FX Market Update 4-8

Market Briefs

• EUR/USD +0.08%, USD/JPY +0.02%, GBP/USD +0.14%, EUR/GBP -0.04%
• DXY -0.12%, DAX +0.15%, FTSE +0.02%, Brent -0.75%, Gold +0.11%
• DE Jun Industrial orders m/m, 1.0% vs f’cast 0.5%, prev 1.0% rvsd 1.1%
• BoE’s Broadbent: UK “a little bit” better placed to cope with higher interest rates-BBC
• Broadbent: Brexit-related sterling fall is reason for higher rates of uk inflation
• Japan’s GDP seen expanding for 6th straight quarter on domestic demand
• Nothing cold about sub-zero rates, IMF researchers find
• Oil prices fall as OPEC oil exports rise
• Gold steady near 7-week highs ahead of U.S. jobs data

Looking Ahead – Economic Data (GMT)

• 12:30 CA Employment change (Jul) (mkt +10.0k, prev 45.3k)
• 12:30 CA Unemployment rate (Jul) (mkt +6.5%, prev 6.5%)
• 12:30 CA Trade balance C$ (Jun) ( mkt -1.35 bln, prev -1.09 bln)
• 12:30 US Nonfarm Payrolls (Jul) (mkt +183k, prev +222k)
• 12:30 US Private Nonfarm Payrolls (Jul) (mkt +180k, prev +187k)
• 12:30 US Manufacturing Payrolls (Jul) (mkt +4k, prev +1k)
• 12:30 US Unemployment Rate (Jul) (mkt 4.3%, prev 4.4%)
• 12:30 US Average Hourly Earnings (Jul) (mkt +0.3% m/m, prev +0.2% m/m)
• 12:30 US Workweek Hours (Jul) (mkt 34.5, prev 34.5)
• 12:30 US International Trade (Jun) (mkt -$45.0 bn, prev -$46.5 bn)
• 14:00 CA Ivey PMI (Jul) (prev 63.9)
• 14:00 CA Ivey PMI SA (Jul) (prev 61.6)
• 17:00 Baker-Hughes Oil Rig Count (weekly) (prev 766, +2 w/w, +392 y/y)

Looking Ahead – Events, Other Releases (GMT)

• 15:45 FedTrade operation 30-year Ginnie Mae (max $1.375 bn)

Currency Summaries

EUR/USD

• Tight 1.1868-89 range so far Fri as markets await NFP – Reuters poll 183k
• US yields weak, DXY consolidates just above Wed’s 92.548 l/term low
• Thur 1.1830 setback low supports, Bids ahead of Wed/Tues 1.1794/86 lows
• Initial resistance Wed’s 1.1910 30mth high, Little thereafter til 1.20 barrier
• 1.20 could trigger demand toward 50% of 2014-17 slide at 1.2167
• Decent gains for NFP risk premium this week – O/n vol is 8.5/73 pips
• Buyers O/n vol and downside likely hedging cash longs against strong NFP
• 920mln 1.1850 largest expiry today, more surround

USD/JPY

• Daily range just 1.0985-110.18 so far today. 1bln 109.50 option expiry
• USD/JPY support at 55WMA 109.72, not closed below since November
• Little on daily charts until 15/14 June lows 109.28/108.81, 17 Apr 108.13
• Thin 1.1140-56 daily cloud may start to attract, especially if strong NFP
• Thur/Wed hi’s 110.82/98 initial resistance. 1bln 110.95-1.1100 expiries
• Option vols waning and JPY call risk rev bias off highs now 0.85 from 1.1
• O/n vol looks expensive at 8.5/67 pips break even given 33pip daily range

EUR/CHF

• EUR/CHF pivoted 1.1500 thru European am as it consolidates recent gains
• 1.1524 was 31-month high Wednesday (1.1461 = subsequent low)
• 1.1524 = 4.6% above last week’s 1.1009 low (pre-Jordan’s 1.10 view)
• 1.18 & 1.20 among bull targets if the force remains with euro
• Swiss July inflation data due Monday, Swiss jobs data due Tuesday

GBP/USD

• 30DMA marks base of cable’s Friday range-to-date, 1.3130-1.3164
• 30DMA also propped cable after Thursday fall on dovish BoE hold
• 1.3113 = Thursday low. US July jobs report due 1230GMT, NFP f/c 183k
• Offers ahead of 0.9050 have capped EUR/GBP since dovish BoE hold
• 0.9050 = Oct 31 high. Cross revisited Thursday’s 0.9048 high in Asia
• 0.9000 is now a support point (former resistance level)

USD/CAD

• Meagre 19 pip range for USD/CAD during European am, 1.2559-1.2578
• Canada/US jobs reports 1230GMT will expand range. Canada jobs f/c +10k
• Canada jobs beat + NFP/AHE misses could deflate USD/CAD to/thru 1.2500
• Large 1.2500, 1.2550 & 1.2600 option expiries for 10am ET NY cut
• 1.2500 strike = USD 1.1bln. 1.2550 = USD 681mn. 1.2600 = USD 460mn

AUD/USD

• AUD/USD ticked up to 0.7980 European am high after upbeat RBA SoMP
• Offers are tipped ahead of 0.8000 (0.7993 was Wednesday’s high)
• Expected Friday White House announcement on China IP/trade postponed
• US/China trade friction was flagged as factor in AUD drop to 0.7914 Thursday

NZD/USD

• NZD/USD held below 0.7450 through the European am
• 0.7450 was Asia high. 0.7451 was Thursday’s high
• US jobs report due 1230GMT, NFP f/c 183k, AHE f/c +0.3%
• RBNZ is expected to keep OCR at 1.75% next week

FX OPTIONS

• Short dated EUR vols peak in to NFP, O/n USD calls to hedge long cash
• USD/JPY shorter dated vols and JPY calls off highs as downside holds
• GBP/USD vols on the back foot after UK MPC – huge 1.3200-25 expiry
• AUD vols have peaked as spot recovers. CAD vols hold cycle highs pre jobs
• No setbacks for EUR/CHF vols as yet, 4% spot rise still being absorbed

CHART

Charts begin to show recovery for USD/JPY

• Charts begin to show recovery for USD/JPY
• Slow stochs lift fm OS levels. Sppted ahead of lower 30-day Bolli at 109.79
• And also the 55-WMA at 109.72. 109.85 is today’s low
• Thin daily cloud, spanning 111.40/56 today, could attract spot higher
• And also the cloud twist by 111.60 on Monday
• 112.20 is the long target, by Kijun, 200-DMA & July 26 high. Stop at 109.30

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