WWM - Analytics

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    US Market Open – Wednesday, March 16, 2016: Range generally tight ahead of FOMC

    fed-6.png

    Overnight Events

    • USD/JPY again moving in step with Kuroda rhetoric: 113.03-113.75
    • GBP/USD 1.4085-1.4158 and mid-range into NY
    • EUR/USD 1.1074-1.1113 and quiet range ahead of FOMC
    • DAX up 0.4%, Brent 1.75%, Iron Ore flat
    • UK Jan ILO jobless rate 5.1% vs 5.1% prev, 5.1% exp
    • UK Jan Avg Earnings 2.1% 3mths y/y vs 1.9% prev, 2.0% exp
    • BOJ Kuroda – Can theoretically cut rates to -0.5% in answer to Diet question
    • Kuroda   NIRP not  meant to affect FX but admits it does with other factors
    • Kuroda won’t hesitate  to ease again if needed Rtrs
    • Japan's megabanks go big with bonds as new rules loom – Nikkei
    • Japan Inc: Architects of Abenomics revive   spirit to compete  with China – FT
    • RBNZ – Banks can withstand severe dairy downturn – Rtrs

    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)

    • 3mth vols get key June FOMC to underpin from today
    • Not much priced in to today’s FOMC when looking at O/n options
    • O/n expiry USD/JPY vol trades 18.25 or 86 pips break even
    • O/n EUR/USD vol trades 20.5 or 95 pips break even
    • O/n GBP/USD around 20.0 or 118 pips (gets UK budget)
    • O/n AUD/USD around 25 or 78 pips (also gets AU jobs data tonight) 

    Chart - EUR/JPY capped by 50% Fibo (Source:ThompsonReuters)
    Tenkan and kijun lines remain negatively aligned, highlighting the overall bearish EUR/JPY structure. The expectation is for a bearish cycle down 123.67 – March 10 low - in coming sessions. The strong recovery last week was capped by 127.27 – 50% retracement of the 132.45-122.09 (Jan 29-March 1) fall. The subsequent falls are likely to be sustained, but we need to get a daily close below the tenkan line which comes in at 125.17. Note the tenkan line was marginally breached on Tuesday. A break and close above 127.27, however, will defer the bearish move. Chart: https://tmsnrt.rs/1XuoeOB

    Economic Data(Source:Bloomberg)

    March16data.png


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