WWM - Analytics

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    US FX Market Open – Wednesday, June 8, 2016: NEW FIVE WEEK LOWS IN USD/CAD

     

     

    Overnight Events

    • Japan MoF May flows – Japanese bought more for-bonds, foreign Japan interest mixed
    • Japan Q1 GDP revised up to 1.9% annualized
    • PBOC: Look to maintain ’16 growth at 6.8%, CPI likely 2.4%, exports to slide 1%
    • PBOC: Fixed asset investment 11%, real estate major uncertainty
    • China May trade surplus $49.98bn vs $58bn exp
    • ECB launches corporate bond buying in new attempt to revive inflation – RTRS
    • FPO challenges Austrian presidential election result-Austrian constitutional court – RTRS
    • Share of EUR in global FX reserves fell 0.6% to 19.9% in 2015-ECB – RTRS
    • Public support for the EU plunges across Europe – Pew Research Center survey
    • German criticism of ECB shows it should explain decisions better-Villeroy – RTRS
    • UK Apr Industrial output 2.0%m/m vs 0.3% prev, 0.0% exp
    • UK Apr Indurtrial output 1.6%m/m vs -0.2% prev, 1.6% exp
    • UK Apr Manufacturing output 2.3%m/m vs 0.1% prev, 0.0% exp
    • UK Apr Manufacturing output 0.8%m/m vs -1.9% prev, -1.5% exp
    • UEA’s Hanretty: Should have good idea of Brexit result by 10.30pm ET June 23
    • Hanretty: If Sunderland Brexit vote result is close ‘then remain has probably won’ overall

    Currency Summaries

    EUR/USD   
    • Just 15 pips cover European EUR/USD range, 1.1362-77
    • After NFPs, traders seek more guidance from US data
    • But no EZ data today and no major US data this week
    • Further consolidation and calm conditions looking likely
    • Bullish short-term techs favour dip buying likely 1.13-1.14 range

    USD/JPY  
    • USD/JPY has seen a range of 106.72-107.39
    • Recent failure above 107.56 Fibo weighs technically on USD/JPY
    • Japanese insurer and other Japanese investors have bids on dips
    • These bids are said to be especially sub-106.50, 106.35 low Mon
    • Decent bids also ahead of 105.00, 105.50 option barriers
    • EUR/JPY range 121.35-121.93

    GBP/USD
    • GBP/USD rose to 1.4580 after big UK industrial/mfg data beats at 4.30am ET
    • 1.4502 was early Europe low (pre-UK data). 1.4532-1.4559 = Asia range
    • EUR/GBP fell to 0.7797 on the back of the big UK data beat
    • 0.7838 was pre-UK data high (0.7835 was Tuesday’s early Europe high)

    EUR/CHF
    • EUR/CHF lower again as techs flip from bullish to bearish after 1.10 break
    • Post NFP unwinding of USD/CHF longs adds to pressure on EUR/CHF
    • Given clear rise in reserves more SNB smoothing looks likely
    • Brexit risk boosting safe haven appeal
    • 200-DMA @ 1.0929 surely sensitive for SNB. Merits buying dips from hereon

    USD/CAD
    • USD/CAD has fallen to a 5wk low of 1.2703 on the back of higher oil prices
    • WTI rose to an 8mth high not far shy of $51/barrel during European am
    • 1.2760 was Asia high. 1.2733 was Tuesday low as oil climbed

    AUD/USD        
    • AUD/USD met fresh headwind at 0.7465 in Asia
    • 0.7465 was Tuesday’s high, after short-covering on ‘neutral’ RBA
    • More stops tipped above 0.75
    • Large 0.7425 option expiry for NY cut, A$657mn strike. 0.7430 = Asia low

    NZD/USD
    • NZD/USD scaled a 5wk peak of 0.7006 in Asia
    • Ensuing pullback based circa 0.6982 (Tuesday’s high)
    • RBNZ OCR announcement 5pm ET (9am local time)
    • Interest rate futures suggest 38% chance of 25bp OCR cut to 2.0%

    Chart - (Source:ThompsonReuters)

    EUR/JPY
    Concern for bears is Monday's failure to take out Friday's 120.83 low, reaching 120.84 before the reversal higher. The overall scope is growing for losses down through So far, however, the kijun line at 122.74 has capped recovery moves convincingly. The expectation is for the tenkan line at 122.51 to cap near-term gains. Chart: https://tmsnrt.rs/1TYqeS9

    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)

    • Brexit the main prop for front end vols, certainly GBP based
    • Cable and EUR/GBP 1mth vols at 7 year highs
    • EUR/USD and other EUR related front end vols underpinned
    • USD/JPY vol setbacks stall on downside spot fears and BoJ risk
    • AUD/USD vols 2016 lows and value vs realised. CNH vols/puts suffer
    • NZD gamma propped pre RBNZ – O/n 30.0 vols/88 pips break even   

    Economic Data(Source:Bloomberg)


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