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    US FX Market Open – Tuesday, June 7, 2016: USD CONSOLIDATING, GBP VOLATILE, AUD UP AFTER RBA

     


    Overnight Events

    • Clinton reaches magic numbers in fight for Democratic nomination – RTRS
    • Japan MoF gauges bank appetite for neg rate lending – RTRS Buzz
    • Japan Apr Coincident indicator 2.0m/m vs 0.5m/m prev
    • Japan Apr Leading indicator 1.4 vs -0.5 prev
    • China May FX reserves $3.19tn vs 3.22 prev, $3.20 exp
    • PBOC Sets Yuan Mid-Point at 6.5618 / Dlr Vs Last Close 6.5642
    • PBOC Injects 50bln Yuan through 7-Day Reverse Repos – Traders
    • Australia's central bank (RBA) stands pat, neutral tone lifts Aussie - RTRS
    • RBA keeps cash rate at record low 1.75 pct - RTRS
    • RBA: Steady policy consistent with sustainable growth – RTRS
    • All potential euro zone members fail accession criteria-ECB – RTRS
    • Euro Zone Q1 GDP revised 0.6%q/q vs 0.5% prev, 0.5% exp
    • Euro Zone Q1 GDP revised 1.7%y/y vs 1.5% prev, 1.5% exp
    • German April Industrial output 0.8% vs -1.3% prev, 0.7% exp
    • Polish president to present CHF FX loan proposal at 1500GMT - RTRS
    • UK May BRC Retail sales 0.5%y/y vs -0.9% prev
    • UK May Halifax house prices 0.6%m/m vs -0.8% prev, 0.3% exp
    • UK May Halifax house prices 3(m)y/y 9.2% vs 9.2% prev, 8.9% exp
    • 52% of Brits want to stay in EU vs 40% leave ‘among full sample’ – ORB poll for Telegraph
    • Betting indicates 72% probability of UK voting to stay in EU-Betfair – RTRS

    Currency Summaries

    EUR/USD  
    • EUR/USD a quiet 1.1351-81 in Europe
    • Steady, slightly bid tone, perhaps surprising given stocks
    • DAX storming up 1.7% today. US stock futures 0.35%
    • EZ Q1 GDP revised higher to 1.7% yy from 1.5%
    • Daily cloud likely influences top-picking: https://reut.rs/1Unlz6G

    USD/JPY
    • USD/JPY range has been 107.23-107.90
    • Watch 2yr UST/JGB spread. 48/72H log correlation with USD/JPY 0.76/0.72
    • Interim offers located circa 108.00, pivot point comes in @108.04
    • Technical supply solid between 108.30/40 (Full Story)
    • USD/JPY was choppy in Asia, buffeted by big move in GBP
    • GBP/JPY drove higher to trigger stops
    • EUR/JPY range has been 121.82-122.70

    GBP/USD   
    • GBP/USD based at 1.4494 early Europe following its Asia jump to 1.4664
    • 1.4609 = European am high amid focus on ORB’s Brexit poll for Telegraph
    • ‘Definite voters’ vs ‘full sample’ painted different picture
    • Speculation that IMM trade might have influenced Asia jump to 1.4664
    • EUR/GBP topped out at 0.7835 early Europe after rallying off 0.7756
    • 0.7756 = Asia low. 0.7784 = European am low, amid Dax gains

    EUR/CHF
    • EUR/CHF down sharply for 2nd day, longs squeezed, some cite Poland CHF story
    • Poland president's office to present proposal for CHF mtg problem 1500 GMT
    • Some speculation plan may result in CHF-buying to resolve issue
    • EUR/CHF slices below 1.10/100-DMA, likely to prompt SNB to smooth move
    • USD/CHF tests support 0.9640/20: 61.8% Fibo of May rise & Ichi cloud base
    • SNB reserves up CHF 14bn May; chart https://link.reuters.com/dub54w

    USD/CAD
    • USD/CAD fell to 1.2760 during European am as WTI rose to $50/barrel
    • 1.2760 = 5wk low. USD/CAD traded on 1.28 handle thru Asian session
    • US & German names went long USD/CAD as their trades of the week Monday
    • Stop on US name’s position has been tripped. German name’s stop 1.27

    AUD/USD            
    • AUD/USD shorts have been squeezed on the back of the ‘neutral’ RBA
    • 0.7450 = 1mth high during European am. 0.7450/55 option expiries today
    • AUD/USD was trading sub-0.74 before RBA statement at 0.30am ET

    NZD/USD
    • NZD/USD has risen to threaten 0.6960/65 amid greenback weakness
    • 0.6960 was pre-weekend high. 0.6965 = Monday’s high (early Asia)
    • RBNZ OCR announcement Wednesday 5pm ET, too close to call
    • Interest rate futures suggest 52% chance of 25bp OCR cut to 2.0%

    Chart - (Source:ThompsonReuters)

    USD/CHF bias remains on downside
    USD/CHF large drop on Friday weighs, meaning bias is squarely on the downside, weakness continues to set new lows this week. Ultimately the scope for 30-day lower Bollinger-band at 0.9533. Daily close below 0.9760 - 38.2% retrace of the 0.9444 to 0.9956 rise - on Friday was a bearish sign. Likely we will see a daily close below 0.9760 - 50%)of 0.9444 to 0.9956- Tuesday. Fourteen-day momentum is negative, reinforcing shift in sentiment to downside. Wide 30-day lower and upper Bollinger-bands points to increased statistical volatility, continued large ranges are expected. Chart: https://tmsnrt.rs/25JZTgf

    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)

    • Mild vol setbacks post Yellen as related risk premium pared
    • EUR/USD vols underpinned by firmer realised and Brexit risk
    • GBP/USD gamma continues to perform. 1mth 7yr hi o/n at 23.0 (765 pips)
    • AUD/USD vols new 2016 lows since RBA. NZD vols propped in to RBNZ
    • USD/CAD vols meet demand after testing their own 2016 lows Monday
    • USD/JPY vols ease with spot recovering. BoJ and 105.50-00 barriers risk

    Economic Data(Source:Bloomberg)


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