WWM - Analytics


    158.25 5.25/10
    100% of positive reviews

    US FX Market Open – Thursday, June 16, 2016: SIGNIFICANT YEN RALLY AFTER BOJ


    Overnight Events

    • USD/JPY -1.65%, GBP/JPY -2.0%, EUR/JPY -1.9%, CHF/JPY -1.8%
    • UK May R.Sales 6.0% y/y vs rvsd 5.2% prev, 3.9% exp-Biggest rise since Sept
    • EZ May final infl. -0.1% y/y vs -0.1% prev, -0.1% exp
    • IPSOS MORI CEO –Leave campaign outgun remain with immigration argument
    • MORI poll 51% leave, 49% remain, Paddy Power 11/8 leave, 4/7 remain
    • BoJ Policy Board leaves policy unchanged
    • BoJ vote 8-1 for money base target, 7-2  for NIRP
    • Kuroda sticks script on NIRP, QQE & prices. Points to problems with yen rise
    • Kuroda: Current yen rise could have undesirable impact on prices, Japan econ - RTRS
    • Japan ChiefCabSec Suga – Recent FX moves rapid
    • Japan Suga Fx  speculative, undesirable,  will take steps if needed – Rtrs
    • Brexit seen lifting yen with risk-off mood, narrower rate spread – Nikkei
    • Japan’s megabanks step away from JGBs – Nikkei
    • Credit downgrade may be positive for Japan’s 10 trln bond market – Rtrs
    • SNB left rates unchanged and continues to warn of CHF intervention
    • SNB’s Jordan-Intervention only makes sense if has chance of impact
    • SNB’s Maechler-SNB has full team following Brexit on 24-hour basis
    • Brexit helped keep Fed on hold, could slow future US rate rises-RTrs
    • Divided Wall  Street sees just one Fed rate hike in ’16 – Rtrs
    • G.Sachs – GBP could fall 11%, EUR 4%, JPY could rise 14%, CHF 8% on Brexit - Rtrs

    Currency Summaries

    • EUR/USD 1.1257-95 in Asia then lower in Europe to 1.1230
    • EUR/JPY selling at heart of flows after USD/JPY plummet in Asia
    • Stronger JPY has stoked risk averse sentiment linked to UK referendum
    • EUR/JPY pinned to lows despite small USD/JPY bounce
    • EUR/USD likely sees more ranges near 1.12/13. 100-DMA/cloud base underpin
    • Chart: https://reut.rs/1XqOqx6
    • EUR 3.5bln option expiries 1.1250-00 should cap but potential magnets  

    • USD/JPY dove as BoJ held, took out large 105.00 barriers
    • USD/JPY high in Asia was 106.02
    • Fell but found support below @103.56 in Europe
    • Intra-day recovery seen as corrective, mainly short covering
    • Talk Tokyo names were buyers near the low
    • Stops said to be above 104.60, 104.80. Recovery high has been 104.41
    • Supply likely @104.48 & 104.95 pivot points
    • EUR/JPY has fallen from 119.41 to 116.94

    • No surprises from the SNB's continued warnings over intervention
    • EUR/CHF in the spot light having fallen 3% since May 20 1.1128 high
    • Despite established CB stance EUR climbed to 1.0836 vs 1.0808 early low
    • Offer soon returned and cross 1.0810 into New York
    • Potential turbulence for the CHF over the UK EU vote heightens SNB vigil
    • FX intervention tool of choice, infl. profile raised and highlights Brexit risk
    • EUR/CHF 1.08-1.0860 and squeeze risk: Chart: https://reut.rs/25Ze7Kz

    • GBP/USD fell to 1.4125 after 4am ET Ipsos MORI poll showed big swing to Brexit
    • Cable then rallied thru 4.30am ET release of strong UK May retail sales data
    • 1.4195 was cable high shortly after the data was officially released
    • EUR/GBP rose to eye 0.80 shortly before European equities fell 1% from 3am ET open
    • Ensuing losses influenced by European equities paring losses & UK retail sales data

    • USD/CAD has risen to threaten 1.30 under the influence of softer oil prices
    • WTI plumbed a 1mth low of $47.22/barrel during the European am
    • Half-yard 1.30 expiry Friday. BoC forecasts flat/slightly negative Canada GDP in Q2

    • AUD/USD fell to 0.7345 early Europe amid AUD/JPY losses/risk aversion
    • 0.7345 = 100 pips below 0.7445 Asia peak (scaled after Oz jobs data)

    • NZD/USD elicited early Europe support at 0.7035 after retreating from 0.7095
    • 0.7095 = Asia high after NZ Q1 GDP beat. 0.7035 & 0.71 option expiries Friday
    • AUD/NZD plumbed a 6-day low of 1.0424 early Europe. 1.0410 = recent 13mth low

    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 off their risk averse/pre Brexit rally highs yesterday
    • Mild support coming in again today as Brexit continues to factor
    • Bid/Offers spreads still high and wide – especially in GBP pairs
    • 1wk rolls over Brexit tomorrow – 1wk Cable expected around 50 vols
    • USD/JPY 1mth risk reversals highest downside bias in 6 years now
    • AUD/USD 1mth risk rev 3yr high AUD puts.  EUR/USD 2bln 1.1250 expiry

    To leave a comment you must or Join us

    By visiting our website and services, you agree to the conditions of use of cookies. Learn more
    I agree