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US Market Open – Wednesday, March 2, 2016: Yen easier again as risk appetite builds

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Overnight Events

• USD/JPY plays 113.75-114.45 and drifts from high into NY
• EUR/JPY reaches 124.35 high from 123.65
• CH Q4 GDP 0.4% q/q vs -0.1% Q3 rvsd, 0.4% y/y vs 0.8% Prev
• EZ Jan prod prices -2.9% y/y vs -3.0% prev, -2.9% exp
• UK Feb construction PMI 54.2 vs 55.00 prev, 55.00 exp
• ECB’s Coeure-studying how other jurisdictions use negative rates Rtrs
• ECB’s Villeroy-looking for second round effects of low oil Rts
• Villeroy-Even though not deflation the battle is not over Rtrs
• Moody’s China outlook on Aa3 govt bond rating to negative vs stable
• China RRR cut not signal of impending large-scale fiscal stimulus – Xinhua
• BoJ Gov Kuroda – Price trend improving, crude oil holding prices back – Rtrs
• UK Jan BRC shop rices -2.2% y/y, 34th straight fall, Jan -1.8%
• Australia Q4 GDP 0.6% q/q, 3.0% y/y, 0.4% and 2.5% eyed

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 pressured amid improved risk sentiment, more settled spot
• EUR/USD 1mth 11.9-11.25 this week, ECB risk limits deeper decline
• USD/JPY has totally retraced 10-11 Feb vol spikes – 1mth 12.2 vs 16.25
• EUR/JPY 1mth 2.0 below last week’s 14.5 hi, 1mth AUD/JPY 16.5 vs 20.2
• AUD/USD 1mth eyes 2016 low 11.7. NZD 1mth 2.0 above AUD pre-RBNZ
• 1mth Cable off 2.0 to 10.7 since last week, 1mth EUR/GBP off 1.4 to 11.6
• USD/CNH 1mth vol off 4.5 vols in recent weeks, now around 6.0

USD/JPY
• USD/JPY has made gains from 113.75 to 114.45
• Decent offers ahead of 115.00, gamma profile thins out above
• Tech reversal continues but 115.08 could bound
• 115.08 is 38.2% Fibo 121.70-110.99
• Large white hourly candlestick line highlights bulls strength
• Nikkei index surged higher closing up 4.11%.
• Nikkei futures 48/72-hr correlation with stop 0.67/ 0.71
• EUR/JPY has seen a range of 123.65-124.35 

Chart - USD/CAD ripe for near-term recovery  (Source:ThompsonReuters)
USD/CAD found support at 1.3387 on Tuesday ahead of 1.3360 - 23.6% retrace of the 0.9059-1.4689 (2007/2016) recovery – which means there is an expectation for a near-term recovery to 1.3694 – 23.6% of 1.4689-1.3387 ((2016) drop. The market is trading back above a flattening 30-day lower Bollinger band, which adds to the scope for further near-term recovery attempts before longer-term bears return. Interim targets include Feb 29's 1.3586 peak and the falling 10-DMA at 1.3616. A break and close below 1.3360, however, will put the recovery on hold and unmask deeper downside targets. Chart: http://tmsnrt.rs/1oOEa32

Economic Data(Source:Bloomberg)

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