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    US FX Market Open – Wednesday, June 15, 2016: CONSOLIDATION AS BREXIT ISSUE SIMMERS

     

    Overnight Events

    • UK May Claimant Count -0.4k vs 6.4k rvsd prev, 0.0k exp
    • UK  ILO Jobless Rate 5.0%, 5.1% exp, lowest since 2005
    • UK Apr Earnings 3m y/y 2.0% vs 2.0% prev, 2.1% exp
    • EZ Apr Trade Surplus E 27.5 bln vs 28.6 bln prev
    • JPMorgan research UK campaign to leave in the lead
    • MSCI declines to add China A-shares, South Korea to global benchmark
    • BMG hoax poll data. Pollster says poll not released yet
    • Brexit would force Japan Inc to adopt twin-track strategy in Europe – BTS
    • Japan ChiefCabSec Suga – Desirable for UK to stay in EU
    • PBOC – To fend off potential risks managing FX reserves, currently  appropriate – Rtrs
    • Australia Jun Westpac/MI consumer confidence index -1.0% to 102.2, 7.2% y/y

    Currency Summaries

    EUR/USD   
    • Another day, another dull EUR/USD range, 1.1298-1.1235 in Europe
    • Trading suppressed ahead today's FOMC decision but also ahead UK referendum
    • Further risk reduction closer to UK vote likely to see EUR/USD shorts pared
    • 21/100-DMAs 1.1220/1.1230 & daily cloud base 1.1219 weigh intraday
    • Levels pivotal on NY closing basis: https://reut.rs/21lIsfx

    USD/JPY
    • USD/JPY range has been 105.94-106.40
    • Offers are still in size ahead of 106.50
    • Spot is stuck below 106.46 pivot point
    • More JPY safe haven flows possible into UK referendum next Thu
    • Decent demand at Gotobi Tokyo fix, Japanese importers were out in force
    • Short-covering was another reason for USD/JPY rise
    • EUR/JPY has seen 118.73-119.44

    EUR/CHF
    • EUR/CHF staged strong rebound against Tues 1.0884-1.0791
    • 1.0846 session high as CHF and EM-risk profit taking sets in
    • Cross remains a sell but near 3% drop since June 3 overdone
    • USD/CHF continues sideways inside its daily cloud
    • Spot plays 0.9630-0.9663 range
    • Chart: https://reut.rs/1sG4Y7E

    GBP/USD   
    • GBP/USD rose to 1.4124 after better than expected UK data at 4.30am ET
    • Earnings came in higher than expected, ILO jobless rate fell to 11yr low
    • 1.4187 was pre-UK data high. 1.4094-1.4148 was Asia range
    • EUR/GBP fell to 0.7892 on the better than expected UK data
    • Ipsos MORI & Survation Brexit polls due Thursday

    USD/CAD
    • USD/CAD rose to 1.2879 in Asia as WTI fell to 3wk low of $47.55/barrel
    • Ensuing fall to 1.2827 influenced by rise in risk appetite
    • 1.2822 was Tuesday’s North American session low. 1.2881 = 55DMA

    AUD/USD    
    • AUD/USD has risen to threaten 0.7411 amid a rise in risk appetite
    • 0.7411 was Monday’s high. 0.7334 was Asia low
    • Recent talk of stops above 0.7420 (0.7421 was June 9 low)
    • Australian May jobs data due 9.30pm ET. Employment f/c 15k

    NZD/USD
    • NZD/USD has risen to 0.7046 amid a rise in risk appetite
    • 0.6963 was 1wk low in Asia. Fonterra dairy auction result due circa 10am ET
    • NZ Q1 GDP data due 6.45pm ET. 0.5% f/c vs 0.9% in Q4

    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)

    • Recent G10 vol rally over, sellers return for now as risk recovers
    • FOMC/BoJ tonight, but O/n JPY vol still drops 30.0-24.0 (135-110 pips)
    • 1mth USD/ JPY 13.8 vs 15.0 and EUR/USD 1mth 12.0 from 13.6 Tuesday
    • Even GBP vols off extremes, tho losses obviously limited pre Brexit
    • Cable vol spreads remain high and wide and flow consequently limited

    Economic Data(Source:Bloomberg)


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