WWM - Analytics

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    US Market Open – Tuesday, March 15, 2016: YEN bit following BOJ

     

    YYYen.jpg

    Overnight Events

    • USD/JPY heavy after BoJ-114.17 to 112.93
    • GBP/USD 1.4303 to 1.4155 on latest Brexit poll
    • EUR/USD heavy but a tight 1.1072-1.1121 range
    • EZ Q4 Employment y/y vs 1.1% prev
    • Campaign for Brexit in lead in ORB/Telegraph-49% vs 47% in and 4% DK
    • DE police believe an explosion caused car to explode in Berlin-Rtrs
    • SE Feb CPIF 1.1% y/y vs 1.6% prev and 1.1% exp
    • BoJ leaves policy as is, Y80 trln base money target, IOER -0.1%
    • BoJ to review  ratio of reserves applied to NIRP every 3-mos
    • BoJ to exempt money reserve funds   from NIRP
    • BoJ removes language to cut rates again if needed
    • BoJ to maintain  option of easing in three dimensions
    • RBA Mar 1 minutes – Low infl.  provides scope for easing  if needed
    • China said to draft rules for Tobin tax on currency transactions – Bbg

    USD/JPY
    • USD/JPY falls from 114.17 to hit 112.93
    • Becomes very heavy as risk aversion, technicals weigh
    • 48/72-hour log correlation with Nikkei futures both 0.81
    • Algo spike to 114.17 in Asia has been replaced by sustained offered tone
    • Drops below 113.00, despite Kuroda defending NIRP at news conference
    • BoJ stands pat as expected but wording tilt on NIRP weighs on spot
    • EUR/JPY drops from 126.68 to reach 125.28

    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 vols remain pressured since ECB, JPY vols off since BoJ
    • 1mth EUR/USD 9.4 from 11.9 pre ECB, daily realized vol 8.95
    • USD/JPY 1mth 9.7 from 11.0 Monday – now below realized
    • EUR/JPY 1mth is 9.2 vs 12.3 pre ECB and AUD/JPY 1mth in to 14.5
    • AUD/USD 1mth back at multi month pivot point of 12.0
    • USD/CNH 1mth tests support/low since Aug at 5.0 vs 10.5 mid Feb
    • Only mild event risk attached to FOMC Wednesday 

    Chart - EUR/USD remains supported by cloud (Source:ThompsonReuters)
    EUR/USD remains supported by cloud EUR/USD has potential to move higher near-term to retest Thursday's 1.1218 peak despite the latest corrective moves lower. A large tail on Thursday’s candlestick highlights the underlying bullish structure. The market broke through the rising cloud on Thursday, but the failure to close within or below it has added to the upside bias. The cloud currently spans 1.0931-1.1050, so  expect significant demand to remain in this region. Important Fibonacci levels also act as support between 1.0973/1.1020 – 61.8%/50% retracement of the 1.0822 to 1.1218 Thursday spike. A daily close within the cloud is needed to challenge the current bullish structure. Chart: https://tmsnrt.rs/1RjF26v

    Economic Data – (Source:Bloomberg)

    March15data.png


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