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    US Market Open – Friday, March 18, 2016: EUR snaps two-day rally: ECB rhetoric cited

     

    eurfalls.png

    EUR/USD   

    • EUR/USD a little softer 1.1337-1.1256 in Europe
    • Dovish ECB a little help
    • China fix also contributing to lower EUR
    • Rising EZ labour costs ignored
    • Fed rates lifted by Philly data: https://reut.rs/22qXZMG
    • Michigan inflation expectations may come under closer scrutiny

    Overnight Events

    • EUR/USD snaps impressive two-day rally: backs away from 1.1342 Thurs high
    • USD/JPY off its 110.67 Thurs low and hinting at higher lvls next week
    • GBP/USD marginally lower high at 1.4496 and 1.4412 low early Europe
    • DAX 0.2%, Brent 0.35%, Iron ore 5.5%
    • DE Feb Producer Prices -3.0% y/y vs -2.4% prev, -2.6% exp
    • EZ Q4 Wages 1.5%  vs  1.4% in Q3
    • EZ Q4 Labour costs 1.3% y/y vs 1.1% Q3
    • ECB’s Praet-May cut deposit rate further if needed-Repubblica
    • Japan FinMin Aso – Closely watching FX market moves – Rtrs
    • BoJ Jan policy minutes three options proffered – more QQE, NIRP or combo
    • PM Abe considering delaying planned sales tax hike – Yomiuri
    • ChiefCabSec Suga– Not true government considering sales tax hike delay –Rtrs
    • China Feb new home prices 3.6% y/y, Jan 2.5%
    • NZ Fonterra update – ‘15/16 collection forecast -4%, NZ -1%, Australia -3%

    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)

    • Vols more settled today as spot markets trade sideways, long Easter w/end looms
    • EUR/USD curve just above Thurs initial post FOMC lows. 1mth r/rev bid EUR calls
    • USD/JPY vols peak and JPY call bias capped as spot settles and 110 barriers hold
    • AUD/USD 1mth risk rev eyes 20 month low at 0.8 AUD put, vols just off their lows
    • 1mth EUR/JPY expiry gets ECB already, rest of EUR complex from Monday
    • 3mth USD vols propped by June FOMC. 3mth GBP gets Brexit vote from Wed’s 

    Chart - EUR/CHF supported by 50% Fibo (Source:ThompsonReuters)
    EUR/CHF low so far on Friday has been 1.0918, which is just above 1.0916 – 50% retracement of the 1.0810-1.1023 (Feb 29/Mar 10), so bulls have found decent support at this level. Fourteen-day momentum remains positive, so the risk remains on the upside. Scope is for recovery moves 1.1005/1.1051 - 50%/61.8% retracement of the 1.1200-1.0810 February fall. Note the 30-day upper Bolli-band, currently at 1.1075, is our ultimate target. A break and daily close below the 1.0916 Fibo level will shift the bias to the downside, however.  Chart: https://tmsnrt.rs/21yQYac

    Economic Data(Source:Bloomberg)

    March18data.png


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