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    US Market Open – Friday, February 26, 2016: USD/CAD bears down on 1.3360 Fibo

     

    CAD226.png

     

    Overnight Events

    • USD/JPY higher to 113.22 but not convincing
    • GBP/USD back above 1.40 but short lived
    • DAX up 2.2%, Brent up 1.75%, Copper up 1.7%
    • CH Q4 Non-Farm Payrolls 4.897mln vs 4.244mln
    • EZ Feb Business Climate 0.07 vs 0.29 prev, 0.28 exp
    • EZ Feb Econ Sentiment 103.8 vs 105.00 prev, 104.4 exp
    • EZ Feb Cons Conf. -8.8 vs -3.2 prev, -6.7 exp
    • EZ Feb Consumer inflation expectations 3.7 vs 2.3 prev
    • EUR.Grp Chairman-does not believe monetary policy has reached its limit
    • U.S Tsy Sec-Chuina needs to communicate policies clearly, esp exch rate
    • Japan FinMin Aso – Not considering added fiscal stimulus Rtrs
    • Aso: Wants to reaffirm G20 commitment against deval race - Rtrs
    • Kuroda: BoJ won't deepen negative rates at pre-set timing - Rtrs
    • BoJ Gov Kuroda – QQE/NIRP working but global risk aversion
    • Kuroda- technically  possible to push interest rates more negative
    • PBOC Zhou – China has more room to support economy
    • IMF Lagarde – Policymakers should go bold, go broad, go together – MNI
    • OECD - Calls for G20 structural reforms - Reuters
    • BoE Gov Carney – Warns NIRP could prove zero-sum game-Rtrs
    • Jan core CPI unch y/y, as eyed, core-core 0.7%; Tokyo Feb -0.1% vs -0.2%
    • UK Feb GfK consumer conf. index at zero, 3 eyed, lowest since Dec ’14

    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)

    • Spot markets consolidate pre weekend to keep pressure on vol curves
    • Post Easter expiry adds weight to 1mth vol since yesterday. 1wk now gets NFP
    • CB risk underpins expiries falling mid March, ECB, BoC, RBNZ, BoJ, FOMC
    • GBP recovers to large 1.4000 expiry. Back date vol/GBP put setbacks more limited
    • CAD gamma still performing. AUD vols ease further, NZD preferred over RBNZ    

    Chart - USD/CAD bears down on 1.3360 Fibo  (Source:ThompsonReuters)

    USD/CAD is gearing up for  a break and close below 1.3360 which will then unmask the 1.3000 psychological level and 1.2538 – 38.2% retracement of 0.9059 to 1.4689 (2007/2016) rise. The market is getting closer to 1.3360 23.6% of the 0.9059-1.4689 recovery as we predicted on Feb 1. Massive rejection of the upside break in January above 1.4512 – 76.4% retrace of the 1.6197-0.9059 (2002/2007) fall – continues to weigh heavily on the outlook. Fourteen-month momentum is less positive in February than the readings in January and December, highlighting a weakening in the uptrend. A failure to take out 1.3360 will make it increasingly possible for a recovery to occur. Chart: https://tmsnrt.rs/1n15w4F

    Economic Data(Source:Bloomberg)

    Feb26data.png


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