FX Market Update 12-1

Market Briefs

  • USD/JPY -1.1%, EUR/USD +0.6%, GBP/USD +0.47%
  • DXY -0.56%, DAX -0.5%, Brent +1.0%, Iron +1.67%, Gold +1.16%
  • DE 2016 GDP 1.9% vs 1.7% prev, 1.8% exp
  • EZ Nov Ind. Prod. 3.2% y/y vs rvsd +0.8% prev, 1.6% exp
  • IT Nov Ind. Prod. 3.2% y/y vs 1.3% prev, 2.0% exp
  • SE Dec Core CPI +1.9% vs +1.6% prev, 1.8% exp
  • Riksbank minutes Dec meet: more of a dovish line but SEK rallies
  • Toyota Pres Toyoda meets with US VP-elect Pence in Washington, DC – Kyodo
  • NAB marketing 7-year samurais, Daiwa-SMBC Nikko leads – IFR
  • China NDRC approves $26.5 bln fixed-asset investment in December – Reuters
  • China Commerce Min – Challenging, complicated trade outlook for ’17 –Reuters
  • NZ Dec ANZ commodity price index +0.7% m/m,+16.5% y/y, dairy driven rise

Looking Ahead – Economic Data (GMT)

  • 13:30  Initial Jobless Claims Jan 6 week mkt 255k, prev 235k
  • 13:30  CA Nov Hse Starts Idx mkt 0.3%, 0.4% prev
  • 13:30  Cont Claims Dec 31 week mkt 2.118 mln,  prev 2.112 mln
  • 13:30  Import Prices Dec mkt +0.7% m/m, prev -0.3%
  • 13:30  Export Prices Dec mkt +0.1% m/m, prev -0.1%
  • 19:00  Federal Bdgt Dec mkt $25.00 bln def, prev Dec -$14.44 bln

Looking Ahead – Events, Other Releases (GMT)

  • 13:30  FRB Chicago’s Evans/Atlanta’s Lockhart roundtable discussion; Naples, FL
  • 13:30  FRB Philadelphia’s Harker on the economic outlook; Malvern, PA
  • 14:45  FedTrade operation 30-year Fannie Mae / Freddie Mac (max $2.350 bln
  • 16:45  FedTrade operation 30-year Ginnie Mae (max $1.300 bln
  • 17:30  FRB Atlanta’s Lockhart repeats speech delivered on January 9; Naples, FL
  • 18:15  FRB St. Louis’s Bullard on U.S. econ and monetary policy; New York, NY
  • 18:45  FRB Dallas’s Kaplan on the economy and monetary policy; Dallas, TX
  • 22:30  Fed Chair Yellen addresses educators in Washington, and n/wide webcast

Currency Summaries

EUR/USD 

  • EUR/USD extends recovery to 1.0665 from 1.0643 Asia & 1.0454 low Jan 11
  • Close over 55-DMA 1.0653 should neutralize bearish techs
  • Dec 30 high @ 1.0700.  1.0707 38.2% retrace drop since US election
  • Rates little changed with bund yields following UST yields lower
  • Host of Fed speakers incl Yellen in focus
  • Less Fed tightening priced

USD/JPY 

  • USD/JPY fell from 115.50 trading to 113.75, ahead of the latest recovery
  • Below 114.25 and 114.00 triggered stops
  • Japanese bids remains in size below the market
  • While technicals are bearish importer interest to buy remains strong
  • Decent sized 1.1B 115.00 set to expire at the NY cut today
  • EUR/JPY range has been 121.19-122.24

CHF

  • US yields slip and USD follows after Trump’s Wed press call
  • Lack of yld-supporting policy comments by Trump left USD longs wanting
  • USD/CHF closed NY at 1.0140 but soon lost its way in Asia
  • 1.0248 into Trump talk, 1.0102 NY low and 1.0061 from 1.0158 NY recovery
  • 30DMA Lower Bolli at 1.0050 ahead of key 1.0025 Dec 30 low
  • EUR/CHF relatively steady as USD game plays out: 1.0711-1.0745

GBP/USD

  • GBP/USD extended north in early European trade, as more USD longs unwound
  • 1.2317 = intra-day high vs 1.2170 Asia low. 1.2249 = pullback low from 1.2317
  • USD longs unwound on Trump avoiding economic policy issues Wednesday
  • 1.2273 was Wednesday high vs 3mth low of 1.2038 pre-Trump news conference
  • EUR/GBP is respecting Wednesday’s 0.8648-0.8706 range amid USD focus

USD/CAD

  • USD/CAD tripped stops sub-1.3081 en route to a 12wk low of 1.3028 during European am
  • 1.3081 was Dec 14 low, pre-Fed’s hawkish dot plots. 1.3119 = Weds low. 1.3195 = Asia high
  • Bids expected near 1.3000: 1.3000/05 = Sept 22/Oct 19 lows

AUD/USD    

  • AUD/USD scaled a 4wk peak of 0.7516 during European am as more USD longs unwound
  • 0.7353 was low before Trump news conference Wednesday. 0.7471= Wednesday high
  • Stops tipped above 0.7525 (Dec 14 high, before Fed’s hawkish dot plot)

NZD/USD

  • NZD/USD extended north to 0.7134 during European am as more USD longs unwound
  • 0.7134 = 4wk high. 0.6962 was pre-Trump news conference low Wednesday

OPTIONS

  • USD/JPY slide keeps vols and JPY calls at recent/cycle highs for now
  • EUR/USD short dated setbacks meet demand – 1 week gets ECB
  • GBP/USD vols peak for now as GBP recovers. EUR/GBP vols off highs
  • AUD/USD vols finding support, but interest limited as wider ranges hold
  • 5.5bln USD/JPY 115 expiries Thurs-Mon’. 7bln 1.05-1.06 EUR expiries Fri’
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