WWM - Analytics


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    US Market Open – Thursday, March 10, 2016: Euro heavy into ECB policy decision


    Overnight Events

    • NZD/USD falls to cloud top at 0.6615 then recovers to 0.6670
    • EUR/USD heavy to 1.0960 from 1.1004-1.0980 into NY
    • USD/JPY 113.15 to 113.80 and 113.50 into NY
    • DE Jan Trade surplus narrows: Exports fall 0.5% vs -0.7% prev
    • FR Jan Ind. Output 1.3% m/m vs -0.6% rvsd prev, 0.8% exp
    • NO Feb Core CPI 3.4% vs 3.0% prev, 3.1% exp
    • IIF – Financial mkt dislocations growing – Singapore Bus. Times
    • ICM poll 40%b Brits was to remain in EU, 41% want to leave
    • Japan FinMin Aso – Japan no longer in state of deflation – Bbg
    • Hedge funds back off bets on China devaluation – Rtrs
    • China Feb CPI 1.6% m/m, 2.3% y/y, 1.1% and 1.9% eyed
    • ECB questions banks on Brexit preparations – Handelsblat
    • RBNZ cuts OCR 25 bps to record low 2.25%
    • Moody’s – Credit risk to NZ bks from lower dairy payouts – Rtrs

    • EUR/USD expectedly quiet ahead today's ECB meeting
    • ECB-10bp deposit rate cut and additional 10bln QE expected
    • 21-DMA lower towards 200-DMA. 1.1040/43. Close over maybe a game changer
    • 200-HMA looking key below: https://reut.rs/1M8gJag
    • Options anticipate a decent move. O/N ATM straddle costs 175 pips   
    • EUR risk reversals flip to a sizeable downside bias
    • USD/JPY range has been 113.15-113.80
    • Nikkei closed up 1.26%
    • Relationship with Nikkei futures persists - 48/72H correlation 0.72/0.75
    • Large 114.00 strike to expire at the NY cut worth 1.9B may attract
    • Thick offers noted @113.80 & above, bidding interest now circa 113.50
    • Gotobi flows helped push spot higher in Asia from 113.15 low into Tokyo fix
    • EUR/JPY sees 124.30-124.90 so far

    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)

    • Focus on ECB, O/n EUR/USD vols at 38.0 or 175 pips breakeven
    • Sentiment turns lower – 1wk risk/rev paid 1.0 EUR put vs 0.2 EC Wed’
    • 1wk 18.5 vols/225pips (12.0 vols over realised) with FOMC now in the mix
    • EUR/JPY 1wk trading 19.0 vols or 250 pips breakeven (BoJ next Tues’)
    • NZD related vols off highs after RBNZ surprise cut. NZD spot hit  
    • USD/JPY vols settle marginally lower. Riskies hold strong downside bias 

    Chart - USD/JPY primed for 110.35 attempt (Source:ThompsonReuters)
    USD/JPY is gearing up for another attempt at taking out 110.35 - 61.8% retracement of 100.76 to 125.86 (2014-2015) rise. The close at the end of February below 113.31 – 50% retracement of 100.76 to 125.86 - has weakened the bearish structure. Fourteen-month momentum remains negative, meaning gains are likely to top out as the underlying bias is on the downside. The recovery from 110.99 February 10 low will likely remain bound by 115.08 - 38.2% retracement of the 121.70-110.99 (Jan/Feb) drop. Interim resistance comes between March 114.56 peak and the kijun line at 114.61. If spot vaults 115.08 on a sustained basis, this will put a test of 110.35 on hold. Chart 1) https://tmsnrt.rs/1M8fHLf 2) https://tmsnrt.rs/1QFVwsu

    Economic Data(Source:Bloomberg)


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