FX Market Update 19-5

Market Briefs

• Potential worst week in 9-mths for the USD
• EUR/USD +0.56%, USD/JPY flat, GBP/USD +0.57%, EUR/GBP flat
• DXY -0.43%, DAX +0.34%, FTSE +0.51, Copper +0.65%
• Seeking a new narrative, Trump embarks on trip to Middle East
• Long queues as Iranians start voting in presidential election
• Euro zone current account surplus eases from record high
• EZ Mar Current account NSA 44.8b vs revsd 27.8b prev 27.9b
• EZ Mar Current account SA 34.1b vs revsd 37.8b prev 37.9b
• OPEC panel looking at deepening, extending oil cuts – sources; Brent +1.12%
• DE Apr Producer prices yy 3.4% vs prev 3.1%
• UK PM May’s Conservatives set to outspend Labour in election battle
• TPP trade deal members seek to move ahead without US
• Japan’s April exports seen up for 5th straight mth; +7.8 pct yr/yr vs +12.0 in March
• Gold on track for biggest weekly gain in five; Gold +0.49%

Looking Ahead – Economic Data (GMT)

17:00 Baker-Hughes Rig Count (weekly)

Looking Ahead – Events, Other Releases (GMT)

13:15 FRB St. Louis’s Bullard (non-voter, dove) on the economy and monetary policy
15:45 FedTrade Operation 30-year Ginne Mae (max $975 mn)

Currency Summaries

Thursday pullback looking corrective as EUR takes off topside again
• Trading 1.1164 session high into New York from 1.1097 low
Thursday 1.1174 high initial res. But market has a 1.12+ feel about it
• Passing of Greek bailout measures latest in line of EUR positives
• Bond markets paint a very favourable picture for the EUR
• EUR 3.3bln expiries 1.1100-20 may prove magnetic later


• USD/JPY recovery continues, with the envelope pushed to 111.70 from 111.12
• Tech bulls have taken cue from long tail on Thur’s candlestick
• Expect solid resistance around 112.00. Note cloud top is @112.03
• Some stops likely to have clustered above 112.05 – 50% 113.85 to 110.24 fall
• UST-JGB spread widens across curve which is underpinning USD/JPY
• Fading recovery moves ahead of 112.00 a favourable strategy
• Any further Trump woes would put USD/JPY recovery in jeopardy


• Dollar respite was short lived and USD/CHF is offered again
• 0.9804-0.9769 Europe. Could threaten 0.9759 Thurs trend low
• Tight 1.0892-1.0906 EUR/CHF range in Europe. Recovery fm Thurs 1.0867 low
• Thurs low was a 61.8% retrace of May rise, break under remains likely
• Below risks full retracement to May 3 1.0793 low & 200-day MA at 1.0783
• Hourly cloud, 1.0912/1.0924 & falling 100-HMA at 1.0920 resistance Fri
• CHF benefits from safe haven demand fueled by U.S political turmoil


• GBP recouped remainder of Thursday’s ‘flash slip’ losses during European am
• 1.3011 = European am high to follow 1.2959 Asia high
• Stops below 1.2980 were tripped en route to 1.2888 low at 1735GMT Thursday
• 1.3048 = Thursday’s 8mth high after UK retail sales beat, before ‘flash slip’
• Option barrier mooted at 1.3050, with 1.35 among bull targets beyond
• Citigroup says Tories to win majority of 104-190 seats in June 8 election


• USD/CAD slid to 1.3566 (3wk low) during European am as WTI rose to 50.07
• 50.07 bucks/barrel = 3wk high, on expectations of oil output cut extension
• 1.3671 was USD/CAD high Thursday, when WTI near 48 bucks/barrel
• Bids around 1.3576 based USD/CAD losses TuesdayWednesday
• 1.3576 = 38.2% of 1.3224-1.3793. Canada CPI/retail sales data due 1230GMT
• Apr CPI f/c +1.7% y/y, core CPI f/c +1.4% y/y. Mar retail sales f/c +0.4%


• AUD met headwind at 0.7470 after extending north from 0.7407 (Asia low)
• Offers just shy of 0.7470 capped AUD/USD rise from 0.7409 Thursday
• Dalian iron ore closed up 3.2% Friday, source of support for AUD
• More AUD/USD offers tipped at 0.75 (AUD/USD sub-0.75 since May 3)


• NZD/USD scaled intra-day peak of 0.6907 as AUD/USD rose to 0.7470
• Simultaneous AUD/NZD rise to 1.0820 (23-day high). 1.0787 = Asia high
• AUD/NZD traded as low as 1.0695 Thursday, before Aussie jobs data


• Risk sentiment recovers for now, vols give back some of the mid week gains
• USD/JPY vols rose the most so fall hardest, still above lows however
• 1mth USD/JPY risk reversals much slower to ease, suggests market still wary
• EUR/USD vol setbacks stall as spot pushes higher, EUR call bias peaks
• AUD buyers 1mth risk reversals from 8 year low AUD puts
• USD/CAD 1 week vol higher on BoC and OPEC capture.


GBP/USD looks toppy

GBP/USD looks toppy. Short-covering was the basis of the rally from 1.2110 in March to 1.3048 yesterday with traders seen too bearish. Few were actually bullish the pound but the price action suggests that many have got long. The first sign of longs was evident in the reaction to strong CPI data this week with GBP selling off when it should have rallied. Yesterday’s dump late in the NA session is another indication of a long, and perhaps overlong GBP position. GBP/USD dived from 1.3000 to 1.2888 in minutes. That was the move anticipated on the trigger of stops above 1.3000 barriers which instead resulted in hours of grinding, choppy, price action that failed to knockout more barriers at 1.3050. Aside a brief dip below the 21-DMA in April GBP/USD has been bullish above this line throughout the Mar/May correction. A close under the 21-DMA will likely prove too much for a market now long GBP for Brexit.


Euro bulls fight back versus yen

EUR/JPY bullish prospects have improved with the cross set for a retest of the recent 2017 125.81 high if it manages to register a daily close back above the tenkan line, currently 124.19. The cross left a long tail on Thursday’s candlestick line as EUR/JPY recovered after Wednesday’s bearish black candle. Bulls will already be encouraged by the failure to register a daily close below 123.23 on Thursday – 23.6% retrace of the 114.86 to 125.81 rise – and seem poised to capitalise on Friday’s gains. Both the tenkan and kijun lines are flat, indicating neutral momentum which bulls need to be mindful of. If the cross fails to register a daily close above the aforementioned tenkan line, this would be a setback for the bulls. A break below Thursday’s 122.57 low would put bears back in command


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