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    US FX Market Open Monday, May 2, 2016:  DXY WEAKNESS EXTENDS TOWARD 15MTH LOWS

     

    Overnight Events

    • Japan officials silent Monday as USD/JPY hits multi-month low
    • USD/JPY falls to low not seen since October 2014
    • Fin Min Aso: Yen’s strength extremely concerning - Japanese media (weekend comment)
    • Japan back on holiday from Tuesday until Friday = Golden Week
    • Nikkei tumbles to near 3-week low on stronger yen
    • Japan Apr Nikkei manufacturing PMI 48.2 vs 48.0 prev
    • EUR/USD hits new 2016 peak
    • Euro zone Apr Markit manufacturing PMI 51.7 vs 51.5 prev, 51.5 exp
    • German Apr Markit/MME manufacturing PMI 51.8 vs 51.9 prev, 51.9 exp
    • Swiss Mar Retail sales -1.3%y/y vs -0.2% prev
    • Swiss Apr Manufacturing PMI 54.7 vs 53.2 prev, 52.8 exp
    • UK bank holiday Monday sucks liquidity and interest

    CURRENCY SUMMARIES

    EUR/USD  
    • 12 Apr 1.1465 peak breached in Asia, threat on 1.15 barriers in London
    • Comes as DXY extends losses to 92.824. 2.5bln 1.15 expiries today/Tues’
    • 15 Oct 2015 highs 1.1495 last resistance pre 1.1500, barrier defence expected
    • Weekly cloud top 1.1513 above there- break eyes close above this week
    • Support 21HMA 1.1452, today’s low 1.1430, Fri low 1.1349, 21DMA 1.1344

    USD/JPY
    • USD/JPY falls from 106.74 to hit a new 2016 low registered @106.14 in Asia.
    • Yen hits 18mth high vs dollar as Japan seen in policy bind
    • Fails to take out 106.00 barriers
    • Japanese officials conspicuous by their absence, no verbal intervention so far
    • EUR/JPY trades a 121.87-122.29 range, fate tied closely to USD/JPY

    GBP/USD   
    • Consolidates with UK out, 1.4580/1.4637 todays range
    • Fri's 1.4577/1.4672 range is support/resistance. 1.4672 also 4 Feb hi
    • Weak USD underpins, DXY extends Fri's new low since Aug to 92.824
    • GBP 759mln 1.4650 expiry today, 452mln 1.4590 expiry Tuesday

    USD/CAD
    • Erased 1.2500 barriers Friday, follow through limited to 1.2497
    • Recovered 1.2588, closed 1.2567 Fri'. Todays range 1.2531-59
    • Oil off Fri's 48.50 highs to underpin USD/CAD (46.74 today), weak USD caps
    • Resistance from hourly cloud 1.2548-1.2604.
    • Near term focus Trade data Wed', Canada and US jobs data Friday

    AUD/USD       
    • OIS Rate cut expectations raised to near 60% since last Wed's poor CPI
    • Just 1:3 economists looking for cut. Statement could be dovish if hold
    • Hit 0.7751-0.7548 Wed, recovery peak 0.7669 Fri'. Weak USD underpins
    • Today's range 0.7593-0.7623. 21DMA caps 0.7659
    • Implied vols high - Tuesday atm 27.0, break even 85 pips for straddle
    • Short dated risk reversals firmly bid AUD puts - 1wk 0.8, 1mth 1.3

    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)

    • 1wk vols buoyed by NFP. 1mth expiry gets June ECB
    • Tues’ AUD vol 27.0 or 85 pips breakeven, AUD puts and vols bid
    • USD/JPY vols and JPY calls higher as 106-105 barriers eyed
    • Cable and EUR/GBP post Brexit vols saw heavy selling last week
    • EUR/USD vols up on event risk and threat of 1.15 barrier breach

    Chart - (Source:ThompsonReuters)
    EUR/JPY monthly close sub 121.96 fibo a bearish sign
    EUR/JPY has set new 2016 lows and managed a monthly close below 121.96 - 50% retrace of the 94.12-149.79 (2012-2014) rise. This means the 120.00 psychological level is vulnerable for an attack. A close below 120.00 at the end of May will enhance the downside risk and unlock the 115.39 level – 61.8% retrace of 94.12-149.79. Fourteen month momentum remains negative, this has been the case since January 2015 and this is set to remain the case in the months ahead. A monthly close back above the 121.96 50% fibo needed to give bulls a foothold in this market.
    Chart: https://tmsnrt.rs/1Y2ybne

    Economic Data(Source:Bloomberg)


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