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US FX Market Open – Wednesday, Nov. 2, 2016: CHF gains a standout: EUR/CHF 1.0755 low

Posted by Marge Maresca on Nov 2, 2016 7:40:30 AM

 

chfs.png

Overnight Events

• USD/CHF -0.32%, EUR/CHF -0.06%, EUR/USD +0.2%
• USD/JPY -0.5%, GBP/USD +0.15%, NZD/USD +0.8%
• DXY -0.2%, DAX -0.8%, Brent -1.45%, Iron -1.8%
• UK Oct Nationwide Hse prices +4.6% y/y vs 5.3% prev, 5.0%v exp
• DE Oct Mfg PMI 55.0 vs 55.1 prev, 55.1 exp
• EZ Oct Mfg PMI 53.5 vs 53.3 prev, 53.3 exp
• DE Oct Jobless s/adj rate 6.0% vs 6.1% prev, 6.1% exp
• UK Oct Cons PMI vs 53.3 prev, 51.8 exp
• UK rating at risk of downgrade if UK gets poor Brexit deal–Moody’s – Rtrs
• Broadbent favourite to succeed Carney as BoE Governor – Paddy Power
• NIESR estimates UK economy will grow 0.2% in Q4 2016 & 1.4% in 2017 Rtrs
• Tweet from Jo Maugham’s twitter account: “Rumours we’ll get an A50 judgment tomorrow”
• Hilton said “expect 2.5% cut in UK VAT” via Nov 23 autumn statement – Ldn Evening Standard Tuesday
• BoJ Gov Kuroda – Risks to economic outlook skewed to downside
• Italy bond yields fall sharply on speculation of referendum delay – Rtrs
• Japan Oct monetary base at fresh record high, Y417.63 trln, +21.3% y/y
• US Valeant in talks to sell unit to Japan Takeda for @$10 bln – Nikkei
• NIESR - Political attacks on BoE threaten its independence – Rtrs
• China starts credit default swap trading to lessen bond risks – Xinhua

Currency Summaries

EUR/USD  
• EUR/USD rallies 1.1062-1.1099 in early European trading
• 1.1100 likely drew corp sellers but high leads to spec options
• Oct EZ PMI data beats @ 53.5 vs 53.3 but EUR still slips
• Italy the weak link of EZ PMIs, France a rare winner
• Few options higher but EUR 3.8bln expiries 1.09-1.10
• Oct ADP @ 12.15GMT f/c 165k and prior 154k

USD/JPY
• USD/JPY range has been 103.44-104.17 so far, spot remains weak
• Risk aversion sets in as polls tighten in US Election
• Mkt long, desperate that tech bids circa cloud top will come the rescue
• Daily cloud currently spans 101.81-103.52, so this region is supportive
• Mkt continues to fear downside, option market looks short gamma

EUR/CHF
• Risk aversion on risk Trump win sends EUR/CHF to 4 month low
• Technically oversold, below lower 30-day Bollinger band 1.0776
• Last time below same level was on Brexit, only lasted 2 days
• SNB will be active. L-term support @ weekly cloud base 1.0740
• CHF undermined by the most negative bond yields, ultimate funder
• Chart: http://reut.rs/2fcXsMt

GBP/USD
• GBP/USD rose to test 1.2281 early Ldn as EUR/USD ascended to 1.1099
• Ensuing retreat based pip shy of 1.2255 pre-UK construction PMI beat
• 1.2255 was Tuesday’s NY afternoon high. 1.2221 = Asia low
• EUR/GBP met fresh headwind pre-0.9050 early Europe as EUR/USD rose
• 0.9050 was 2wk high Monday. 0.90495 was Asia high. 0.9043 = Tuesday high

USD/CAD
• USD/CAD has risen towards 1.34 to follow early Europe drop from 1.3406-1.3371
• 1.3400 option expiry for NY cut, USD 365mn strike
• WTI 46/barrel at 6.20am ET, 70 cents lower on the day

AUD/USD     
• AUD/USD extended south from 0.7689 to 0.7613 in Asia amid risk aversion
• Risk aversion courtesy of fears Trump may win US presidential election
• 0.7689 was Tuesday’s high. Large 0.7650 expiry for NY cut, A$896mn strike
• AUD/NZD has fallen to a 1mth low of 1.0533 on NZ employment surge
• 1.0704 was Tuesday’s high

NZD/USD
• NZD/USD has risen to a 13-day high of 0.7257 on NZ employment surge
• NZ employment +1.4% in Q3, almost triple the market expectation
• NZ Q3 unemployment rate 4.9% vs 5.1% f/c. 0.7232 was Asia high
• Resistance 0.7265 (Oct 20 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)

• Risk aversion boosted vols overnight – pick up in US election risk
• 1wk vols capture election and significantly higher – especially USD/JPY
• 1wk USD/JPY 9.0 to 17.3 or 103 to 196 pips. 1mth risk rev 1.3 to 2.15 JPY calls
• USD/CHF 1mth biggest 1 day gain since Brexit – 7.1 to 8.75,  1wk 7.2 to 12.5
• EUR/USD gains reached 1.1100, 1wk vol 8.0 to 12.0, 1mth 7.3 to 8.4
• USD/MXN 1mth vol – recent election risk gauge - new highs above 27.0

Chart - (Source:ThompsonReuters)

EUR/USD recovery needs to overcome
EUR/USD has staged a sustained recovery, but there is a chance the 1.1109 level - 50% retrace of the 1.1366 to 1.0851 fall  - will stem gains. Trading in the next couple of sessions is very important for direction. A break and daily close above 1.1109, however, will confirm that bulls remain in control. Chart: http://tmsnrt.rs/2eTOBAZ

Looking Ahead - Economic Data (GMT) - (Source:ThompsonReuters)

• 12:15 ADP Nat Employment Rpt Oct mkt +165k, prev +154k
• 14:30 EIA Weekly Petroleum Status Report

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

• 13:00 FOMC 2-day meeting resumes
• 18:00 FOMC statement

 

Topics: US FX Market Open

 

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