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Daily Financial Futures Markets 16-10

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FX Market Update 16-10

Market Briefs

• EUR/USD -0.25%, USD/JPY -0.02%, GBP/USD 0.06%, EUR/GBP -0.28%
• DXY 0.14%, DAX 0.19%, FTSE 0.11%, Brent 1.4%, Gold 0.02%
• DE Sept Wholesale Price Index YY 3.4% vs 3.2%
• EZ Aug Eurostat Trade NSA, Eur 16.1B vs 23.2B
• May heads for Brussels after Brexit talks deadlock
• Madrid moves towards direct rule over Catalonia as deadline passes
• Canadian small business lending rises in August -PayNet
• White House pitches corporate tax cut as win for workers
• BoJ Gov Kuroda – No excesses in markets, will continue easy policy
• IMF Brekk – Sales tax hike obvious choice for Japan debt woes
• JP MoF off’ls – G20 didn’t discuss trade, FX, Japan not fx manipulator
• China cbank chief surprises with gravity-defying 7 pct H2 growth forecast

Looking Ahead – Economic Data (GMT)

• 12:30 New York Fed Empire State Manufacturing Index (Oct) (mkt 20.7, prev 24.4)
• 18:00 ECB’s Lautenschlager speaks in Washinton DC

Looking Ahead – Events, Other Releases (GMT)

• 15:45 FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.52 bn)
• 01:00 FRB Kashkari participates in moderated Q&A session (with audience Q&A); Minneapolis, MN

Currency Summaries

EUR/USD

• EUR/USD in tight but lower 1.1780-1.1809 range in Europe
• Spain give Catalonia Thursday deadline to drop independence
• Merkel’s Saxony loss & Austrian far right rise weigh EUR
• Fed hawks continue to show their talons while Draghi coos
• EUR/USD down despite lower U.S. rates after softer than f/c CPI
• Buyers rather than stops emerge on first dip below 200-HMA @ 1.1784

USD/JPY

• USD/JPY has seen a 111.65-112.08 range so far Mon
• Offered USD/JPY held up by decent sized bids tipped circa 111.50
• Intra-day technical support comes in @111.60 pivot point
• On the upside there are said to be offers capping 112.10+
• Daily close below 200-DMA @111.79 will weaken the structure further
• Ramped up speculative USD/JPY longs look vulnerable
• Net USD/JPY sales on machine so far Monday contributing to an offered market

EUR/CHF

• EUR/CHF continues to slip from Thurs peak in line with a lower EUR/USD
• Probing the 21-DMA at 1.1491. 1.1518-1.1490 range Europe. 1.1525 Asia high
• Swiss domestic sight deposits fall to 471.303bln in w/e Oct 13
• Speculation remains of official bid circa 1.14. Brief spike to 1.1389 Oct 2
• USD/CHF sideways after Friday dip to 0.9705. 0.9768-0.9747 European range
• Remains supported ahead of the rising 21-DMA at 0.9720

GBP/USD

• EUR/GBP tripped stops below 0.8877 en route to 0.8857 European am low
• 0.8857 = 12-day low. 0.8877 was Friday’s low & Oct 5 low. 0.8850 = Oct 4 low
• GBP/USD traded a 41 pip range during the European am, 1.3271-1.3312
• 1.3249-1.3337 = Friday’s range. May in Brussels with Juncker/Barnier Monday
• UK Sept CPI due Tuesday, 3.0% f/c. Carney letter if CPI at/above 3.1%
• Carney to address TSC Tuesday after Ramsden/Tenreyro appointment meets

USD/CAD

• USD/CAD has risen from a European am low of 1.2471 to threaten 1.2500
• Above-figure resistance 1.2520 (Friday’s high). 1.2450 was Friday’s low
• BoC business outlook survey due at 1430GMT, may impact CAD
• On Saturday, Poloz said Canada growth to slow down in H2

AUD/USD

• AUD/USD respected its 0.7868-0.7893 Asia range thru the European am
• Higher commodity prices are a source of support for AUD
• Copper up to three-year high north of USD 7,000 tonne Monday
• Dalian iron ore closed up 3.8% Monday

NZD/USD

• NZD/USD met fresh headwind pre-0.72 during the European am
• 0.7191 = European am high. 0.7197 was Friday’s high
• NZ Q3 inflation data due 2145GMT, f/c +1.8% vs +1.7% previously
• Formation of new NZ government expected this week

FX OPTIONS

• EUR/GBP 1.7bln 0.8885-0.8900 expiries today, 1.5bln 0.8940-60 Wed’s
• GBP/USD O/n vol break even 71 pips over Tues inflation data, vols/puts bid
• EUR/USD vols heavy as ranges hold. EUR calls stay firm on risk reversals
• USD/JPY 1 week gets election, atm vol 7.5 to 9.0, risk reversal 0.9 to 1.9 JPY call
• USD/JPY inability to break away from 112 impacts realised and implied vols
• NZD 8 day downside strikes favored, Coalition result expected end of week

COMMENT

Profit-taking to weigh on EUR/USD ahead of Oct ECB

Position adjustment may weigh on EUR/USD ahead of the Oct 26 ECB meeting where there’s little certainty about its QE taper plans. German, Austrian and Spanish politics have conspired against those betting on a higher euro. So too has commentary from central bankers with most Fed speakers still talking rates up a lot more than markets are pricing, while ECB Governor Draghi has maintained his dovish bias. The deal breaker is EUR/USD’s reaction to last Friday’s U.S. data. Where the broader dollar softened on the back of the small downside miss for U.S inflation data, EUR/USD also eased–most likely due to speculative positions. Traders added to an already huge bet on a higher euro in the past two weeks but ran into tough resistance at the daily Ichimoku cloud top, now 1.1917, and so booked some profits. With little certainty over what the ECB may say next week, more profit-taking may lead to a test of the daily cloud base at 1.1703.

CHART FOCUS

USD/JPY risks slide towards 110

USD/JPY bears are grappling with the 200-DMA, which is currently at 111.79, a daily close below which will them give them momentum towards significant downside levels under the 30-DMA now at 111.47. The scope would grow for losses to the 110.00 psychological level once the 110.38/111.10 Fibonacci levels give way — 50%/38.2% retrace of the 107.32 to 113.44 (September to October) rise. USD/JPY managed to register a daily close below 112.00 on Friday — 23.6% retrace of the same 107.32 to 113.44 rise — a confirmation that the downside risk is growing. Fourteen-day momentum is at risk of a negative reading for the first time since Sept 11, which would reinforce the new found negative sentiment. If there are a series of failures to register a daily close below the 200-DMA, then this will give USD/JPY bulls a chance to regroup and minimise the downside risk.

Futuro del peso mexicano 16-10

  • USD/MXN opens NorAm 19.0525 v 18.91 Fri close; holds near 19.06 high
  • Grim reality of NAFTA talks sets in after tough US demands 
  • Talks may be extended to Feb 2018 , some doubt US wants a deal
  • USD/MXN rides upper 21-d Bolli (19.1287) up, eyes Apr 26 high by 19.2990
  • Support 18.9965 10-HMA, 18.9083 daily pivot, 18.8036 200-DMA
  • USD/MXN front-end vol remains bid in face of US hike, NAFTA uncertainty

Futuro del peso mexicano 16-10

 

FX Market Update 13-10

Market Briefs

• EUR/USD 0.02%, USD/JPY -0.13%, GBP/USD 0.11%, EUR/GBP -0.1%
• DXY 0.01%, DAX 0.08%, FTSE -0.18%, Brent 2.28%, Gold 0.03%
• ECB homes in on 9 more months of bond buying, at lower volumes
• Lawmakers hit out at ECB as bad loans standoff hardens
• Germany’s economic upswing to lose some momentum in second year-half – ministry
• British PM May could have more to say on Brexit money at EU summit- spokeswoman
• “They have to pay”, EU’s Juncker says of Britain
• DE Sept CPI Final YY 0.1% vs 0.1%, f’cast 0.1%
• DE Sept HICP Final YY 1.8% vs 1.8%, f’cast 1.8%
• Trump nails Obamacare with decision to cut off billions in subsidies
• Trump to target Iran nuclear deal, Revolutionary Guard in speech

Looking Ahead – Economic Data (GMT)

• 12:30 Retail Sales (Sept) (mkt +1.7% m/m, prev -0.2% m/m)
• 12:30 Retail Sales ex-Autos (Sept) (mkt +0.3% m/m, prev +0.2% m/m)
• 12:30 Control Retail Sales (Sept) (mkt +0.4% m/m, prev -0.2% m/m)
• 12:30 CPI (Sept) (mkt +0.6% m/m, +2.3% y/y; prev +0.4% m/m, +1.9% y/y)
• 12:30 CPI ex-Food and Energy (Sept) (mkt +0.2% m/m, +1.8% y/y; prev +0.2% m/m, +1.7% y/y)
• 14:00 Business Inventories (Aug) (mkt +0.4% m/m, prev +0.2% m/m)
• 14:00 U of Michigan Consumer Sentiment Index (prelim Oct) (mkt 95.0, prev 95.1)
• 14:00 U of Michigan Current Conditions Index (prelim Oct) (mkt 111.3, prev 111.7)
• 14:00 U of Michigan Expectations Index (prelim Oct) (mkt 84.7, prev 84.4)
• 15:00 Cleveland Fed Median CPI (Sept) (prev +0.2% m/m)
• 17:00 Baker-Hughes Weekly Oil Rig Count (prev 748, -2 w/w, +320 y/y)

Looking Ahead – Events, Other Releases (GMT)

• 12:30 FRB Rosengren opens conference on monetary policy rules; Boston, MA
• 14:25 FRB Evans speaks in moderated discussion at financial literacy summit; Green Bay, WI
• 15:30 FRB Kaplan speaks in moderated Q&A session at CFA conference; Boston, MA
• n/a Fed Vice Chair Fischer steps down

Currency Summaries

EUR/USD

• EUR/USD fairly static ahead of today’s big U.S. CPI/retail sales releases
• Early session saw EUR/JPY sell-off about 50 ticks
• Likely pre-data position adjustment, given large size of spec EUR/JPY longs
• Cross has recouped most of those losses, EUR/USD range 1.0815-52
• UST/bund spreads wider today influenced by most recent ECB speculation
• ECB seen extending bond buys but lower size of purchases

USD/JPY

• Bulls hoping U.S. CPI digs them out of a hole, causes a short squeeze
• Squeeze may run into 112.50 supply, large (1.6B) 112.60 expiry a beacon
• Bulls are hanging on despite heavy selling from 112.30 to 111.86 earlier
• Buyers have forced a minor recovery to 112.16 where they hit a wall
• Stops likely clustered below 200-DMA @111.82 which is proving pivotal
• USD/JPY trending water circa the 112.10 hourly pivot

EUR/CHF

• EUR/CHF slips from Thurs peak in line with a lower EUR/USD
• Shooting star on candles Thurs after a new trend high = reversal signal
• Lower low Friday half way to confirming. 1.1555-1.1525 European range
• 21-DMA key support at 1.1491, break opens up a further drop
• Touted official bid circa 1.14. Spike to 1.1389 Oct 2 short lived
• USD/CHF plays a very tight 0.9758-48 range in Europe. 100-HMA caps
• Holds off 21-DMA support at 0.9712 but still below Wed’s 0.9767 peak
• Treading water ahead of US CPI & RS data releases Friday

GBP/USD

• Cable extended north to an 11-day peak of 1.3322 during the European am
• Stops above 1.3300 were tripped en route to that high
• Ascent fuelled by hopes of Brexit transition deal for Britain
• 1.3249 = pullback low from 1.3322 on fresh Brexit mutter (pessimistic)
• EUR/GBP slid to an eight-day low of 0.8877 during the European am
• 0.8930 = subsequent rally high on fresh Brexit mutter (pessimistic)

USD/CAD

• Modest 19 pip range for USD/CAD during European am, 1.2456-1.2475
• 1.2450 & 1.2465 option expiries for 10am ET NY cut, USD 921mn strikes
• US Sept inflation & retail sales data due 1230GMT. CPI f/c +0.6%
• BoC business outlook survey may impact CAD Monday

AUD/USD

• AUD is benefitting from higher metals prices: Dalian iron ore up 5% Friday
• 0.7849 = Ldn am high for AUD/USD. 0.7844 was Asia high
• Resistance levels include 0.7875 (last week’s high) & 0.79

NZD/USD

• NZD/USD ticked up to a fresh 8-day high of 0.7153 during European am
• 0.7153 = 101 pips above Monday’s 19-week low
• NZ political fog should finally lift next week: NZ First board meeting Monday

FX OPTIONS

• EUR/USD vols peak with spot but EUR calls remain bid on risk reversls
• 2wk vol propped by Oct ECB and 2mth captures Dec ECB and FOMC
• USD/JPY 1mth vol at 6 week lows, 1mth realised just 5.1 amid stagnant spot
• USD/JPY risk reversals hold firm downside bias in to election
• GBP/USD gamma bid amid recent spot moves/Brexit headlines
• NZD 1-2 week vols propped as markets await coalition results

COMMENT

U.S. retail sales may jolt range-bound USD/JPY
U.S. retail sales may jolt USD/JPY traders’ week long calm. USD/JPY has traded a tight 111.86-112.85 range this week, but given moves on retail sales release days, the range today may exceed that of the prior four days. USD/JPY vols have sunk, so the overnight ATM straddle for USD/JPY (indication of expectations for the day’s range) is just 52 pips. The last three retail sales releases have been much busier for USD/JPY traders. Sept 15 saw a 178 pip range, Aug 15 124 pips and July 14 122 pips. The average 141 pips suggest 111.00-113.50 are the extremes of a data reaction today. Large JPY shorts have been widely reported in advance of the event. The greater focus has been on the vulnerability of these bets to the loss of bullish momentum. The 200-DMA at 111.82 is key on a closing basis yet the resilience of support above the 200-DMA during the consolidation phase since late September depicts USD/JPY in bullish light.

CHART FOCUS

USD/ZAR slump gathers momentum, 13.00 beckons
USD/ZAR bears are gathering momentum and have the 61.8% Fibo at 13.1636 and the daily cloud at 13.1775/13.0294 in their sights. A break and close under 13.1636 (the 61.8% retracement of the September to October 12.73 to 13.865 rise) favors a full retracement to 12.73. The price has been falling since Monday’s rejection at the upper 30-day Bollinger while Wednesday’sbreak and close below the daily Tenkan line helped bolster the downside view. The 30-DMA at 13.3279 was the initial bear target and is very close on Friday. A break under the average could open the path for a deeper fall to the lower Bollinger at 12.7572 which is close to the aforementioned Sept 6 12.73 rally origin. Only a break back above the Tenkan line at 13.6138 would alter the bearish set up and open up 14.00 again

Futuro del peso mexicano 13-10

  • Today’s US data will likely determine if the dollar’s heavy tone this week is more corrective or if this year’s downtrend is resuming
  • China reported its September trade figures
  • Japan’s Ministry of Finance confirmed that foreign investors returned to Japanese equities
  • The MAS kept policy steady at its semiannual policy meeting, as widely expected

The dollar is mostly weaker against the majors ahead of key US data.  The Antipodeans are outperforming, while the euro and Nokkie are underperforming.  EM currencies are mixed.  KRW and ZAR are outperforming, while HUF and SGD are underperforming.  MSCI Asia Pacific was up 0.5%, with the Nikkei rising 1%.  MSCI EM is up 0.2%, with the Shanghai Composite rising 0.1%.  Euro Stoxx 600 is up 0.3% near midday, while S&P futures are pointing to a lower open.  The 10-year US yield is flat at 2.32%.  Commodity prices are mostly higher, with Brent oil up 2%, copper up 0.4%, and gold flat.

Futuro del peso mexicano 13-10

US T 30Y Bond 12-10

VERY MUCH AS EXPECTED – OUR FORMER COMMENTS BELOW.
DAY CHARTS FEELING UP PRESSURE DUE TO RECENT CYCLE LOW IN 10 YEAR FUTURES  (PLUS RESISTANCE IN 10YR + 30YR RATES).
LONGER VIEW STILL OVERALL BEARISH FOR TREASURIES.
RESULT: ON WITH A NICE TRADEABLE RANGE.
KEEP IN TOUCH WITH OUR DESK.

DECEMBER BONDS – 240MINUTE CHART
US T 30 y Bond 12-10

FX Market Update 12-10

Market Briefs

• EUR/USD -0.03%, USD/JPY -0.12%, GBP/USD -0.31%, EUR/GBP 0.26%
• DXY 0.05%, DAX -0.03%, FTSE 0.18%, Brent -0.9%, Gold 0.23%
• EZ Aug Industrial Production YY 3.8% vs 3.2%, f’cast 2.6%, r’vsd 3.65%
• UK small businesses not changing plans in face of Brexit – survey
• Banks filling London staffing gaps before Brexit – Hays
• GB Sept RICS Housing Survey 6 vs 4, f’cast 4
• DE Oct TR IPSOS PCSI 58.02 vs 57.13
• GB Oct TR IPSOS PCSI 49.20 vs 47.78
• U.S. House to vote on $36.5 billion disaster relief package
• Trump expected to sign order side-stepping Obamacare rules

Looking Ahead – Economic Data (GMT)

• 12:30 US Initial Jobless Claims (w/e Oct 7) (mkt 251k, prev 260k)
• 12:30 US Continued Claims (w/e Sept 30) (mkt 1.935 mn, prev 1.938 mn)
• 12:30 US PPI Final Demand (Sept) (mkt +0.4% m/m, +2.5% y/y; prev +0.2% m/m, +2.4% y/y)
• 12:30 US Core PPI Final Demand (Sept) (mkt +0.1% m/m, +2.0% y/y; prev +0.1% m/m, +2.0% y/y)
• 12:30 CA New Housing Price Index (Aug) (mkt 0.3%, prev 0.4%)
• 15:00 US EIA Weekly Petroleum Status Report
• 18:00 US (tentative) Treasury Budget (Sept) (CBO $6 bn, prev Sep $33.445 bn)

Looking Ahead – Events, Other Releases (GMT)

• 12:00 FRB St. Louis’s Bullard speaks to Reuters editors
• 14:30 Fed Governor Brainard participates in panel on monetary policy; Washington, DC
• 14:30 Fed Governor Powell speaks on emerging markets; Washington, DC
• 14:30 ECB President Draghi speaks at the Peterson Institute event on monetary policy; Washington, DC
• 15:45 FedTrade operation 30-year Fannie Mae and Freddie Mac (max $2.2 bn)

Currency Summaries

EUR/USD

• EUR/USD 1.1880 high matching a 50% retrace 1.2092-1.1669 decline
• Daily Kinsen line also 1.1880. Pair eases to 1.1852 ahead NA open
• More strong EZ data ignored for now. Aug Industrial output 1.4% vs 0.5% f/c
• EUR 1.4bln expiries 1.1870-1.1905 adding to resistance of cloud top 1.1917
• EUR 2bln expiries may attract if a market long EUR decides to pare risk
• U.S. PPI today to give some insight for the major U.S. CPI release Friday

USD/JPY

• USD/JPY net selling flows this week might haunt bears
• Stops above 113.00 might become vulnerable
• Expect increased volatility on break sub 200-DMA @111.84 or above 113.44
• Narrow 112.21-53 range as long gamma market continues to take its tol
• Huge Expiries. Thu: 112.00 (1.8B), 112.40-60 (2.9B). Fri: 112.50-60 (2.0B)
• Japanese importers remains circa 112, Japanese exporters ahead of 113
• Sept dom corp goods prices +0.2% m/m, +3.0% y/y, as eyed, highest in 9 yrs
• Sept bank loans Y516.81 trln, +3.0% y/y, Aug +3.2%, July +3.3%.
• PM Abe’s LDP on track for solid majority, maybe 2/3 – Nikkei poll
• Global banks are after Japan’s cash – Nikkei

EUR/CHF

• EUR/CHF rises to a new trend high at 1.1557, tracking EUR/USD north
• 1.1534-1.1558 range in Europe and remains bid into NY
• Not much resistance until the 1.1588 Sept 25 German vote collapse day high
• Then post-1.20 SNB floor break high at 1.1623
• USD/CHF firmer, plays 0.9713 to 0.9750, supported above 0.9707 21-DMA
• A close above the 10-DMA at 0.9749 is required for run at 0.9770+
• U.S CPI data Friday is the next key event risk

GBP/USD

• Cable met fresh headwind pre-1.3268 in early Ldn trade after similar in Asia
• 1.3268 is 38.2% of 1.3659 (Sept 20 high) to 1.3027 (last Friday’s low)
• 1.3222 = cable low since 1.3262 early Ldn high. 1.3265 was Asia high
• Large 1.3200 option expiry for 10am ET NY cut, GBP 503mn strike
• Profit-taking on longs helped deflate EUR/GBP from 0.8988 to 0.8950
• 0.8950 = European am low. 0.8988 was Wednesday’s high

USD/CAD

• USD/CAD lift from 1.2434 (early Ldn 1wk low) aided by profit-taking on shorts
• 1.2484 (Tuesday’s low) is now a resistance level, with 1.2500 beyond
• Size of 1.2500 option strike for 10am ET NY cut is now USD 836mn

AUD/USD

• AUD/USD extended north to a 1wk high of 0.7836 in early European trade
• Ascent influenced by copper price rise to 1mth high of USD 6,850/tonne
• 0.7810 (Wednesday’s high) is now a support point

NZD/USD

• NZD/USD ticked up to fresh one-week high of 0.7124 during European am
• Some short NZD positions have been squeezed en route to that high
• 0.7052 = recent 19-week low. NZ govt decision expected by end of next week

FX OPTIONS

• 7 billion USD/JPY option expiries between 112-113 today NY cut
• USD/JPY 1 month vol new 6wk lows. JPY calls bid on election tail risk
• EUR/USD vols and EUR calls up with spot. Risk reversals 8 year highs
• GBP vol and put setbacks limited, highlight ongoing downside spot fears
• AUD/USD 1mth vol new setback lows. NZD vols premium, coalition awaited

COMMENT

UK CPI data rise could seal deal for BoE Nov hike

Sterling may get a boost if next week’s UK inflation figures show annualized CPI accelerated to 3.0% or higher in September, from a five-year high of 2.9% in August. A CPI number of 3.0% or more could cement the consensus expectation of a 25bps BoE interest rate hike next month (Nov 2). A hawkish shift in BoE expectations on the back of last month’s hawkish hold was the prime reason GBP was the best performing G10 currency in September. A new month then ushered in pain for late-to-the-party GBP bulls, before the pound recovered this week. The UK inflation data will be published on Tuesday (Oct 17), with the UK earnings report due a day later. More immediately, BoE chief economist Haldane is a slated panellist at a Rethinking Macro Policy Conference in Washington at 1745 GMT. Back in June, sterling rallied on the back of a hawkish steer from former dove Haldane.

CHART FOCUS

Dollar bulls should brace for more bouts of weakness

Dollar bulls should brace themselves for deeper falls as USD index seems to have established a significant peak at last week’s 94.267 high. Worryingly for bulls, the index has dropped this week to break the 200-WMA at 92.933. A close below the 200-DMA on Friday could prompt significant falls in coming weeks back towards the 2017 91.011 low posted in September. Recall last week there was a spectacular failure above 94.034 — 23.6% retrace of the 103.82 to 91.011 2017 fall — resulting in a lot of dollar bulls getting trapped. Fourteen-week momentum remains negative, as has been the case since March, highlighting the underlying offered structure of the index. If there is a failure to sustain this break below the 200-WMA into next week, then this will give bulls room to regroup.

Futuro del peso mexicano 12-10

 

  • The market has come to accept a December rate hike- 87%, just as it had to be led by the hand to recognize the March hike
  • The enthusiasm for Spanish assets is somewhat diminished today
  • In addition to the euro’s streak, there is another notable streak underway:  Japanese stocks
  • Singapore August retail sales rose 3.5% y/y; MAS expected to remain on hold tomorrow
  • India reports September CPI and August IP; Peru central bank is expected to keep rates steady at 3.5%

Futuro del peso mexicano 12-10

 

 

FX Market Update 11-10

Market Briefs

• EUR/USD 0.06%, USD/JPY -0.2%, GBP/USD -0.11%, EUR/GBP 0.19%
• DXY -0.06%, DAX 0.1%, FTSE -0.04%, Brent 0.28%, Gold 0.2%
• UK preparing for no deal, but no spend on contingency arrangements yet -Hammond
• Early 2018 is crunch time for banks’ Brexit decisions – UK official
• Three quarters of Americans favor higher taxes for wealthy -Reuters/Ipsos poll
• Spain govt formally agreed to ask catalan govt if it had declared independence or not
• Japan Aug core machinery orders +3.4% m/m, +4.4% y/y, +1.1% and +0.8% eyed
• Japan government ups assessment of sector, picking-up, bodes well for CAPEX
• Oil rises on signs of tighter market, but 2018 looks more uncertain
• Gold prices hold steady ahead of Fed minutes

Looking Ahead – Economic Data (GMT)

• 07:00 MBA Weekly Mortgage Application Indices
• 10:00 JOLTS (Aug) (prev job openings level 6.170 mn (record high))
• 11:00 TR Ipsos PCSI (Oct) (prev 60.77)

Looking Ahead – Events, Other Releases (GMT)

• 11:15 FRB Chicago’s Evans discusses U.S. monetary policy in an era of low inflation; Zurich, Switzerland
• 15:45 FedTrade operation 30-year Ginnie Mae (max $1.25 bn)
• 17:10 New York Fed EVP Potter speaks on “American Exit Strategies”; New York, NY
• 18:00 FOMC Minutes (from September 19-20 meeting)
• 18:40 FRB San Francisco’s Williams speaks at community leaders event; San Francisco, CA
• 20:30 ECB Board Member Praet speaks in New York
• 01:10 FRB Atlanta’s Bostic speaks on balance sheet normalization; Hong Kong

Currency Summaries

EUR/USD

• EUR/USD 1.1796-1.1835 in Asia then higher to 1.1845 in Europe
• Influential sellers emerge & pair trades swiftly to 1.1802 before NA open
• Moves in bond markets & U.S. futures supported the early rise
• Continuing uncertainty in respect Catalonia is one factor weighing
• A top was likely given strength of technical resistance 1.1830-60
• Results of U.S. CPI Friday needed to determine bigger FX/rates moves

USD/JPY

• USD/JPY has relapsed from 112.58 to reach 112.19 on Wednesday
• Asia was a heavy net seller of USD/JPY once it peaked @112.58
• Offshore investor demand for Nikkei, currency hedges propped USD/JPY
• Conversely, London has been net a buyer of USD/JPY but it remains offered
• Japanese importers looking to buy sub-111, exporters sales from pre-113.00

USD/CHF

• USD/CHF lower on the day in line wth broader softer dollar
• 0.9740-0.9767 rise then lower to 0.9742 in Europe
• Back below 10-DMA 0.9747, close under opens the path for further weakness
• EUR/CHF erases gains and drops 1.1509 from early European 1.1539 high
• Above the 21-DMA at 1.1484 stays bullish but below opens up 1.14 again
• Touted official bid by 1.14 in EUR/CHF. Spike to 1.1389 Oct 2 short lived

GBP/USD

• Cable fell from 1.3211 to a low of 1.3176 during the European am
• 1.3176 was also pullback low from Tuesday’s Ldn am high of 1.3203
• EUR/GBP rose to 0.8968 European am high as Catalan tensions eased
• 0.8968 = highest level since Monday. Offers expected ahead of 0.90
• First PMQs since May’s Tory conference speech disaster 1100-1130GMT
• On Tues, May refused to say how she’d vote in another Brexit referendum

USD/CAD

• USD/CAD rose to an intra-day high of 1.2530 during the European am
• 1.2497-1.2521 was Asia range. 1.2555/58 & 1.26 are resistance levels
• FOMC minutes due 1800GMT. Fed rate hike expected Dec 13

AUD/USD

• Modest 20 pip range for AUD/USD during European am, 0.7775-0.7795
• Mooted bids at 0.7750 could prop pair if range base broken
• 0.7750 was Tuesday’s low. 0.7810 was six-day high in Asia
• China steel futures fell 2.5% to 2mth low in Asia, closed down 2.2%

NZD/USD

• NZ political uncertainty continues to weigh on the NZD
• NZ First’s coalition choice not expected before Friday at the earliest
• NZD/USD eased to an intra-day low of 0.7063 during the European am
• AUD/NZD rose to threaten 1.1022 during the European am
• 1.1022 = Tuesday’s high. 1.1022 = 61.8% of 1.1142-1.0827

FX OPTIONS

• Firmer EUR/USD sees pick up in vols and EUR call demand
• USD/JPY short dated risk skewed to downside, especially over elections
• Still 15bln USD/JPY expiries in 112-113 zone remaining this week to contain
• GBP vol/put setbacks limited with renewed GBP weakness expected
• NZD gamma bid in to coalition announcement. Strong NZD vol premium to AUD

COMMENT

Italy politics may ruffle euro’s post-Catalonia calm

Italian politics could soon be elbowing its way into the spotlight and impact the euro just as the political temperature in Catalonia cools. The Italian lower house of parliament is due to hold two confidence votes on Wednesday to try to force through an electoral law that is likely to penalise the 5-Star Movement (M5S), ahead of the national election due by May 2018. M5S is among Italian opposition parties keen on a parallel currency to flank the euro. Recently published data showed Italy’s Target 2 liabilities rose by 18.3 billion euros to a new record high 432.5bln in September. The liabilities are not an issue as long as Italy remains in the euro–an issue M5S has long been vocal about though last month it said a referendum on Italy’s membership of the euro is its “last resort”. The Nov 5 regional election in Sicily–a bellwether of Italian politics for decades, could provide clues ahead of the national election.

CHART FOCUS

USD/ZAR bears gain momentum after Tenkan break

USD/ZAR could see a deeper retreat to the 30-DMA at 13.3003 following Monday’s rejection from the upper 30-day Bollinger. Similar action was seen around the Bollinger on Sept 28, Oct 3 and 6. Pullbacks from these highs were previously held by the daily Tenkan line up until now. Downside pressures Wednesday has seen the price probe through the Tenkan line at 13.6475 which opens the path for a further slide. Monday’s Doji reversal was confirmed by a lower low and close Tuesday which fits with the view of a return to lower levels. Weekly charts show potential for the first bearish close since breaking into the cloud mid-September. The weekly cloud base is at 13.3138 and a break risks a drop to the key 200-WMA support level at 12.8486. Those short USD/ZAR are hopeful of a close under the Tenkan Wednesday to confirm the bear view, while a close back above suggests the bull run is not done yet