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    US Market Open – Wednesday, March 9, 2016: CHF/JPY decline highlights Yen resilience

    chfjpy.png

    Overnight Events

    • USD/JPY third day of losses: 112.23 Europe low vs 112.76 Asia high
    • CHF/JPY 113.10 to 111.93 decent flows touted
    • EUR/USD holding to low side of 1.0961-1.1011 range
    • GBP/USD plays 1.4178-1.4241: EUR/GBP 0.7702-0.7746
    • EUR/CHF 1.0935 5to 1.10 and CHF/JPY losses blamed
    • DAX 0.5%, Brent 1.7%, DXY 0.08%
    • UK Jan Ind. Output 0.2% y/y vs -0.2% prev, 0.2% exp
    • UK Jan Mfg Output -0.1% y/y vs -1.7% prev, -0.7% exp
    • UK “Queen backs Brexit” front-page Sun (tabloid)
    • UK Buckingham Palace insists Queen is “politically neutral”
    • Britain finance lobby TheCityUK says Brexit could crimp investment in UK
    • BoJ seen holding off cutting rates further for time being Rtrs
    • Australia March Westpac/MI consumer confidence index -2.2% to 99.1
    • Asia corporate profits set for first drop since ’08 – Nikkei

    EUR/CHF
    • EUR/CHF bucking the broader EUR drop
    • Risk/commodities/stocks on the climb: CHF knocked
    • Cross back inside daily cloud with a 1.10 high vs 1.0978 base
    • USD/CHF sharply higher into NY 1.0044 vs 0.9948 low
    • Spot highest since Feb 29 1.0038 peak: Targets cloud base at 1.0057
    • Chart: https://reut.rs/1pwY5nN

    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 gamma bid pre ECB, O/n 34.0 vols/180 pips, 1wk 16.0/195 pips
    • RBNZ tonight – O/n NZD/USD 34.0/95 pips, O/n AUD/NZD 27.0/120 pips
    • BoC today  O/n vol around 19.0 or 105 pips breakeven
    • USD/JPY vols buoyed by weaker spot. 1wk gets BoJ – 15.8 or 185 pips
    • Cross/JPY vol gains muted. EUR/JPY allegedly covered down to 120 barriers
    • GBP related vols heavy, but deeper setbacks limited by Brexit risk   

    Chart - Multiple factors lean on EUR/JPY (Source:ThompsonReuters)
    EUR/JPY's failure to hold above 125.12 - 50% retrace of the 128.16-122.09 (Feb/Mar) fall – weighs heavily on the cross. The long black candlestick on Tuesday adds to downside pressure. The market has subsequently forced a break below the tenkan line which is currently at 123.84. If a daily close is registered below the tenkan line, this will weaken the underlying structure further and put 2016 122.09 low back in play. A break below 122.09 will unmask 121.96 – 50% retrace of the 94.12-149.79 (2012-2014) rise.  A failure to close below the tenkan line, however, will put losses on hold and give bulls a stab at another recovery. Chart: https://tmsnrt.rs/1pwWmyP 

    Economic Data(Source:Bloomberg)

    March9data-1.png


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