WWM - Analytics

    WWM

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    US FX Market Open –Monday, May 16, 2016: MARKET HOLIDAYS SAP EUROPEAN INTEREST

    Overnight Events

    • Slow start to week as Holidays reduce Monday interest
    • EUR/USD -0.01%, USD/JPY 0.23%, GBP/USD-0.07%, AUD/USD 0.3%
    • DXY 0.02%, FTSE -0.35%, Brent 2.0%, Iron 0.4%, Gold 0.7%
    • Whit Monday holiday France, Germany, Switzerland, Austria, Norway
    • Japan PM Abe – Majority of G7 leaders agree on need for fiscal steps
    • German FinMin Schaeuble – No request from Japan to boost fiscal stimulus
    • Canada off’l – Risks to world economy to be focus for G7 FinMins – Rtrs
    • BoE Gov Carney – Didn’t overstep on Brexit, neg rates highly unlikely – BBC
    • Japan’s Abe to put off next April sales tax hike again – Nikkei exclusive
    • MoF Asakawa: FX policy not restricted by US Treasury report - RTRS
    • MOF, FSA, BOJ hold 3rd regular meetings to discuss financial mkts - Rtrs
    • Fiscal constraints mean BoJ likely to keep helicopter grounded – Rtrs
    • Japan’s MUFG top lender to energy industry, Y10.4 trln credit lines – Nikkei
    • Massive yen headwind hits Japanese car makers as R&D needs grow – Rtrs
    • PBOC – No change in policy after April loans miss expectations – Rtrs
    • China April industrial output 0.47% m/m, 6.0% y/y, 6.5% y/y eyed

    Currency Summaries

    EUR/USD  
    • EUR/USD 1.1300-26 Asia, 1.1307-1.1331 Europe, now 1.1310
    • Last week's 1.1350-1.1450 focus broke ahead strong US sales data
    • In light low vols but also strong data, range comes down, a bit
    • Support 55-DMA/daily cloud: https://reut.rs/1TiWhch
    • Resistance 100/200-HMAS https://reut.rs/1TiWkVe
    • 1.1250-1.1400 looking a good, possibly optimistic, bet this week

    USD/JPY
    • USD/JPY has traded a range of 108.46-108.98
    • Heavy offers above 109.00, Japanese exporters all the way up to 110.00
    • False break above 109.47 Fibo Fri left a bull trap
    • 109.47 - 61.8% retrace of 111.90-105.55 fall
    • Solid bids on dips from Japanese importers, investors & spec shorts
    • EUR/JPY has been 122.63-123.26

    EUR/CHF
    • EUR/CHF Trying to rebound out of Friday’s 1.0520 low
    • Plays to the top end of a 1.1032-1.1053 range into NY
    • Swiss Whit Monday holiday reducing flow
    • USD/CHF also constructive and edges out Friday’s 0.9774 high
    • Broad based dollar gains albeit marginal
    • Chart: 1) https://reut.rs/1YutvGL 2) https://reut.rs/1YurTwO
     
    GBP/USD   
    • GBP/USD traded a 49 pip range thru the European am, 1.4333-1.4382
    • 1.4333 = 7 pips below Friday low. 1.4382 = 7 pips above pre-weekend rally high
    • EUR/GBP firmed to a high of 0.7892 during the European am
    • Paddy Power has lengthened Brexit odds to 5/2, from 9/4 last week

    USD/CAD
    • USD/CAD fell to a European am low of 1.2905 as oil prices rose
    • WTI trading circa $47.05/barrel at 6.10am ET, 85 cents higher on day
    • 1.2905 = low water-mark since 1.2961 (Asia high). 1.2958 was Friday high
    • Huge 1.2945 option expiry later this week (Friday), $4.1bn strike

    AUD/USD     
    • AUD/USD rose to 0.7305 amid talk of bond issue-related demand for AUD
    • 0.7305 = European am high. 0.7236 = 11wk low in Asia
    • Large 0.7300 option expiry Wednesday, A$938mn strike

    NZD/USD
    • NZD/USD extended north from 0.6748 to 0.6800 during the European am
    • 0.6748 = Asia low (0.6757 = Friday low). 0.6775 expiry today, NZ$150mn strike
    • Fonterra dairy price auction scheduled for Tuesday

    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)

    • 1mth expiry vols get ECB, SNB, FOMC and BoJ to underpin now
    • EUR/USD 1mth implied expensive vs realized so may struggle to hold
    • USD/JPY 1mth vol up 2.0 since Fri’ to 12.1, still below realised
    • GBP gamma propped in to a data rich week, inflation, jobs, retail sales
    • Post Brexit dates see drastic gains – 2mth Cable 18.6 vs 16.7 Friday

    Economic Data – (Source:Bloomberg)

     


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