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US Market Open: Tuesday March 1, 2016: STG Recovers - cable and cross on the move


Overnight Events

• EUR/GBP racks up 4-day slide to 0.7758 Tuesday low
• USD/JPY rebound from 112.16, EUR/USD marking time at 1.0880
• Stocks in the black: DAX 1.6%, FTSE 0.6% but Barclays off after reporting
• DE Feb Mfg PMI 50.5 vs 50.2 prev, 50.2 exp
• DE Feb Jobless 6.2% vs 6.2% prev, 6.2% exp
• EZ Feb Mfg PMI 51.2 vs 51.0 prev, 51.00 exp
• UK Feb Mfg PMI 50.8 vs 52.9 prev 52.2 exp
• EZ Jan Jobless 10.3% vs 10.4% prev, 10.4% exp
• CH Jan R.Sales 0.2% y/y vs  -1.7%, Feb Mfg PMI 51.6 vs 50 prev, 49.6 exp
• Jpn PM Abe advisor Hamada - Not in favor of FX intervention to weaken ccy
• Hamada - Sporadic action may be needed to punish specs – Japan Times
• Japan Feb mfg PMI– final 50.1, slowest growth in 8 mos, flash 50.2, Jan 52.3
• PBOC Chen – Concern over rising spill over frm divergence in global policies
• China Feb Caixin mfg PMI 48.0, 48.3 eyed, Jan 48.4
• China Manufacturing jobs shed at fastest pace in 7-years
• China Feb off’l mfg PMI 49.0, 49.3 eyed, services PMI 52.7, Jan 49.4, 53.5
• Foreign investors shun Gilts, Brexit-c/a deficit cited – Financial Times
• RBA leaves OCR as is at 2%, low inflation leaves scope for easier policy

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)

• EUR/USD below  1.7bln 1.0900-10 expiries, vols capped above realised
• Cable vols ease, front end outpaces back as GBP recovers ground
• NZD vs AUD 1mth vol at l/term high on rising expectations of RBNZ ease
• USD/JPY vols weak despite spot moving – focus on post BoJ strikes
• USD/CNH vols and puts resume sales as spot maintains more settled tone

Chart - GBP/USD recovery likely to stall  (Source:ThompsonReuters)
GBP/USD overall bias remains on the downside for an eventual test of 1.3500, despite the decent recovery from Monday’s 1.3836 new 7-year low. Negative alignment of the 10/30-DMAs highlights the underlying offered structure, as do the bearish 14-day momentum readings. So while gains back above the 30-day lower Bolli band give bulls some hope of a more sustained revival, decent supply is likely to cap moves around some important Fibonacci levels above. Expect bulls to be halted by the 1.4155/1.4254 region – 38.2%/50% retrace of the 1.4672-1.3836 February fall. Chart: https://tmsnrt.rs/1VOiQFA

Economic Data(Source:Bloomberg)


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