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US FX Market Open – Wednesday, November 16, 2016: Broad Based USD dollar gains dominate

Posted by Marge Maresca on Nov 16, 2016 7:29:41 AM

 

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Overnight Events

• USD/JPY +0.3%, EUR/USD -0.14%, GBP/USD -0.02%
• DXY +0.18%, DAX -0.25%, Brent -0.55%, Iron -6.5%
• UBS will not make changes to London ops in wake of Brexit
• EU Comm decides not to suspend funds to Spain/Port for breach of rules
• Fed’s Bullard –Rate regime not expected to turn around and mean revert
• SNB’s Jordan CHF still significantly overvalued, will intervene if necessary
• UK Oct Claimant Count +9.8k vs rvsd 5.6k prev, 2.0k exp
• UK Sept ILO Jobless Rate 4.8% vs 4.9% prev, 4.9% exp
• UK Sept Avg Earnings 2.3% vs 2.3% prev, 2.4% exp
• CH Nov ZEW vs 5.2prev
• Australia Oct Westpac/MI leading index 97.11, Sept 97.05
• NZ Fonterra GDT price index +4.5% at latest dairy auction, last +11.4%
• PBOC fixes CNY at 6.8592 vs USD, spot (CNH=D3) as high as 6.8819

Currency Summaries

EUR/USD  
• EUR/USD opens 1.0747 trades 1.0756 then dumps to 1.0700
• 1.0730 bounce then 1.0697 over the rest of the EU session
• Bonds (US/bund rate yield divergence) continue to lead EUR/USD sellers
• ACB flows eyed behind today's drop, rebals of EM intervention
• EM & commodity ccy weakness may support EUR if focus flips to risk-off
• Monthly trend line @ 1.0661 next support: http://tmsnrt.rs/2fYajTp

USD/JPY
• Trump trade eyes 110 despite narrowing 5yr UST/JGB yield spread
• 5yr UST/JGB yield spread 30/60-day log correlation with USD/JPY +0.68/+0.63
• 109.50 barriers taken out, nothing much by way of vanilla options above
• 110.00 said to have decent option structures which may well be defended
• Offers said to be heavy ahead of 110.00, stops is size above
• There has been a mixture of real money and leverage names selling
• Japanese names have been on the bid, orders in size 108.60/70

CHF
• Monday's bull signal drew good confirmation Tuesday but bear trend intact
• Falling daily tops reduce reversal risk and 10DMA closing the door @ 1.0745
• A sense the SNB will not intervene while EUR/USD remains so heavy
• As if to answer this view: Jordan-CHF still significantly over valued
• SNB will intervene when necessary
• Long the play but trend says otherwise: Chart: http://reut.rs/2gfSG3V
• USD/CHF clear above parity: 1.0050 new trend high
• Broad based USD demand dominates Chart:  2)  http://reut.rs/2eZfD6j

GBP/USD  
• GBP/USD has fallen to 1.2410 as the greenback racks up across-the-board gains
• Offers circa 1.2500 capped early Ldn gains (1.2436 was Asia low)
• EUR/GBP dropped to threaten 0.8567/69 early Europe as EUR/USD fell to 1.0700
• 0.8569 was Tuesday low on Sky News/Hale piece. 0.8567 = 7wk low Nov 11

USD/CAD
• USD/CAD has risen to threaten 1.3500 as WTI retreats towards $45/barrel
• Huge 1.3500 option expiry Friday, $2.5bn strike. 1.3424 = Asia low
• 1.3427 = 50% retracement of 1.3265 (Nov 9 low) to 1.3589 (9mth high Monday)

AUD/USD     
• AUD/USD tripped stops sub-0.75 during the European am, en route to 0.7475
• 0.7475 = 2mth low. AUD hurt by another steep iron ore drop in Asia Wednesday
• AUD also vulnerable due to its proxy roles for Asia EM currencies: MYR in focus

NZD/USD
• NZD/USD has fallen to a 1mth low of 0.7051 as the greenback racks up gains
• Recent talk of bids near 0.7000: 0.7035 = 11wk low Oct 13. 0.7023 = 200DMA
• AUD/NZD fell to a European am low of 1.0590 as commodity losses weighed on AUD

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)

• EUR/USD breaks 1.07 barriers, 1mth vol and EUR puts new highs since July
• Political risk (French elections) fuels demand for 6mth/1yr vol and EUR puts
• USD/JPY en route to 110.00. 1mth vol propped near 13.0. 1mth gets FOMC
• GBP vols supported by decent spot moves of late, EUR/GBP too
• AUD finally breaks 0.7500 which halts vol setback from Monday’s highs

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

• 12:00 MBA Weekly Mortgage Application Indices
• 13:30 PPI Final Demand Oct mkt +1.2% y/y; prev +0.7%
• 13:30 PPI Final Demand ex-Food/Energy Oct mkt +1.5% y/y; prev 1.2%
• 14:15 Industrial Production Oct mkt +0.2% m/m, prev +0.1%
• 14:15 Manufacturing Output Oct mkt +0.3% m/m, prev +0.2%
• 14:15 Capacity Utilization Oct mkt 75.5% m/m, prev 75.4%
• 15:00 NAHB Housing Market Index Nov mkt 63, prev 63
• 15:00 Atlanta Fed Business Infl Expectations Nov prev +1.7%  y/y
• 15:30 EIA Weekly Petroleum Status Report
• 21:00 Treasury International Capital Flows Sep

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

• 12:45 FRB Minneapolis's Kashkari Too Big to Fail; New York, NY
• 16:45 FedTrade 30-year Ginnie Mae max $1.225 bln
• 19:30 FedTrade 15-year Fannie Mae/Freddie Mac max $650 mln
• 22:30 FRB Philadelphia's Harker local econ and Fed functions; Philly

 

Topics: US FX Market Open

 

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