WWM - Analytics

    WWM

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    US Market Open – Thursday, February 18, 2016

    STERLING BID HEADING INTO THE EU SUMMIT

    europeanfeb18.png

    Overnight Events

    • Sterling bid heading into EU summit-UK deal decision
    • GBP/USD 1.4259 to 1.4378 and EUR/GBP to 0.7735 vs 0.7816
    • USD/JPY plays 113.62-114.33-EUR/JPY 126.53-127.11
    • EUR/USD tight and directionless-1.1123-1.1149
    • EZ Dec C/A E41.4 bln vs revised E30.3 bln
    • CH Jan Trade Bal. CHF3.513 bln vs revised CHF 2.589 bln
    • Sweden Jan Core CPI 1.6% vs 1.3% exp, 0.9% prev
    • EUR/SEK falls to 9.4070 from 9.4700 on the strong price data
    • Riksbank’s Jansson-question is how big inflation volatility will be - Rtrs
    • BoJ Kuroda: Negative rates not sign QQE has reached its limit - Rtrs
    • BoJ Ishida warns of cost of prolonging ultra-easing policy – Rtrs
    • Japan PM Abe – Amid signs of trouble, rules out stimulus spending – Nikkei
    • Sources - PBOC asks banks about need for MLF loans, lower rates – Rtrs
    • Fed’s Bullard – Unwise to continue hiking rates amid falling CPI  expectations
    • RBA AsstGov Edey – Too much focus on recent market turmoil not good Rtrs

    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 Lower as risk improves again, but 1mth vols get FOMC to underpin
    • AUD/USD 1mth is 12.75 vs 13.8 Wed’. USD/JPY 1mth 13.6 vs 15.25
    • EUR/USD 1mth setbacks limited to 11.9 vs 12.3 and very rich vs realized
    • GBP gamma remains bid in to EU summit, mid dates on Brexit fears
    • Friday EUR/GBP costs 60 pips and Cable 107 pips breakeven for straddle
    • CNH vols and risk reversals remain heavy after recent profit takes

    Chart - (Source:ThompsonReuters)

     GBP/USD outlook grim, 1.4220 next key support

    GBP/USD's slide Weds resulted in a daily close below 1.4306, the 61.8% retracement of the Jan/Feb rise (1.4080-1.4672) that has reinforced the picture of underlying market weakness. A break and close below the pivotal support 1.4220 level, the 76.4% of that same zone, will open up a retest of the 30-day lower Bolli band. Tuesday's big drop from 1.4515 to 1.4278 has decimated any brewing bullishness and adds negative outlook. Any recovery attempts are likely to run into resistance/supply at the 30-DMA at 1.4380. But a daily close above this level will shift the overall risk back to the upside. 

    https://tmsnrt.rs/1RPWnJd

     

    Economic Data(Source:Bloomberg)

    Feb18data.png


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