WWM - Analytics


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    US Market Open – February 5, 2016

    Overnight events

    •    EUR/USD plays a tight 1.1183-1.1216 range
      • USD/JPY heavy in 116.55-116.99 range
      • GBP/USD off its lows but offered-1.4507-1.4592 seen
      • Brent choppy but positive into NY-Crude up 0.4% to 31.85
      • ECB’s Jazbec-Will act in March if necessary- WSJ
      • Rtrs Poll-most accurate 2015 China pollsters see 2016 GD at 6.7%
      • DE Dec Ind. Orders -0.7% vs 1.5% prev, -0.5% exp
      • RBA quarterly MPS – Highlights job strength in steady policy
      • Antipodean food producers struggle to meet Lunar NY demand
      • CNB considered cutting rates into negative territory Thurs  

    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.  

    FX Option Expirations(Source:ThompsonReuters)

    • Cost of NFP cover in USD Majors via Monday atm straddles
    • EUR/USD vol 11.0 or 90 pips.  USD/JPY vol 13.0 or 110 pips breakeven
    • GBP/USD vol is 9.0 or 99 pips and AUD/USD vol 12.5 or 65 pips breakeven
    • USD/JPY vols/Riskies stay firm pre NFP amid risk of further spot weakness
    • EUR/USD vols off highs, but riski at 6yr high EUR calls to lift vol if USD falls
    • China NY holiday keeping trade flow light today and next week  

    EUR/GBP gearing up for strong gains
    There's scope for EUR/GBP to test 0.7799 - 76.4% of the 0.8066 to 0.6935 (Sept 2014/July 2015) fall - a break and close above which will unmask the 0.8000 psychological level. Sustained trading above the head and shoulders neckline which comes in at 0.7498 sets up a measured objective at 0.8065/70. Fourteen-week momentum remains positive, the highest reading since March 2013, highlighting the overall upside potential. Only a weekly close back below the head and shoulders neckline will shift the overall bias back to the downside.

    Economic Data(Source:Bloomberg)


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