FX Market Update 24-4

Market Briefs 

  • Macron/ Le Pen to contest 2nd round French election May 7-Macron seen +20-pips
  • EUR/USD +1.34%, USD/JPY +1.0%, GBP/USD +0.09%, EUR/JPY +2.45%
  • DXY +0.01%, DAX +2.85%, Brent +0.85%, Iron +0.3%, Gold -0.95%
  • DE Apr IFO Bus. Climate 112.9 vs rvsd 112.4 prev, 112.5exp
  • DE Apr IFO Curr. Cond. 121.1 vs rcsd 119.5 prev, 119.2 exp
  • DE Apr IFO Exp. 105.2 vs 105.7 prev, 106.0 exp
  • UK CBI Trends Apr Orders =4 vs 8 prev, 5 exp
  • CH Sight Depos mixed: Domestics bks fall while total depos rise w/e Apr 21
  • Investors cheer France vote as far-right vs far-left clash averted – Rtrs
  • NoKorea – preparing nuclear test, ready to strike US aircraft carrier – Rtrs
  • Trump’s big announcement on tax to be broad principles – Rtrs
  • ECB/Austria CB Nowotny – ECB to set post-’17 policy in H2 – Profil
  • Wall Street gears up for busiest earnings week in years – Rtrs
  • IMF deletes anti-protectionism pledge, keep currency commitments – Rtrs
  • IMF/Mexico Carstens – All IMF member aligned on need for free, fair trade
  • BoJ trims purchases of 3-5 year JGBs to Y320 mln from Y350 bln – Rtrs
  • Fears of weak renminbi fuel Chinese household forex demand – FT
  • PBOC DepGov Yi Gang – SDR market not sufficiently liquid – Xinhua

Looking Ahead – Economic Data (GMT)

  • 13:30  Chicago Fed National Activity Index(Mar prev 0.34
  • 13:30  CA Feb W/sale Trade mkt -1.0% m/m, +3.3% prev
  • 15:30  Dallas Fed Texas Mfg Outlook Survey Apr prev 16.9

Looking Ahead – Events, Other Releases (GMT)

  • 14:45  FedTrade ops 30-year Fannie Mae/Freddie Mac max $1.450 bln
  • 16:30  FRB Minneapolis’s Kashkari  dove on TBTF; Los Angeles, CA
  • 19:30  FedTrade operation 15-yr Fannie Mae/Freddie Mac max $600 mln
  • 20:15  FRB Minneapolis’s Kashkari  on TBTF; Claremont, CA

Currency Summaries

EUR/USD  

  • EUR/USD lower to 1.0832 soon after Europe opened on corp selling
  • Follows Asia’s 1.0891 open, 1.0940 peak, closed 1.1726 in NA Friday
  • Rebounds and peaks 1.0877 following a better IFO
  • IFO 112.9 in April vs 112.3 in March on improving current conditions
  • Expectations fell to 105.2 from 105.7 and compare t a 106.0 f/c
  • Narrower bund yields to EZ & US a driving force of EUR strength
  • 1.0950 & 1.10 barriers define resistance. Buyers drawn to 200-DMA 1.0838

USD/JPY

  • USD/JPY session range has been 109.85-110.64
  • USD/JPY tilted to downside as gap needs filling
  • Gap between last week’s 109.49 high and this week’s 109.85 low
  • Mkt less risk-off hurt yen as nightmare Le Pen vs Melenchon scenario avoided
  • Widening UST/JGB spreads have also helped push USD/JPY higher
  • 30/60-day log correlation significant between spreads & USD/JPY across curve
  • Decent sized 109.00 strike set to expire at the NY cut worth 1.6 yards
  • Japanese exporters took advantage of the spike higher to sell in Asia

EUR/CHF

  • Favourable French election outcome suggests SNB steps back
  • Had been fears polls would be proved wrong again: Risk on early Monday
  • CHF hit along with yen EUR/CHF hits 4-mth high @ 1.0836 early
  • Back abv 200DMA @1.0781 and abv upper 30DMA Bollinger @ 1.0755
  • Pullback underway: likely to ease o/b condition and steady @ 1.0750-60
  • Domestic bk depos with the SNB fall while total depos rise
  • SNB activity to tame CHF likely eased as the cross consolidated last week
  • Today’s 1.0836 spike again removing need for official support for EUR/CHF
  • Clse sub 200DMA sees Bolli reassert:
  • GBP/USD
  • GBP/USD elicited support at 1.2775 after early Ldn probe below 1.2782
  • 1.2782 = Asia low after early Asia jump to revisit 1.2908 (Apr 18 high)
  • Early Asia jump courtesy of EUR/USD spike on Macron’s 1st round win
  • EUR/GBP rose to threaten 0.8512 in Asia courtesy of the French election
  • 0.8512 was Apr 18 high, before GBP gained on snap UK election news

USD/CAD 

  • USD/CAD is eyeing 1.3400-10 after sliding from 1.3500 (Asia high)
  • Losses influenced by WTI oil reclaiming a 50 bucks/barrel handle
  • 1.3410 = 38.2% of 1.3224 (Apr 13 low) to 1.3525 (Friday’s 6wk high)
  • Large 1.3500 option expiry Tuesday, $1.3bln strike

AUD/USD

  • AUD/USD rose towards mooted offers at 0.76 during the European am
  • 0.7600 = early Asia high when AUD boosted by risk appetite rise on Macron
  • Subsequent retreat to 0.7539 Asia low influenced by temporary iron ore losses
  • Dalian iron ore closed up 0.3% Monday having been down 3% at one stage

NZD/USD

  • NZD/USD traded a modest 19 pip range during European am, 0.7027-0.7046
  • 0.7054 was early Asia high (0.7052/53 = last week’s highs). 0.7016 = Asia low

FX OPTION EXPIRIES

  • EUR/USD: 1.0800 (301M), 1.0950 (548M)
  • USD/JPY: 109.00 (1.59BLN), 109.50 (580M), 111.00 (301M), 111.50 (500M)
  • EUR/GBP: 0.8650 (201M)
  • USD/CHF: 0.9905 (200M)
  • USD/CAD: 1.3305 (186M)
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