WWM - Analytics


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    US FX Market Open – Monday, June 6, 2016: USD SLIDE STALLS, YELLEN AWAITED


    Overnight Events

    • Japan MoF Vice Fin Min Asakawa: Closely watching FX moves – RTRS
    • Asakawa: No objection to G7/G20 stance against competitive FX devaluation – RTRS
    • Asakawa: Excess FX volatility, disorderly moves hurt economy – RTRS
    • Chief Cabinet Secretary Suga: Closely watching FX, stability extremely important – RTRS
    • Euro Zone Jun Sentix index 9.9 vs 6.2 prev, 7.0 exp
    • ECB’s Liikanen: Key interest rates to stay as are or lower for extended time – MNSI
    • Liikanen: Long-term expectations low in the euro area
    • German Apr Industrial orders -0.2% vs 1.9% prev, -0.5% exp
    • Italy's M5S looked likely to take charge of Rome after municipal elections at the weekend – RTRS
    • 5-Star Movement (M5S) wants to hold a referendum to decide whether Italy should remain in euro
    • Swiss voters rejected by a wide margin proposal to introduce guaranteed basic income
    • Brexit polls fuel GBP volatility, TNS & YouGov Brexit polls hurt the pound
    • Latest ICM poll shows 43% of Britons would vote to remain in EU, 48% would vote to leave
    • Pro-Remain MPs consider using majority to keep Britain inside EU if vote is for Brexit - BBC

    Currency Summaries

    • Post NFP rally peaked 1.1374 Fri, 1.1375 today, setback 1.1334 since
    • 830mln 1.1340-50 expiry helps contain. 1.1380 May 13 high resistance
    • Daily cloud top 1.1361, 50% of 1.1616-1.1097 is 1.1356 – bulls need close above
    • 55DMA 1.1304, 21DMA 1.1253 to underpin
    • Yellen at 16.30 GMT – O/n vol is 13.5 – premium 64 pips break even

    • USD/JPY recovery moves from Asia's 106.35 low to hit 107.28 in London
    • Offers are said to be heavy from 107.50, could limit bulls
    • There are 805M worth of 107.50 strikes set to expire at NY cut
    • MoF's Asakawa comments highlight nervousness with USD/JPY's sharp decline
    • EUR/JPY range has been 120.84-121.79 so far

    • GBP/USD was helped to a European am high of 1.4464 by profit-taking on shorts
    • Profit-taking kicked in after early Europe failure to break below 1.4352
    • 1.4352 was 3wk low in Asia after GBP hurt by TNS & YouGov Brexit polls
    • EUR/GBP retreated to a European am low of 0.7854 as GBP shorts were lightened
    • 0.7906 was Asia high after 2 polls suggested more Brits want to leave EU than stay

    • USD/CAD traded a 1.2939-1.2981 range thru the European am
    • Asia range was 1.2942-1.2974

    • AUD/USD is eliciting support from commodity price gains
    • Dalian iron ore closed up 5.6% Monday. Copper 1% to 4wk high
    • 0.7366 = European am high for AUD/USD vs 0.7316 Asia low
    • AUD/NZD pushed recovery envelope from 1.0520 to 1.0637 during European am
    • RBA seen on hold Tuesday, approximate 50-50 chance of RBNZ cut Wednesday

    • NZD/USD elicited support pre-0.6900 after retreating from 0.6965
    • 0.6907 was early Europe low. Risk of 25bp RBNZ rate cut this week

    Chart - (Source:ThompsonReuters)

    EUR/GBP likely to remain capped below 0.7906 Fibo
    Cross recovers but has so far been capped by 0.7906 in Asia, 61.8% of 0.8117 (Apr 7 high) to 0.7566 (May 25 low). The risk remains for a bearish resumption is the days ahead sub 0.7800. Daily cloud is thin, 0.7876-0.7885, offering little protection against gains. Bulls need to force a daily close above the cloud to change the trajectory back to the upside. Conversely a failure to close above the cloud, despite the intra-day break, will add to the underlying bearish structure. Chart: https://tmsnrt.rs/28eHQxH

    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)

    • Post NFP vol setback limited by speed of USD decline Friday
    • Brexit big risk – props 1mth vols broadly – GBP especially
    • 1mth Cable 7yr high above 22.0. GBP gamma performs amid polls
    • AUD RBA tonight, no change F/cast, but 50/50 RBNZ cut Thursday
    • USD/JPY recoveries limited, vols underpinned, cross/JPY too
    • O/n vols propped in to Yellen speech at 16.30GMT


    Looking Ahead - Economic Data, Events, Other Releases (GMT)

    • 14:00 US Labor Market Conditions Index, May, prev change -0.9
    • 14:00 US Employment Trends Index, May, prev 128.3
    • 15:45 FedTrade Operation 30-year Ginnie Mae, max $2.375bn
    • 16:30 Fed Yellen (voter, dove) on econ outlook & mon pol to World Affairs Council; Philadelphia, PA
    • 18:00 Fed Yellen in roundtable discussion on worker skill development; Philadelphia, PA


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