FX Market Update 28-3

Market Briefs

EUR/USD -0.07%, USD/JPY 0.41%, GBP/USD -0.06%, EUR/GBP -0.02%
DXY 0.13%, DAX -0.95%, FTSE -0.4%, Brent -0.48%, Gold -0.36%
FR Consumer Confidence Mar, 100, 100 f’cast, 100 prev
IT Industrial Orders MM SA Jan, -4.50%, 6.50% prev
IT Industrial Orders YY NSA Jan, 9.60%, 6.90% prev
IT Industrial Sales MM SA Jan, -2.80%, 2.50% prev
IT Industrial Sales YY WDA Jan, 5.30%, 7.20% prev
GB CBI Distributive Trades Mar, XX, 15 f’cast, 8 prev
Reuters: 5,000 UK finance jobs may be moved by Brexit, half earlier forecast
U.S., S.Korea to revise trade pact with currency side-deal, autos concessions
BOJ’s Kuroda says need to stick with current monetary easing framework
Gold slips from previous day’s peak as dollar recovers
Oil eases back from 2018 highs above $70 a barrel

Looking Ahead – Economic Data (GMT)

12:00 US MBA Mortgage Applications w/e, -1.1% prev
12:00 US Mortgage Market Index w/e, 383.0 prev
12:00 US MBA Purchase Index w/e, 249.9 prev
12:00 US Mortgage Refinance Index w/e, 1,107.7 prev
12:00 US MBA 30-yr Mortgage Index w/e, 4.68% prev
13:30 US Corporate Profits Pelim Q4, 5.7% prev
13:30 US GDP Final Q4, 2.7% f’cast, 2.5% prev
13:30 US GDP Sales Final Q4, 3.3% f’cast, 3.3% prev
13:30 US GDP Cons Spending Final Q4, 3.8% prev
13:30 US GDP Deflator Final Q4, 2.3% f’cast, 2.3% prev
13:30 US Core PCE Prices Final Q4, 1.9% f’cast, 1.9% prev
13:30 US PCE Prices Final Q4, 2.7% f’cast, 2.7% prev
13:30 US Adv Goods Trade Balance Feb, -75.26B
13:30 US Wholesale Inventories Adv Feb, 0.8% prev
13:30 US Retail Inventories Advance Feb, 0.1% prev
15:00 US Pending Homes Index Feb, 104.6 prev
15:00 US Pending Sales Changes MM Feb, 2.1% prev, -4.7% prev

Looking Ahead – Events, Other Releases (GMT)

N/A CA Finance Minister Charles Sousa speaks at Toronto
15:30 Fed’s Bostic speaks at Atlanta, Georgia
21:30 Bundesbank’s board member Wuermeling speaks at New York

Currency Summaries

EUR/USD

1.6bln 1.2400 option expiry helps contain in to 10am NY cut
1.2421-1.2377 range today after fall from 1.2476 to 1.2372 Tues
USD attracting dip buyers as stocks suffer, and some weight from EUR/JPY
EUR/USD scope to support at Mon low 1.2343 and 30DMA 1.2339
US Q4 final GDP is key data today – 2.7% exp vs 2.5% prior
Notable lack of interest as dealers wind down in to Easter holiday weekend

USD/JPY

USD/JPY sees a 105-34-105.81 range
Market remains capped by key 105.96 Fibo
Month, quarter and Japan financial year-end flows seems to be coming to an end
NY Cut Expiries: 105.20-25 USD575M, 105.50 813M, 106.05 320M

GBP

Cable rose to 1.4200 in Asia on Times piece about UK/Ireland border
Times said Irish officials have been told to expect new proposals imminently
1.4135 was European am low after more month-end buying of EUR/GBP
Month-end flow inflated the cross by a quarter-penny to 0.8761
Prior month-end buying propelled EUR/GBP to 1wk high of 0.8796 Thursday
Tuesday’s 178 pip range for cable was largest since Feb 14

USD/CAD

USD/CAD rose to 1.2908 during the European am amid risk aversion
1.2871 was Asia low. 1.2922 (Monday’s high) is a resistance level

AUD/USD

AUD/USD slid to 0.7656 (14wk low) during the European am on risk aversion
S&P E-mini -0.2% at 0953GMT. 0.7651 = 76.4% of 0.7501-0.8136 (Dec-Jan)
0.7702 was Asia high, before AUD hurt by Global Times piece
Global Times says China preparing tariffs on U.S. imports

NZD/USD

NZD/USD eased to 0.7246 during the European am on risk aversion
0.7234 (Monday’s low) and 0.7203 (last Friday’s low) are support levels

FX OPTIONS

Vols mostly heavy, despite stocks coming back under pressure
Impending Easter holiday weekend saps interest, especially short dated vol
Cable vols off lows as spot performs and UK GDP looms Thursday
AUD/USD vols also off lows as spot edges ever closer to key 0.7600 barrier
Big expiries today EUR/USD 1.24, USD/JPY 105.50, USD/CAD 1.2850

COMMENT

FX on alert as U.S. stocks near critical levels

U.S. stocks are near key levels that should determine the direction of FX and bigger positions like EUR longs. The DJI has dropped 7.5% in the last 20 days to close 2% above its 200-DMA at 23,385 and the low of the panicked sell-off seen on February 9th at 23,360. Closing breaks below these points will have big technical significance and are likely to be sustainable as the drop since Feb 27 has not been a rushed decision with stops hit unexpectedly like in early Feb. Instead the last six weeks has seen rising U.S. protectionism add to already rising interest rates to promote the notion that a top for stocks has finally been reached. For FX traders a top for the DJI and the paring of bets on its further rise is likely to lead a purge of other long-held positions like EUR/USD longs. Most other FX bets are now small but selling of commodity currencies is also highly likely and emerging markets where investors are long many high yield currencies should suffer too.

CHART FOCUS

USD/JPY longs in danger as key Fibo caps recovery

USD/JPY risks a fresh setback with growing scope for a resumption of the bearish trend as the two-day recovery from Monday’s 104.56 2018 low looks to be coming to an end. The market peaked at 105.91 on Tuesday below the key 105.96 Fibonacci level — 23.6% retrace of the 110.48 to 104.56 (February to March) fall — daily EBS volume failed to pick up as the market rose which is indicative of bulls running out of steam. The 10- and 30-DMAs are negatively aligned, highlighting the overall bearish bias and this is reinforced by 14-day momentum which has been negative since March 12. A drop below the 104.56 low will unmask 103.64 Fibonacci level — 76.4% retrace of the 99.00 to 118.86 (June to December 2016) rise. USD/JPY bulls need to force a break of the 105.96 Fibonacci to avert an imminent drop, while a daily close above the 30-DMA at 106.29 will shift the overall bias back to the upside.

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