FX Market Update 9-8

Market Briefs

• EUR/USD -0.05%, USD/JPY -0.46%, GBP/USD +0.18%, EUR/GBP -0.24%
• DXY -0.1%, DAX -1.21%, FTSE -0.79%, Brent +0.58%, Gold +0.56%
• EUR/CHF loses 1.6%: Low of 1.1272 in thin Europe trade
• N.Korea considers missile strike on Guam after Trump’s ‘fire and fury’ warning
• Steady China factory inflation a boon for industrial profits, economic growth
• China says deleveraging efforts showing results but debt still too high
• Japan’s econ minister pledges to stick to primary budget fiscal discipline target
• IT Jun Industrial output y/y, 5.3% vs f’cast 3.4%, prev 2.8& rvsd 2.7%
• Oil edges higher above $52 before U.S. inventory report
• Gold up on rising U.S.-North Korea tensions

Looking Ahead – Economic Data (GMT)

• 11:00 US MBA Weekly Mortgage Application Indices
• 12:15 CA House starts annualised (Jul), (mkt 205k, prev 212.7k)
• 12:30 CA Building permits m/m (Jun), (mkt -2.0%, prev +8.9%)
• 12:30 US Productivity (Q2) (mkt +0.7% q/q AR, prev 0.0% q/q AR)
• 12:30 US Unit Labor Costs (Q2) (mkt +1.7% q/q AR, prev +2.2% q/q AR)
• 14:00 US Wholesale Inventories (Jun) (adv +0.6% m/m, prev +0.4% m/m)
• 14:00 US Wholesale Sales (Jun) (mkt +0.1% m/m, prev -0.5% m/m)
• 14:30 EIA Weekly Petroleum Status Report

Looking Ahead – Events, Other Releases (GMT)

• 15:45 FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.65 bn)
• 17:00 Fed’s Evans addresses the economy and monetary policy in closed group interview

Currency Summaries

EUR/USD

• Heavy EUR/USD tone that followed JOLTS is maintained
• Position paring dominating today & traders are very long EUR/USD
• No big supports give way though, so far froth off top of big rally
• Resistance around 1.1800 (100/200-HMAs). Support @ Aug 8 low 1.1715
• 21-DMA @ 1.1666 looking pivotal for the many sitting long EUR
• Super Italian IP data overshadowed. Output 5.3% yy from 2.8

USD/JPY

• USD/JPY trades lower as risk aversion spurs position unwinding
• US/N Korea tension spurs broad paring of risk
• Speculators are heavily long USD/JPY & losing: http://reut.rs/2frFQ3f
• Japanese accounts smooth way down buying dollars to offset spec supply
• USD/JPY 109.66 in Europe having opened 109.95, high 110.07
• Asia range 109.74-110.37. More JPY short covering likely regardless Korea

EUR/CHF

• Safe-haven CHF in demand courtesy of North Korea worries
• N.Korea considers missile strike on Guam after Trump “fire & fury” warning
• EUR/CHF down to 1.1333 in Asia & 1.1272 during European am
• DAX & CAC both down over 1%. 1.1272 approximates to July 27 high
• 1.1395 was early Europe recovery rally high from 1.1333
• Key support 1.1200 (stops above 1.12 Feb 2016 high tripped July 27)

GBP/USD

• M&A news was catalyst for cable’s early Ldn rise to 1.3030
• US firm Vantiv clinches GBP 8bln deal to buy Worldpay
• 1.2970-1.2994 was Asia range. 1.2953 was Tuesday’s 19-day low
• EUR/GBP extended south to 0.9012 during the European am
• Losses influenced by P/T on longs since 0.9091 threatened Tuesday
• 0.9091 = 1.10 GBP/EUR. BoE survey: UK firms plan “modest” pay rises

USD/CAD

• USD/CAD eased to 1.2670 after threatening 1.27 in early European trade
• 1.2693 was early Europe high. 1.2698 was Asia high
• Above-figure resistance 1.2705-15 (MondayTuesday highs)

AUD/USD

• AUD/USD met headwind pre-0.79 after firming from 0.7855 (Asia low)
• 0.7895 = European am high. 0.7899 = 23.6% of 0.8043-0.7855
• Drop to 0.7855 on N.Korea worries: AUD main EM Asia proxy

NZD/USD

• NZD/USD respected its 0.7309-0.7335 Asia range thru European am
• 0.7309 = 3wk low. Recent NZD fall on expectations of dovish RBNZ hold
• RBNZ statement 2100GMT: may maintain status quo on OCR guidance
• 0.7300/05 option expiries Thursday, NZD 406mn strikes

FX OPTIONS

• EUR/USD 1.1725 (721M) 1.1700 (566M), 1.1850 (513M), 1.1900 (379M)
• EUR/JPY 130.15-30 (758M)
• USD/JPY 110.00 (849M), 110.45/50 (637M, 109.75 (502M)
• EUR/GBP 0.8900 (420M)
• GBP/USD 1.2975-85 (393M), 1.3000 (178M)

CHART

USD/CHF bull trend faces severe damage

USD/CHF’s trend reversal from July 21’s 0.9439 low to 0.9772 Aug 8 high has hit the rocks with technicals pointing to further setbacks. Daily candle stick Dojis Monday and Tuesday gave warning that the underlying trend was fading and that Doji indecision has now led to a sharp decline to 0.9613 today from 0.9772. Key support is at the 200-WMA at 0.9606, which ties in with a daily Fibo level. Today’s price moves point to potential for a weekly bearish engulfing line which joins a significant cloud break on the daily chart. Cloud parameters are at 0.9654 and 0.9826 with the 30-DMA upper Bollinger line capping the market at 0.9772. On a close below the daily cloud, Fibo retrace levels present bear targets at 0.9606 and 0.9566, 50% and 61.8% respectively. A close back inside the cloud would suggest a period of sideways action before a bullish resumption.

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