WWM - Analytics

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    US FX Market Open – Tuesday, June 14, 2016: CABLE RECOVERS BUT REMAINS FRAGILE

     

    Currency Summaries

    • Sterling sharply lower again, hits 1.4112 low
    • William Hill halves Brexit odds from 3/1 to 6/4
    • Leave on 46%, remain 39% - YouGov poll for The Times
    • Leave on 49%, remain 48% - ORB poll for Telegraph (those certain to vote)
    • Polls show increasing Brexit support; Murdoch's Sun backs 'Leave' - Rtrs News
    • Brexit top tail risk for global fund managers - BofAML - Reuters Buzz
    • GBP/USD -0.65%, USD/JPY -0.3%, EUR/USD -0.64%, AUD/USD -0.60%
    • DXY 0.35%, DAX -0.75%, Brent -1.35%, Iron -4.2%, Gold -1.12%
    • CH May Prod. Prices -1.2% y/y vs -2.4% prev
    • UK May CPI 0.3% y/y vs 0.3% exp, 0.4% prev
    • UK May Core CPI 1.2% y/y vs 1.2% prev, 1.2% exp
    • UK May Core O/P prices 0.5% y/y vs 0.5% prev, 0.6% exp
    • EZ Q1 Employment 1.4% y/y vs 1.2% prev
    • EZ Apr Ind. Production 2.0% y/y vs 0.2% prev, 1.4% exp
    • Japan FinMin Aso – No comment on FX levels, FX stability extremely important
    • EconMin Ishihara – Government closely watching market moves – Rtrs
    • Templeton’s Hasenstab – Investors underestimate Fed hike, rising infl.  risk

    Currency Summaries

    EUR/USD  
    • EUR/USD sinks to 1.1209 from 1.1295 open in Europe
    • Lower GBP and heightened risk of Brexit led EUR long liquidation
    • Only close below 100-DMA/cloud base is bearish: https://reut.rs/1XmPDFO
    • UST/Bund spreads tighten. US rates lower on safe-haven demand USTs
    • DAX down 0.66%. Stocks/bond moves usually supportive EUR
    • Weaker CNY another likely prop EUR: https://reut.rs/21jDHTF
    • But all currently overwhelmed by the fear UK votes out

    USD/JPY
    • USD/JPY edges closer to 2016 105.55 low posted in May
    • 105.63 has been the low, down from 106.42
    • Option barriers @105.50 & 105.00 are in focus, maybe tough to break
    • Short gamma below 105.00, expect choppy trading on a break
    • Nikkei index closed down 1% @15,859.00, below 16,000.00
    • EUR/JPY fell from 120.10 to 118.51
    • Brexit risk weighed on GBP/JPY to see drop from 151.60 to 149.25

    EUR/CHF
    • CHF rally resumes following decent Monday adjustment to 1.0922
    • Brexit fears driver of broader FX market and CHF sucking in safety flow
    • Cross sides to new trend low of 1.0833 and has a 1.0810 look about it
    • Sight depos suggest CB stepped back from mkt last wk
    • Current mkt environment likely to limit any CB FX involvement
    • 1.0810 = Feb 29 2016 low: Chart: https://reut.rs/1XmSbDR

    GBP/USD   
    • GBP/USD fell to 1.4112 during the European am amid heightened Brexit fears
    • 1.4112 = new 2mth low (1.4117 was Monday’s low)
    • Paddy Power cut its Brexit odds to a low of 5/4 during the European am
    • 5/4 = lowest odds for Brexit during referendum campaign-to-date
    • EUR/GBP retreat from 0.7972 early Europe high influenced by EUR/USD losses

    USD/CAD
    • USD/CAD rose half-a-cent to an 8-day high of 1.2870 during the European am
    • Ascent influenced by WTI oil price drop to low just shy of $48.00/barrel

    AUD/USD   
    • AUD/USD fell three-quarters-of-a-cent to 0.7330 during the European am
    • 0.7330 = 8-day low. Losses influenced by weaker commodities/risk aversion
    • Dalian iron ore closed down 4.2% Tuesday. London copper -0.65% at 6.20am ET

    NZD/USD
    • NZD/USD fell half-a-cent to 0.6998 (six-day low) during the European am
    • Losses influenced by risk aversion amid heightened Brexit fears
    • NZ Q1 C/A data due 5.45pm ET. NZ Q1 GDP data follows 24 hours later

    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)

    • Vols stay high and wide in G10 amid Brexit risk contagion/illiquidity
    • GBP/USD 1mth extends high through 29.0/ 950 pips break even
    • EUR/GBP 1mth record high 26.75 or 500 pips break even for straddle
    • 1mth EUR/USD up over 3.0 since last week to 13.5/350 pips
    • AUD/USD 1mth up 2.1 in a week to 13.0. 1mth risk rev 15mth high 2.0
    • USD/JPY 1mth 14.7 vs 11.5 last week. 105.50-00 barriers threatened

     


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