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US Market Open – Friday, March 18, 2016: EUR SNAPS TWO-DAY RALLY: ECB RHETORIC CITED

Posted by Marge Maresca on Mar 18, 2016 7:22:49 AM




• EUR/USD a little softer 1.1337-1.1256 in Europe
• Dovish ECB a little help
• China fix also contributing to lower EUR
• Rising EZ labour costs ignored
• Fed rates lifted by Philly data:
• Michigan inflation expectations may come under closer scrutiny

Overnight Events

• EUR/USD snaps impressive two-day rally: backs away from 1.1342 Thurs high
• USD/JPY off its 110.67 Thurs low and hinting at higher lvls next week
• GBP/USD marginally lower high at 1.4496 and 1.4412 low early Europe
• DAX +0.2%, Brent +0.35%, Iron ore +5.5%
• DE Feb Producer Prices -3.0% y/y vs -2.4% prev, -2.6% exp
• EZ Q4 Wages 1.5%  vs  +1.4% in Q3
• EZ Q4 Labour costs +1.3% y/y vs +1.1% Q3
• ECB’s Praet-May cut deposit rate further if needed-Repubblica
• Japan FinMin Aso – Closely watching FX market moves – Rtrs
• BoJ Jan policy minutes three options proffered – more QQE, NIRP or combo
• PM Abe considering delaying planned sales tax hike – Yomiuri
• ChiefCabSec Suga– Not true government considering sales tax hike delay –Rtrs
• China Feb new home prices +3.6% y/y, Jan +2.5%
• NZ Fonterra update – ‘15/16 collection forecast -4%, NZ -1%, Australia -3%

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)

• Vols more settled today as spot markets trade sideways, long Easter w/end looms
• EUR/USD curve just above Thurs initial post FOMC lows. 1mth r/rev bid EUR calls
• USD/JPY vols peak and JPY call bias capped as spot settles and 110 barriers hold
• AUD/USD 1mth risk rev eyes 20 month low at 0.8 AUD put, vols just off their lows
• 1mth EUR/JPY expiry gets ECB already, rest of EUR complex from Monday
• 3mth USD vols propped by June FOMC. 3mth GBP gets Brexit vote from Wed’s 

Chart - EUR/CHF supported by 50% Fibo (Source:ThompsonReuters)
EUR/CHF low so far on Friday has been 1.0918, which is just above 1.0916 – 50% retracement of the 1.0810-1.1023 (Feb 29/Mar 10), so bulls have found decent support at this level. Fourteen-day momentum remains positive, so the risk remains on the upside. Scope is for recovery moves 1.1005/1.1051 - 50%/61.8% retracement of the 1.1200-1.0810 February fall. Note the 30-day upper Bolli-band, currently at 1.1075, is our ultimate target. A break and daily close below the 1.0916 Fibo level will shift the bias to the downside, however.  Chart:

Economic Data(Source:Bloomberg)




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