FX Market Update 5-5

Market Briefs

  • EUR/USD -0.2%, USD/JPY -0.25%, GBP/USD +0.1%, EUR/JPY -0.4%
  • DXY +0.05%, DAX -0.4%, FTSE +0.05%, Brent +0.4%, Copper +0.4%
  • EUR/USD off 6-month high on profit taking. 1.0990 high in Asia
  • Swiss forex reserves up in Apr. CHF 695.943bln vs prev 683.386bln
  • Swedish Mar Industrial output rises 0.3% m/m, +3.8% y/y vs 0.9%/4.1% f/c
  • Macron stretches lead as French presidential campaign enters final day – Rtrs
  • Brexit minister Davis says EU trying to bully Britain – Rtrs
  • EU to cut Greece 2017 growth forecast to 2 pct – EU official – Rtrs
  • BoJ Kuroda: 2% target challenging, won’t be abandoned – Rtrs
  • Kuroda: Infl expectations still not anchored around 2% price target – Rtrs
  • Consensus emerging for OPEC, non-OPEC to extend output pact -Saudi governor – Rtrs
  • Czech C. bank vice-Gov Hampl says FX development “so far so good” after float – Rtrs

Looking Ahead – Economic Data (GMT)

  • 12:30  Nonfarm Payrolls (Apr) mkt +185k, prev +98k
  • 12:30  — Private Nonfarm Payrolls (Apr) mkt +180k, prev +89k
  • 12:30  — Manufacturing Payrolls (Apr) mkt +10k, prev +11k
  • 12:30  Unemployment Rate (Apr) mkt 4.6%, prev 4.5%
  • 12:30  Average Hourly Earnings (Apr) mkt +0.3% m/m, prev +0.2% m/m
  • 12:30  Workweek Hours (Apr) mkt 34.4, prev 34.3
  • 17:00  Baker-Hughes Rig Count (weekly) prev 697, +9 w/w)
  • 19:00  Consumer Credit (Mar) mkt +$14.85 bn, prev +$15.21 bn

Looking Ahead – Events, Other Releases (GMT)

  • 15:30  Fed Vice Chair Fischer speaks at Hoover’s Monetary Policy Conference; Stanford, CA
  • 15:45  FedTrade Operation 30-year Ginnie Mae (max $875 mn)
  • 16:45  FRB San Fran’s Williams gives keynote address for Shadow Open Market Committee; NY
  • 17:30  Fed Presidents Bullard, Evans & Rosengren participate in monetary policy panel; CA

Currency Summaries
EUR/USD

  • EUR/USD 1.0988 in NA then 1.0990 in Asia
  • Key 1.10 resistance untouched ahead NFP so profit-taking in Europe
  • EUR/USD 1.0956. Prior 1.09-40-50 resistance reverts to support
  • EUR/JPY which led rise seeing similar pre-NFP action, down 72 ticks
  • All eyes to NFPs & whether USD weakness again follows robust data
  • 1.1070-90 targets on 1.10 break. Recent lows ahead 1.0850. 200-DMA 1.0832

USD/JPY

  • USD/JPY relapsed from 112.65 to 112.09, ahead of the latest consolidation
  • Bids likely to be in decent size ahead of 112.00
  • Market has failed to register an hourly low below 112.18 pivot  point
  • Now stuck between two reasonably sized option strikes @112.00 & 112.50
  • NY Cut Expiries: 112.00 (689M), 112.50 (760M)

USD/CHF

  • USD/CHF lifts to 0.9888 from new 0.9859 trend low in Asia
  • 0.9853 Fibo is key support, bears seeking break/close below
  • EUR/CHF within 1.0827/1.0845 range in Europe
  • Swiss FX reserves rise points to active SNB
  • C. bank could be working new EUR/CHF 1.08 soft floor


GBP/USD

  • GBP/USD met headwind pre-1.2950 after catching bid from Ldn open
  • 1.2942 = two-day high. 1.2948 = Wednesday’s intra-week peak
  • More offers expected pre-1.30 option barrier level. 1.2965 = recent 7mth high
  • EUR/GBP was helped off 0.8508 to 0.8469 by profit-taking on EUR longs
  • 0.8508 = 9-day high in Asia amid expectations of easy Macron win Sunday

USD/CAD

  • USD/CAD elicited support near 1.3750 after retreating from highs near 1.38
  • Highs notched in late Asian/early European trade after oil tanked in Asia
  • 1.3800 = option barrier level.
  • USD/CAD helped off high by WTI rallying to $45.90 from $43.76 low in Asia

AUD/USD

  • AUD/USD met headwind circa 0.7400 after rallying off 0.7368 (late Asia 4mth low)
  • Drop to 0.7368 influenced by another steep Dalian iron ore fall, closed -7.5%
  • Stops below 0.7380 tripped en route to 0.7368. More stops tipped sub-0.7350

NZD/USD

  • NZD/USD met headwind at 0.69 after pushing recovery envelope from 0.6840
  • 0.6887 = Asia high after RBNZ inflation survey. 0.6840 was Thursday’s 11mth low

FX OPTIONS

  • Short dated vols propped by final short cover pre NFP/French vote
  • Risk premiums tame however – O/n vol break evens well below round 1
  • NFP event risk included also. Monday EUR/USD 15.0 vol or 120 pips, yen 12.0/96 pips
  • JPY vols little changed on week. AUD vols up on weaker spot but limited demand
  • Cable vols at ever new lows since late 2015. 1mth GBP put bias long term lows

COMMENT
Fed – Payrolls day but don’t forget Fed speakers

The FOMC statement this week highlighted that the Fed is still on track for a further rate hike at the June meeting. It would take a shockingly weak employment report today to reduce the chances of a June hike. The market is currently priced with a 75% probability of a further 25bps hike in the fed funds target range. In addition to the payrolls report we also have four Fed speakers on tap today in the form of Fischer, Williams, Evans, Bullard, Rosengren and Yellen [FED/DIARY]. These speakers will be as important as the data today and more of a focus will be any updates to the debate over balance sheet reduction. The idea being to prep markets for the release of minutes from this week’s FOMC meeting that are released in 3-week’s time.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s