stops likely to be clustered above Tue's 114.32 peak
• Japanese exporter offers return in size to put brakes on spot rise
• Bids from 113.60-70 but not large till pre-113.00
• Demand at the Gotobi Tokyo fix was not that strong
• North Korea missile test threats have weighed on USD/JPY
• 30/60-day log correlation with significant across UST-JGB curve

• CHF gained vs the dollar early Europe after Trump fired FBI director
• USD/CHF lower initially to 1.0048 vs Tues' 1.0091 peak. 1.0075 Asia high
• 1.0043 is 100-day MA sppt. Rebound to Europe's high at 1.0070 ahead of NY
• EUR/CHF offered, -0.1% to 1.0943 from 1.0966 Europe/1.0969 Asia
• Support by 30-day upper Bollinger threatened, techs roll over

• GBP/USD met fresh headwind pre-1.30 after catching bid from Ldn open
• 1.30 = option barrier level. 1.2988 = European am high, 1.2938 = ensuing low
• Three recent  cable failures pre-1.30 (one last Friday & two Monday)
• EUR/GBP plumbed 19-day low of 0.8383 after tripping stops sub-0.84 early Europe
• Cross had traded on 0.84 handle since Macron’s first round election win

• USD/CAD based at 1.3687 after falling from an early Europe high of 1.3732
• Parameters within Tuesday’s 1.3671-1.3753 range (low before high)
• Key support 1.3643 (last Friday’s low after failure pre-1.38 option barrier level)

• AUD/USD is trading within strike of a quarter-yard 0.7375 expiry for NY cut
• Offers expected near 0.74: AUD 1bln 0.7400 expiry Thursday
• 0.7398 was Tuesday’s high, before weak Aussie retail sales data hurt AUD
• Dalian iron ore closed up 2.6% Wednesday, source of support for AUD

• NZD/USD has risen to a high of 0.6935 ahead of RBNZ event risk at 5pm ET
• 0.6890-0.6911 = Asia range. RBNZ is expected to keep OCR at 1.75%, MPS in focus
• RBNZ may bring forward expectations of hike to 2018 from 2019
• 1.0633 = 10wk low for AUD/NZD during European am. 1.0641 was Asia low


 Norges Bank data miss but not yet a concern
Softer than expected Norway inflation in April but prices likely to come back on track in May. An unchanged 1.7% core rate was 0.4% below the Norges Bank call but with an Easter skew the April data needs to be taken in that context. Food prices fell more than expected, 0.7%, while air fares added 0.5%. Leaving April aside the inflation outlook favours a rebound and a tighter margin to the Norges Bank estimate of 1.9% for May. Central Bank policy remains loose but a shift to a more dovish stance will require a significant undershoot in the May core prices. A weaker NOK and improving domestic economic backdrop should help underpin inflation in coming months. Inflation data supportive of EUR/NOK but range trading at slightly softer levels expected through May. Chart: forex

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 related vols stay heavy at long term lows as broader ranges hold
• 1mth EUR expiry captured June ECB from Monday to limit losses
• Cable and EUR/GBP 1mth vols at 2 year lows. O/n vols propped in to MPC
• Thurs Cable 12.0/65 pips, EUR/GBP 11.0/40 pips. Thur NZD 17.0/50 pips over RBNZ
• USD/JPY vol gains have peaked with spot, JPY call setback stalls  

Economic Data (GMT) - (Source:ThompsonReuters)

• 12:00  MBA Weekly Mortgage Application Indices
• 13:30  Import Prices (Apr) mkt +0.2% m/m, prev -0.2% m/m
• 13:30  Import Prices ex-Fuels (Apr) prev +0.2% m/m
• 13:30  Export Prices (Apr) mkt +0.1% m/m, prev +0.2% m/m
• 15:30  EIA Weekly Petroleum Status Report
• 19:00  Treasury Budget (Apr) mkt -$175.8 bn, prev -$106.5 bn

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

• 16:45  FedTrade Operation 30-yr Fannie Mae/Freddie Mac (max $1.6 bn)
• 17:00  FRB Boston's Rosengren luncheon speech; NYC
• 20:00  New York Fed releases agency MBS operation schedule


Topics: US FX Market Open


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