FX Market Update 10-1

Market Briefs  

  • USD/JPY -0.09%, EUR/USD +0.12%, GBP/USD -0.15%
  • DXY +0.02%, DAX +0.2%, Brent +0.6%, iron +8.0%, Gold +0.3%
  • HSBC Brexometer to gauge bal hard & soft Brexit: 0 = UK stays, 100 = hardest Brexit
  • Brexometer currently around 74-  HSBC sees cable at 1.10 if Brexometer rises to 100
  • EZ should be split into two with strong cluster around DE and weak cluster incl FR, AfD
  • Corbyn-“Labour not wedded to freedom of movement for EU citizens in UK pt of principle
  • CH Dec Unemployment Adj 3.3% vs 3.3% prev, 3.3% exp
  • CH Dec Unemployment U/adj 3.5% vs 3.3% prev
  • FR Nov Ind Output 2.2% m/m vs -0.2%, +0.6% exp
  • JPM CEO Dimon – Strong econ will speed interest rate hikes – Rtrs
  • UK Dec BRC like-for-like retail sales +1.0% y/y vs 0.6% prev
  • Jpn Dec consumer confidence index 43.1, November 40.9
  • Toyota looks to invest $10 bln in US over next five years – Nikkei
  • Jpn Takeda set for fresh acquisitions after $5.2 bln US Ariad buy – Rtrs
  • Jpn Mitsubishi Chemical to buy US carbon fiber plant – Nikkei
  • Australia Nov retail sales +0.2% m/m, +0.4% eyed, last +0.5%

Looking Ahead – Economic Data (GMT)

  • 13:30 CA Nov Building Permits mkt -5.0%, +8.7% prev
  • 13:55  Redbook Same-Store Sales Index (weekly)
  • 15:00  Wholesale Inventories (Nov) (mkt +0.9% m/m, prev +0.9% m/m)
  • 15:00  Wholesale Sales (Nov) (mkt +0.5% m/m, prev +1.4% m/m)
  • 15:00  JOLTS (Oct) (mkt job openings level 5.555 mn, prev 5.534 mn)

Looking Ahead – Events, Other Releases (GMT)

  • 16:45  FedTrade operation 30-year Ginnie Mae max $1.450 bln

Currency Summaries

EUR/USD 

  • EUR/USD initially higher to 1.0620 on back of EUR/GBP demand
  • Tops after USD/CNH rallies back towards 6.9000
  • European range 1.0580-1.0620. EUR 1bln expiries 1.0575 potentially magnetic
  • Many traders sidelined ahead key speech from Donald Trump 16GMT tomorrow
  • Lots of Fed speakers including Fed chair Jan 11/12
  • Close beyond 55-DMA or 21-DMA needed to excite:

USD/JPY 

  • USD/JPY fell from 116.21 to 115.20 in Asia, before decent recovery
  • There are 947M worth of 115.95-116.00 strikes set to expire at the NY cut
  • Important downside level is Fri’s 115.06 low, 2 pips below 115.08 Fibo
  • 115.06 – 61.8% of 112.87-118.66 rise – masks 115.00 where barriers reside
  • Standing bids still ahead of 115.00, Japan importers, large stops below
  • Japan Inc outbound M&A, FDI, investment flows continuing unabated

CHF

  • Spot heavy at 1.0130 and just dragging cross from a 1.0747 high
  • Series of six higher lows the cross beginning to trend but key res. close
  • 1.0761 double day highs from late Dec stand in the way
  • EUR/CHF plays 1.0724-1.0747 and 1.0728 into NY
  • Thick daily cloud leaning on price from 1.0774 and begins to fall late Jan
  • Swiss Dec jobless data firms u/adj 3.5% vs 3.3%
  • Counter trend short favoured despite trend:

GBP/USD

  • GBP/USD elicited support pre-1.2100 after GBP took fresh early Ldn hit
  • 1.2100 = mooted option barrier level. 1.2161 = subsequent rally high
  • HSBC has created a ‘Brexometer’ to track hard/soft Brexit vibe
  • EUR/GBP extended north to 0.8763 (2mth high) in early Ldn trade
  • Ascent to 0.8763 fuelled by “hard Brexit” fears. 0.8588 = pre-weekend high

USD/CAD

  • USD/CAD elicited fresh support circa 1.3200 in Asia, 1.3199 = session low
  • 1.3198 was Monday’s low. More bids tipped near 1.3177 (Friday’s 3wk low)
  • Resistance 1.3235/40 (rally highs from 1.3198/99), 1.3269 (100DMA) & 1.33
  • Large 1.3300 option expiry later this week (Friday), $1.78bln strike

AUD/USD  

  • AUD/USD met headwind pre-0.7385 in Asia after vaulting 0.7374 (Monday high)
  • 0.7385 = 61.8% of 0.7525 (Dec 14 high) to 0.7160 (Dec 23 low)
  • More offers expected near 0.74, stops tipped above 0.7405

NZD/USD

  • NZD/USD retreated to 0.6994 after threatening 0.7050 (Dec 16 high) in Asia
  • 0.7009 was Asia low. 0.7082 (200DMA) resistance beyond 0.7050

OPTIONS

  • Gamma propped over Trump speech Wed’ – Cable awaits article 50 ruling
  • Cable gamma up but supply suggests binary/RKO barriers 1.21-1.20
  • EUR/USD tied to 1.0570-75 expiry (1bln) and 6bln 1.05-1.06 Friday
  • USD/JPY intraday moves keep vols near m/term highs. 1.15/1.20 DNT in play
  • Commod’ related vols stay weak but losses stall for now
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