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US Market Open – Friday, March 11, 2016: EUR STOPS TRIGGER DEEPER PULLBACK

Posted by Marge Maresca on Mar 11, 2016 7:26:57 AM



Overnight Events

• EUR/USD on the pullback-1.1083 low vs 1.1210 Asia high
• USD/JPY 112.75 to 113.92 and bid holding into NY
• DAX up 2.6%, Iron Ore -2.6%,  Brent +2.15%, DXY +0.5%
• DE Final Feb CPI  confirmed HL 0.0% and HICP -0.2% y/y
• UK public infl. exp yr-ahead = 1.8% in Feb vs 2.0% in Nov-BoE
• UK Jan Trade Bal. –GBP10.289bln vs -10.45bln rvsd, -10.3bln exp
• UK Jan Construction output -0.8% vs +1.6% prev, -1.5% exp
• PBOC fixes CNY at 6.4905 against USD, strongest this year
• PBOC Gov-country’s leverage ratio is excessively high-CSJ
• Japan Q1 big mfg sentiment index -7.9, Q4 ’15 +3.8
• Japan inv trust outflows in Feb Y460 bln, 7 ½ yr high-Nikkei

• EUR/USD opens 1.1176 in Europe and heads south
• Initially trigger of stops 1.1150-60 and EUR/CHF through 1.1000
• Little let up in selling thereafter as pair gradually slips to 1.1083
• No news or data evident to fuel slide. DAX rallies 2.75%
• Longer-dated UST/Bund spreads push 6-8bp wider supporting EUR/USD drop
• Tech followers look to buy dips into prior resistances 1.1070-80 & 1.1040-50  

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)

• Big sell off in EUR related vols since ECB Thursday
• EUR/USD 1wk down 6.0 to 12.5 and 1mth 2.0 to 9.85
• EUR/GBP 1mth 9.7 vs 11.4 and EUR/JPY 1mth 11.3 vs 12.3
• USD/JPY vols marginally softer but BoJ risk helps prop short dates
• GBP/USD 1mth now 3.0 off 24 Feb 12.7 peak as related sales weigh
• AUD and CAD vols steady. NZD vols lower since RBNZ

Chart - EUR/GBP long tail adds to bull tone  (Source:ThompsonReuters)
EUR/GBP left a massive tail on Thursday's candlestick line which highlights the rejection of the downside. Failure to close below the 0.7680 level - 61.8% retrace of the 0.7527-0.7928 (February) rise - adds to the upside bias. Daily cloud, which currently spans 0.7380-0.7578, will come into play more towards the end of March, early April as it rises and will provide bulls with sustained support under 0.7800. Note cross continues to trade within the context of a large inverse head and shoulders pattern with a measured objective at 0.8065/0.8070, so even deep falls all the way down to its neckline at 0.8498 should be viewed as merely corrective. Chart 1)  2)Â

Economic Data(Source:Bloomberg)




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