WorldWideMarkets Community

Forex Trading, Market News & Technical Analysis

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



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 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 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

• 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:

• 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 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 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 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:

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


Tools & Educational Resources

Forex 101LEARN MORE >>
Learn the basics of Forex and how to practice trading the markets.

GlossaryLEARN MORE >>
Confused by the language? Click here and search for key trading terms.

Browse our frequently asked questions and find your answers right away.

Access to the educational lessons, webinars and platform walkthroughs.


Get started with a FREE $10,000 Demo Account and experience the Forex Market RISK FREE!