WWM - Analytics

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    US FX Market Open – Monay, June 20, 2016: STERLING BOOSTED BY REKINDLED REMAIN HOPES

    Overnight Events

    • GBP/USD 1.73%, EUR/USD 0.45%, USD/JPY 0.3%
    • DXY 0.001%, DXY 3.13%, Brent 1.4%, Iron 0.8%
    • UK William Hill 5/2 for Brexit, 3/1 for remain
    • Sunday Times and Sunday Telegraph advocated Brits vote to leave
    • Mail on Sunday says Brits should vote to remain in EU
    • Implied probability of a remain vote 72% vs 65% Friday-Betfair odds
    • DE May Producer Prices 0.4% m/m vs 0.1% prev, 0.3% exp
    • DE May Producer Prices -2.7% y/y vs -3.1% prev, -2.8% exp
    • BoJ Kuroda: Hard to lay out tools for contingencies in advance - Rtrs
    • Kuroda: Decline in potential growth rate likely to exert downward on econ - Rtrs
    • Kuroda: Positve impact on econ from NIR is already starting to be seen - Rtrs
    • Kuroda: Direct impact of NIR on profitability of Jpn banks really limited - Rtrs
    • IMF: Japan needs bold reforms to spark economic revival - Rtrs
    • SNB-Total and domestic sight deposits increase in latest week
    • Three of six UK opinion polls show shift towards “remain” – Reuters FACTBOX
    • EU banking watchdog to leave London in case of Brexit – Rtrs
    • Germany FinMin - German econ had good Q2 start, upswing to continue –Rtrs
    • BoJ holds more than a third of all JGBs – Nikkei
    • PBOC established direct FX trading between CNY, ZAR – Rtrs
    • Nigeria CB removed fixed exchange rate peg-NGN loses indicated 28%

    Currency Summaries

    EUR/USD   
    • Choppy crosses adding to the EUR volatility but gains seen fragile
    • Hearing bids sat 1.1330-1.1335 and hourly action shows minor base
    • Short squeeze to 1.1383 early Europe found profit taking but said light
    • Sterling the main driver and feed through to a broadly easier USD
    • Bund yields higher early but now losing ground with U.S yields
    • Chart:https://reut.rs/28ImLDp

    USD/JPY
    • USD/JPY static seeing a narrow 104.30-104.85 range
    • Focus on pivot point which comes in @104.34
    • Japanese exporter, other offers trail up from 105.00
    • In early Asia USD/JPY got a boost on UK "remain" polls and Gotobi demand
    • Risk tentatively on as Nikkei Index closed 2.34%
    • EUR/JPY range has been 117.78-119.12

    EUR/CHF
    • Volatility playing out ahead of UK EU referendum Thursday
    • EUR/CHF uncharacteristically big ranges since June 3 U.S payroll day
    • Monday range: 1.0850-1.0910 and mid-range into New York
    • Thurs Long Legged Doji pointed mkt indecision and cross reversed higher
    • Extension to 1.0910 but soon lost traction and bears back in the game
    • SNB sight depo numbers suggest heavier FX activity in latest week
    • Below 1.0850 and bear run to resume: Chart:  https://reut.rs/28IeqU7

    GBP/USD   
    • GBP/USD extended north to 1.4673 during European am amid remain vote hopes
    • Cable rose from 1.4390 to 1.4625 in Asia on weekend polls showing remain momentum
    • 1.4686 (200DMA) is a resistance level. Referendum Thursday (polls close 5pm ET that day)
    • EUR/GBP fell to a European am low of 0.7732 amid remain vote hopes
    • 0.7720/21 (June 2/3 low) & 0.7692 (1.30 GBP/EUR) are support levels

    USD/CAD
    • USD/CAD fell to European am 1wk low of 1.2811 courtesy of a rise in risk appetite
    • Rise in risk appetite influenced by hopes Britain will vote to remain in EU
    • 1.2830 was Friday’s low. 1.2832-1.2878 was Asia range

    AUD/USD      
    • AUD/USD tripped stops above 0.7453 en route to European am high of 0.7472
    • 0.7453 was Asia high. Gains fuelled by rise in risk appetite on lower Brexit fears

    NZD/USD
    • NZD/USD is buoyant on the back of a rise in risk appetite on lower Brexit fears
    • 0.7127 = European am high. 0.7148 was 12mth peak after unchanged RBNZ June 9

    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)

    • GBP gains as Brexit odds lengthen, risk improves, G10 vols hit
    • Liquidity poor, especially GBP – vols gap lower, limited volumes
    • 1wk cable 40 from 53.0 Friday, EUR/GBP 1wk 35.0 from 48.0
    • 1mth Cable 21.5 vs 25.0 Friday. EUR/GBP 1mth 19.5 vs 24.0 Friday
    • EUR/USD 1mth 9.5-13.6 last week, settles 10.5 now
    • USD/JPY 1mth now 12.5 vs post BoJ high at 14.5 (11.5 the week prior)

    Economic Data(Source:Bloomberg)


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