FX Market Update 16-1

Market Briefs

  • GBP/USD -0.9%, USD/JPY -0.3%, EUR/USD -0.5%
  • DXY +0.26%, DAX -0.55%, Brent +0.15%, Iron +7.2%, Gold +0.45%
  • Sunday Times said UK ministers expect UK Supreme Court ruling on Article 50 Jan 23
  • Spokeswoman for British PM May says talk of hard Brexit is speculation Rtrs
  • Swiss sight deposits mixed: Domestic bks fall, total rise in latest week
  • UK set to choose sharp break from European Open – Sunday/New York Times
  • UK’s May to urge national unity amid reports of “hard Brexit” – Rtrs
  • UK likely to leave single market unless May performs a volte face –M.Wolf FT
  • Trump says Brexit to be a great thing, wants quick trade deal with UK – Rtrs
  • BOJ offers brighter view on regional Japan economies – Rtrs
  • Baker McKenzie – UK M&A to drop sharply in ’17 as invs await Brexit clarity – Rtrs
  • CFTC IMM CTA – Specs cut USD longs latest wk, EUR shorts 65.8k smallest since Jun
  • China CASS Xiao – Should stop intervening in FX and let CNY float – China SJ
  • S.Korea Vice FinMin Choi – Watching FX volatility closely – Rtrs
  • ESM Regling – Brexit bigger problem for UK than rest of Europe – Rtrs
  • SNB ViceChair Zurbruegg – Negative rates key for monetary policy
  • Zurbruegg neg rates will help  head off excessive CHF appreciation – NZZ am Sonntag

Looking Ahead – Economic Data (GMT)

  • No US or Candaina data scheduled

Looking Ahead – Events, Other Releases (GMT)

  • 18:30 UK: BoE Governor Carney due to speak at London School of Economics

Currency Summaries

EUR/USD 

  • EUR/USD led lower by GBP/USD. Hard Brexit risk both sides
  • EUR/USD 1.0580 low just shy Jan 12 low @ 1.0572
  • 200-HMA also 1.0573:
  • 55-DMA defining resistance, no close over:
  • 21-DMA key downside @ 1.0500. Jan 11 low 1.0454. Jan 3 low 1.0340
  • US holiday. Few expiries of note. EUR 433lln @ 1.0575

USD/JPY

  • Hard Brexit” fears leads to GBP/JPY sell off from 137.50
  • Weak GBP/JPY has put pressure on a vulnerable USD/JPY
  • Recent double top in USD/JPY above 118s continues to weigh
  • Nikkei futures trades in line with USD/JPY. 48/72H correlation +0.73/+0.74
  • USD/JPY range has been 113.61-114.80
  • Has traded circa 114.00, but only 575M 114.00 NY Cut Expiries
  • Note there are 3.6B 115.00 strikes set to expire at NY cut which could draw
  • EUR/JPY range has been 120.77-121.65 so far

USD/CHF

  • Spot posted a bullish signal, candle hammer, Frid and hits 1.0134 high today
  • Traction soon lost and softer bias taking hold:
  • USD/CHF plays 1.0094-1.0134 and cross 1.0710-1.0738
  • EUR/CHF trying to maintain bull bias but again advantage small and fading
  • Swiss sight deposits mixed: Domestic fall, total rise
  • Cross rose 0.2% last wk but struggles to hold a bid: Chart: http://reut.rs/2jVRXGK
  • SNB’s vice pres says negative rates key for monetary policy [nL5N1F40G7]

GBP/USD

  • GBP/USD dropped to threaten 1.1981 again in early Ldn trade
  • 1.1981 = 61.8% of 1.1491-1.2775. 1.1983/87 = Asia/early Ldn lows
  • Recovery rally topped out at 1.2085 (early Asia low)., 1.2175 = NY close Friday
  • Gap/subsequent drop thru 1.20 courtesy of “hard Brexit” speculation
  • Speculation in UK Sunday newspapers ahead of May’s Brexit speech Tuesday
  • Corporate buying of GBP flagged as factor in EUR/GBP fall from 0.8853-0.8768
  • 0.8853 = early Ldn 2mth high. 0.8850 = Asia high/1.13 GBP/EUR. 0.8767 = Friday high

USD/CAD

  • USD/CAD elicited support circa 1.3100 in Asia: 1.3102 = 200DMA
  • 1.3126-1.3154 was European am range. BoC seen on hold Wednesday
  • Quarterly BoE MPR and subsequent Poloz press conference in focus

AUD/USD   

  • AUD/USD held below 0.7500 (100DMA/200DMA) through the European am
  • 0.7458 = European am low. 0.7459 was Friday’s low
  • Cumulative yard of 0.7470/75 option expiries for NY cut

NZD/USD

  • NZD/USD met fresh headwind just shy of 0.7150 in Asia, 0.7149 = session high
  • 0.7142/44 = Thursday/Friday double-day high. 0.7146 = 100DMA
  • 0.7077 = European am low. 0.7072 was Friday’s low (after 0.7142)

OPTIONS

  • GBP gamma at the fore as GBP suffers in to PM May speech Tues
  • Tues’ Cable vol 30.0/150 pips, 1wk 18.0/246 pips, 1mth 13.3 vs 11.0 Thur’
  • EUR/GBP O/n vol 27.0/100 pips, 1wk 16.5/160 pips. 1mth 12.2 vs 9.8 Thur’
  • EUR/USD 1wk vol 11.0/128 pips over ECB. 1mth off lows on weaker spot
  • USD/JPY spot volatility and d/side fears keep vols near cycle highs
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