Category Archives: Market News

FX Market Update 12-12

Market Briefs

• EUR/USD 0.07%, USD/JPY -0.11%, GBP/USD -0.04%, EUR/GBP 0.11%
• DXY -0.04%, DAX -0.05%, FTSE 0.24%, Brent 1.14%, Gold 0.17%
• Europe’s Unibail-Rodamco bids USD16 bln for Westfield in global shift
• DE ZEW Economic Sentiment Dec, 17.4, 18.0 f’cast, 18.7 prev
• DE ZEW Current Conditions Dec, 89.3, 88.5 f’cast, 88.8 prev
• GB Core CPI YY Nov, 2.7%, 2.7% f’cast, 2.7% prev
• GB CPI YY Nov, 3.1%, 3.0% f’cast, 3.0% prev
• GB RPI YY Nov, 3.9%, 4.0% f’cast, 4.0% prev
• GB RPIX YY Nov, 4.0%, 4.2% prev
• GB PPI Input Prices YY NSA Nov, 7.3%, 6.8% f’cast, 4.6% prev
• GB PPI Output Prices YY NSA Nov, 3.0%, 3.0% f’cast, 2.8% prev
• GB Core Output YY NSA Nov, 2.2%, 2.2% f’cast, 2.15 prev
• FR Non-Farm Payrolls Rev Q3, 0.20%, 0.20% prev
• German negotiated wages rise most since 2014
• Oil tops $65, first time since 2015, on UK pipeline outage
• Gold inches up from near 5-mth low ahead of Fed meeting

Looking Ahead – Economic Data (GMT)

• 12:30 PPI-Final Demand (Nov) (mkt +0.4% m/m; prev +0.4% m/m, +2.8% y/y)
• 12:30 PPI-Final Demand ex-Food and Energy (Nov) (mkt +0.3% m/m; prev +0.4% m/m, +2.4% y/y)
• 12:30 PPI-Final Demand ex-Food, Energy and Trade Services (Nov) (prev +0.2% m/m, +2.3% y/y)
• 12:55 Redbook Same-Store Sales Index (weekly) (prev +3.0% y/y)
• 18:00 Treasury Monthly Budget Statement (Nov) (prev Nov -$136.669 bn)

Looking Ahead – Events, Other Releases (GMT)

• 13:45 FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.510 bn)
• 14:00 NY Fed co-host a conference – New York
• 17:00 FOMC begins two-day meeting
• 19:00 ECB’s Draghi speaks at a conference – Frankfurt
• N/A ECB Governing council meeting – Frankfurt
• N/A EU General Affairs Council meeting – Brussels

Currency Summaries

EUR/USD

• EUR/USD little moved in Europe as traders sit tight for tomorrow’s FOMC
• German ZEW survey disappointed falling to 17.4 in December from 18.7
• Current conditions improved but EUR surprisingly immune to soft expectations
• U.S. rate expectations and bond yields pumped up ahead FOMC tomorrow
• Maximum 1.1700-20-1.1800-20 range eyed for EUR/USD ahead the event

USD/JPY

• USD/JPY was bought in Asia for the first couple of hours, been neutral since
• Tuesday has seen a modest 113.37-58 range so far. 113.25-69 this week
• 5 year UST-JGB spread widening & looks poised to widen further
• Market in holding pattern ahead of Federal Reserve later this week
• USD/JPY 30/60-day correlations with 5s, 10s UST-JGB spreads are significant
• Tech outlook remains bullish, poised for gains to 113.81 Fibo
• 113.81 — 76.4% of the 114.73 to 110.85 fall

EUR/CHF

• USD/CHF steps lower and makes progress deeper inside daily cloud
• Friday bearish candle signal confirmed by Monday close
• Further confirmation Tuesday and drop to 0.9891: 30DMA 0.9906
• NYC attack add to CHF’s risk-off bid and theme continues into Tues
• Cautious longs taking some profits before Wed’s US CPI and FOMC meet
• 50% of Dec rebound & Tenkan @ 0.9857, Dec 7 low at 0.9856 key props
• EUR/CHF attempts to crack 30DMA support at 1.1650 but finds 1.1653 bids
• Playing long CHF through spoy looks to have more mileage near-term
• Chart: forex http://tmsnrt.rs/2jzonIL

EUR/GBP

• Cable fell to 1.3311 from 1.3380 high after higher than expected UK CPI
• 1.3311 = 2wk low. UK Nov CPI 3.1% vs 3.0% f/c, highest since March 2012
• Carney now has to write a letter of explanation to UK Chancellor Hammond
• BoE MPA & MPC minutes Thursday (BoE raised rates last month)
• EUR/GBP rose to threaten 0.8849 after falling to 0.8807 on above f/c UK CPI
• 0.8849 was Dec 7 high (before Brexit breakthrough). 0.8807 = near 200DMA

USD/CAD

• USD/CAD has eased to a low of 1.2821 ahead of the North American open
• Bids expected near 1.2800: 1.2805 was last Friday’s low
• Higher oil prices are source of support for CAD: WTI above 58 bucks/barrel
• Poloz slated to speak at Canadian Club Toronto later this week (Thursday)

AUD/USD

• AUD/USD shorts squeezed during European am rise to 0.7577 (6-day high)
• Ascent influenced by Unibail-Rodamco/Westfield M&A news
• French company has agreed to buy Westfield for USD 15.7bln
• It would be the biggest takeover of an Australian company on record
• 0.7519 = Asia low. 0.7501 = recent 6mth low (0.7500 = option barrier level)

NZD/USD

• NZD/USD extended north to a 1mth high of 0.6953 during the European am
• Ascent influenced by AUD/USD gains on huge M&A deal news (Westfield)
• AUD/NZD simultaneously rose to threaten 1.0900 during the European am
• 1.0900 was Asia high–before drop to 1.0859 (10-week low)

FX OPTIONS

• Limited spot ranges pre CB meets and impending X-mas lull pressure G10 vols
• Many of these curves are eyeing, or already at 3-year lows
• Event premium for FED, ECB and MPC meetings on the tame side
• Cable vols still have additional event premium over the EU summit
• 1.2Bln 113.50 USD/JPY expiry Wed. 2.3bln each EUR/USD Fri 1.17 & 1.18

COMMENT

Sterling bulls have a couple of straws to cling to

Sterling bulls are licking their wounds after recent selling of the pound on the Brexit breakthrough fact, although they do have a couple of UK politics-related straws to cling to. A YouGov poll for The Times suggests UK PM May’s Conservatives are more popular than the opposition Labour Party for the first time since June’s general election. ITV political editor Robert Peston, meanwhile, says May’s deputy Damian Green will be told on Wednesday that he can keep his job nL3N1OB4V9. If the steer is accurate, it means May can avoid a tricky cabinet reshuffle–which might have had a negative knock-on impact on the PM. If May exits 10 Downing Street before Britain’s scheduled EU exit in March 2019 it could be very destabilising for the pound–so any news which is perceived to lessen that risk should be GBP-supportive. Ladbrokes currently quotes 5/4 for May to be replaced as UK PM in 2018, a fraction longer odds than the 11/10 odds it quoted last Thursday (before the Brexit breakthrough).

CHART FOCUS

GBP/USD bulls might find platform off major 50% Fibo

GBP/USD relapse from December’s 1.3550 high might be coming to an end as bulls will likely regain their footing ahead of 1.3295 — 50% retrace of the 1.3040 to 1.3550 rise. Scope is for an eventual recovery back through the tenkan line, currently at 1.3430, if a daily close is registered above it will likely propel spot back into the 1.3500s. The tenkan and kijun lines are positive aligned, reinforcing the overall upside potential. There is interim support at the kijun line which is at 1.3306. Only a break and daily close below the aforementioned 1.3295 Fibonacci level will shift the overall bias back to the downside. Caution is advised in coming sessions as volatility is likely to persist, catching out both bulls and bears

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FX Market Update 11-12

Market Briefs

• EUR/USD 0.27%, USD/JPY -0.08%, GBP/USD -0.09%, EUR/GBP 0.33%
• DXY -0.14%, DAX 0.17%, FTSE 0.66%, Brent 0.17%, Gold 0.26%
• FR Retail Sales SA MM Oct, -1.00%, 0.90% prev
• FR Retail Sales NSA YY Oct, -2.10%, 3.40% prev
• Germany-US yield gap near 8-month high as central bank meetings loom
• Powell faces early test of policy view as tax cuts near approval
• Britain’s May hails new optimism in Brexit talks after deal
• Oil prices slip under shadow of US drilling
• Gold edges up; looming US rate hike weighs on momentum

Looking Ahead – Economic Data (GMT)

• 14:00 JOLTS (Oct) (prev job openings level 6.093 mn)
• 14:00 Employment Trends Index (Nov) (prev 135.6)

Looking Ahead – Events, Other Releases (GMT)

• 15:45 FedTrade operation 30-year Ginnie Mae (max $1.405 bn)

Currency Summaries

EUR/USD

• EUR/USD gets a small boost to 1.1801 in Europe after opening 1.1780
• Asia range 1.1761-1.1791. Europe 1.1775-1.1801. Bullish signs in derivatives
• Euro cross ccy basis swaps reverse lower. 5 yr 5 yr inflation swaps higher
• EUR/USD capped close site EUR 1bln vanilla option expiries @ 1.1800
• One-mth sinks below 6. Nov low 5.3 may encourage eur shorts to fund carry
• Closing break from daily cloud needed to excite. Cloud 1.1716-1.1833

USD/JPY

• Market heavy and is trading near the base of Mon’s 113.33-69 narrow range
• Struggling to make headway above cloud top, now @113.52, after Fri’s break
• If there is break above 113.69, might be limited to 113.81 Fibo
• 113.81 — 76.4% retrace of the 114.73-110.85 fall
• Could see dips to 113.00-20 region, USD 1.5B worth of NY cut expiries
• EBS sales seen last week has extended into Mon’s trading

CHF

• Spot fail (0.9978) ahead of parity and 61.8% of 1.0343-0.9421 drop @ 0.9991
• Profit taking a theme given decent run up from 0.9736 Dec 1 low
• EUR/CHF still pretty much sideways abv day cloud and short to med-term avgs
• Loss of upside momentum ahead of 1.20 former SNB floor
• USD/CHF hanging man/shooing star candle Frid: Set up bearish Monday start

EUR/GBP

• Cable up to 1.3432 then down to 1.3342 in early European trade
• 1.3432 was also Friday’s post-US jobs data high
• More EUR/GBP shorts squeezed during European am climb to 0.8840
• 0.8774 = early Europe low. 0.8806 = Friday’s high after prior short-covering
• IMM gross GBP positions upped by a third in week to Dec 5
• Gross GBP longs & shorts both upped by more than 20k contracts

USD/CAD

• USD/CAD has traded 32 pip range thus far Monday: 1.2832-1.2864
• 1.2880 (Friday’s high) & 1.29 are resistance levels beyond 1.2864
• Large 1.2900 option expiry for 10am ET NY cut, USD 580mn strike

AUD/USD

• 0.7536 = high water-mark for AUD/USD since 0.7500 threatened in Asia
• 0.7500 is an option barrier level (option-related demand ahead)
• AUD/NZD down to 1.0865 (10wk low) after Orr named new RBNZ chief
• 1.0985 was Asia high, before Orr news boosted NZD

NZD/USD

• NZD/USD extended north to test 0.6930 (Nov 29 high) early Europe
• 0.6930 tested as continent digested Orr to be new RBNZ Governor news
• 0.6836 was Asia low, before NZD rose on Orr news
• 0.6945 (Nov 28), 0.6980 & 0.70 are additional resistance levels

FX OPTIONS

• Limited risk premiums priced over this weeks plethora of CB events
• Spot market mostly rangebound, with little expectations of a break-out
• Leaves vols heavy as markets wind down in to X-mas holidays
• EUR/USD and USD/JPY 1-month expiry vols just 0.5 above multi year lows

COMMENT

Bitcoin – Low volume/strong gains for bitcoin futures

CBOE bitcoin futures trading helps to open speculation to a wider range of players while also proving the ability to lower the frictions in shorting the digital currency. So far the shorts have stayed away. We already have a very volatile and illiquid underlying market and this is now joined by a futures contract that is equally volatile and illiquid. On the latter the front month bitcoin future saw trading volume of 2,700 contracts with Feb (12 contracts) and Mar (47 contracts) having limited volumes.

In terms of price action, the front month contract opened at $15,400 and after a brief dip went all the way to $18,140. While we talk of bitcoin it is important to realise that in addition to the daily volatility, its price on different exchanges and the futures contracts from CBOE and CME are cash settled and cannot settle bitcoin. The availability of futures contracts thus allows increased speculation as opposed to the use of bitcoin for transactions.

These are early days and speculative interest remains strong with more and more mom/pop type of investors still looking to get a slice of the action. The CME will make its offering next week on Dec 17 and there is much focus on how long before a bitcoin ETF is introduced. The spread between the Jan and the Feb/Mar contracts is around $1,500 with the premium of the Jan contract over spot at $1,200. Volumes might be low initially but most will want to see how the futures trade over the first few days before dipping their toes into the waters.

CHART FOCUS

EUR/USD bulls tighten grip and aim for cloud top

EUR/USD scope is for eventual gains for another test of November’s 1.1961 peak, which is just below 1.1965 — 76.4% retrace of the 1.2092 to 1.1553 (September to November) fall. Bulls are in control after a dragonfly doji formed on Friday’s candlestick line, its long tail signaling a rejection of the downside. Tenkan and kijun lines are positively aligned, further reinforcing the upside bias. There is interim supply at the daily cloud top now at 1.1833, which might disrupt gains, but this is likely to be temporary. Support has swelled ahead of 1.1709 — 61.8% retrace of the 1.1553 to 1.1961 November gain. The market failed to register a daily close below 1.1757 — 50% of the same 1.1553 to 1.1961 rise — despite the break on Friday. Only a daily close below the 1.1757 Fibonacci level will weaken the scope for a break of the cloud top

FX Market Update 8-12

Market Briefs

• EUR/USD -0.25%, USD/JPY 0.41%, GBP/USD -0.08%, EUR/GBP -0.19%
• DXY 0.22%, DAX 1.33%, FTSE 0.25%, Brent 0.61%, Gold -0.03%
• DE Exports MM SA Oct, -0.40%, 1.00% f’cast, -0.40% prev
• DE Imports MM SA Oct, 1.8%, 1.1% f’cast, -1.0% prev
• DE Trade Balance, EUR, SA Oct, 19.9B, 21.8B f’cast, 21.8B prev
• FR Industrial Output MM Oct, 1.9%, -0.1% f’cast, 0.6% prev
• FR Budget Balance Oct, -77.20B, -76.30B prev
• GB Industrial Output YY Oct, 3.6%, 3.5% f’cast, 2.5% prev
• GB Manufacturing Output MM Oct, 0.1%, 0.1% f’cast, 0.7% prev
• GB Manufacturing Output YY Oct, 3.9%, 3.9% f’cast, 2.7% prev
• GB Construction O/P Vol YY Oct, -0.2%, 1.9% f’cast, 1.1% prev
• GB Goods Trade Balance GBP Oct, -10.78B, -11.45B f’cast, -11.25B prev
• GB Goods Trade Bal, Non-EU Oct, -2.38B, -3.30B f’cast, -2.98B prev
• EU’s Juncker says brexit talks to enter second phase
• EU’s Juncker says sure EU27 will open next phase of talks
• Japan’s 3Q GDP blows past initial estimates as business investment surges
• China exports growth hits 8-mth high, imports defy pollution curbs
• Decade in the making: post-crisis banking rules finally signed
• Oil stable as strong Chinese demand counters rising dollar
• Gold rises on bargain hunting after hitting over 4-mth low

Looking Ahead – Economic Data (GMT)

• 12:30 US Nonfarm Payrolls (Nov) (mkt +200k, prev +261k)
• 12:30 US Private Nonfarm Payrolls (Nov) (mkt +190k, prev +252k)
• 12:30 US Manufacturing Payrolls (Nov) (mkt +17k, prev +24k)
• 12:30 US Unemployment Rate (Nov) (mkt 4.1%, prev 4.1%)
• 12:30 US Average Hourly Earnings (Nov) (mkt +0.3% m/m, prev 0.0% m/m)
• 12:30 US Workweek Hours (Nov) (mkt 34.4, prev 34.4)
• 13:15 CA House Starts, Annualized (Nov) (215.0k f’cast, 222.8k prev)
• 13:30 CA Capacity Utilization (Q3) (85.0% f’cast, 85.0% prev)
• 14:00 US U of Michigan Consumer Sentiment Index (prelim Dec) (mkt 99.0, prev 97.8)
• 14:00 US U of Michigan Current Conditions Index (prelim Dec) (mkt 115.5, prev 113.6)
• 14:00 US U of Michigan Expectations Index (prelim Dec) (mkt 90.6, prev 87.6)
• 14:00 US Wholesale Inventories (Oct) (mkt -0.4% m/m, prev +0.3% m/m)
• 14:00 US Wholesale Sales (Oct) (mkt +0.8% m/m, prev +1.3% m/m)
• 15:15 US New York Fed Staff Nowcast for Real GDP growth (Q4) (prev 3.93% q/q AR)
• 17:00 US Baker-Hughes Weekly Oil Rig Count (prev 749, +2 w/w, +272 y/y)
• N/A US Atlanta Fed GDPNow (Q4) (prev +3.2% q/q AR)

Looking Ahead – Events, Other Releases (GMT)

• No Fed or Treasury officials scheduled to speak

Currency Summaries

EUR/USD

• Heavy selling of EUR/GBP after EU/UK deal influencing EUR/USD today
• Sellers also encouraged by rates. UST/Bund 10 yr spread widest since mid-Apr
• Huge number option expiries higher. EUR 5.3bln 1.1800-50. EUR 850mln 1.1750
• U.S. jobs data centre stage but average earnings may prove more influential
• Impact earnings data enhanced by weak labour costs data this week
• Support 1.1700-20. Resistance 1.1800-20. Close outside targets 1.1550/1.1950

USD/JPY

• Risk rebound has seen USD/JPY remain buoyant, up from 113.07 to 113.59
• US Congress debt limit extension to Dec 22 helped with risk
• Spot has broken through the daily cloud top at 113.38
• Bulls are slowing chewing their way through offers above 113.50
• Scope grows for gains to the 113.81 Fibo — 76.4% of 114.73-110.85 fall

EUR/CHF

• USD/CHF continues to gain, above 76.4% Nov-Dec drop at 0.9967 to 0.9971
• Highest since Nov 14. Nov 13 0.9987 peak is the resistance just above
• Pulling further away fm the daily cloud, fuels expectations of a parity test
• 76.4% break targets above parity and a full retrace to the Nov 1 1.0038 peak
• Nov 1 1.0038 practically a dble top with Nov 27 1.0039 high = strong resist
• Solid NFP/AHE reports Fri would also help put 1.00+ within reach again
• EUR/CHF holds close to it’s 1.1737 post-SNB floor removal peak fm Dec 1
• 1.1719 to 1.1690 Friday in Europe but bid returns ahead of NY

EUR/GBP

• EUR/GBP down to six-month low of 0.8690 on Brexit breakthrough
• Pound up to 18-month highs vs JPY & CHF. Cable up to 1.3521
• 1.3521 = three-day high (1.3320 was Thursday’s low)
• Stops tipped above 1.3550 (recent two-month high, Dec 1)
• 0.8734-47 is now a EUR/GBP resistance window
• Window encompasses July, Sept & Nov lows

USD/CAD

• USD/CAD revisited 1.2868 during the European am after rising from 1.2849
• 1.2868 was Thursday’s high. Offers expected near 1.29 if ascent extends
• USD/CAD was trading just under 1.29 into strong Canada jobs data Dec 1
• Pair was trading sub-1.27 into BoC’s dovish hold Wednesday

AUD/USD

• 0.7518 = AUD/USD high since fresh six-month low of 0.7501 in Asia
• Bids are tipped just under 0.7500 (mooted option barrier level)
• 0.7506 was Thursday’s low, after Dalian iron ore fell 7.5%
• Dalian iron ore closed down 1.2% Friday having been -4.4% at one stage

NZD/USD

• NZD/USD topped out a pip shy of 0.6851 after firming from 0.6823
• 0.6851 was rally high from Thursday’s European session low of 0.6829
• 0.6823 = 1wk low in Asia. 0.6817 was Dec 1 low. 0.6781 = Nov low

FX OPTIONS

• GBP vols hammered as risk premiums pared on Brexit deal, 1mth vol off over 1.0
• EUR/USD vols unfazed by weaker spot, but 3mth puts bid over Italy election
• USD/JPY still well contained so no rush for vols or topside cover
• AUD/USD vols supported as 0.7500 barrier tested
• Short dated vols underpinned over NFP and CB risk, but premiums rather tame

COMMENT

Watching Schatz as 3m EUR X-ccy basis widens further

The 3m EUR cross currency basis swap (x-ccy) has moved further into negative territory, reflecting dollar shortage/demand ahead of year-end as well as constraints on arbitrage as a result of balance sheet capacity. At -76bps, the EUR x-ccy basis has moved sharply from -54 last week, but more importantly it is acting like it is already year-end. While there was a pre-year end move last year, the spike did not happen until we had got closer to the last week of the year. The pressures this time round seem more intense and suggest a likelihood that lower liquidity in the short dated forwards will spill over into USD demand in the spot market.

Something that will be watched is whether German bunds will experience similar sort of year-end related scarcity issues that saw spreads widen and sharply negative repo rates as last year. There is no early indication of such scarcity, but this will continue to be watched ahead of year-end. However, over the course of the last 2-weeks the Schatz yield has been moving sharply toward the bottom of its recent trading range. A break of yield support at -0.766% on the Schatz could provide early signs that scarcity is becoming an issue.
SCHATX8122017 :

CHART FOCUS

USD/CHF bulls face little resistance as parity eyed

Parity is within reach for USD/CHF bulls as the pair continues to gain to new short term daily highs. On Friday spot is seen testing 0.9970, just above the last Fibo of the November to December fall at 0.9967. A sustained break above the 76.4% Fibo level puts the 1.0038 November 1 peak in sight. The 1.0038 high is practically a double top with the October 27 1.0039 peak and reinforces resistance at that level. Friday’s new top is the highest USD/CHF has traded since November 14 when 0.9987 was the daily high. The rebound from 0.9736 on December 1 has cleared the daily cloud and the pull further away from its top at 0.9897 is fuelling expectations of further gains. The upper 30-Day Bollinger at 1.0053 is among bullish objectives following Thursday’s break and close above the 30-DMA at 0.9910. The average lies close to the aforementioned daily cloud top and only a break back below those supports would deter the bulls

FX Market Update 6-12

Market Briefs

• EUR/USD 0.02%, USD/JPY -0.38%, GBP/USD -0.47%, EUR/GBP 0.48%
• DXY -0.06%, DAX -1.02%, FTSE -0.14%, Brent -0.65%, Gold 0.12%
• DE Industrial Orders MM Oct, 0.5%, -0.3% f’cast, 1.0% prev
• Swiss CPI rises 0.8% y/y in Nov vs 0.9% f/c
• No Brexit deal this week, Sun political editor cites DUP source as saying
• DUP declines to comment on whether Brexit border deal possible by end of week
• Britain’s May working towards EU summit, progress made in talks – spokesman
• ECB should plan for end of bond buys: Mersch
• Britain has not formally assessed impact of Brexit on economy – Brexit minister
• BOJ’s Masai advocates staying with ‘powerful easing’, warns on side-effects
• China Nov data to show economy facing pressure from debt, pollution crackdowns
• Israel’s shekel dips vs dollar on fears over US Jerusalem decision
• Oil falls after rise in US fuel stocks; doubt grows over global growth
• Gold recovers from 2-month low as dollar weakens

Looking Ahead – Economic Data (GMT)

• 12:15 ADP National Employment Report (mkt +185k, prev +235k)
• 12:30 Productivity (revised Q3) (mkt +3.3% q/q AR, prev +3.0% q/q AR)
• 12:30 Unit Labor Costs (revised Q3) (mkt +0.3% q/q AR, prev +0.5% q/q AR)
• 14:30 EIA Weekly Petroleum Status Report
• 20:00 Treasury STRIPS

Looking Ahead – Events, Other Releases (GMT)

• 13:45 FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.515 bn)
• 15:45 FedTrade operation 15-year Fannie Mae / Freddie Mac (max $565 mn)
• 15:00 Bank of Canada key policy rate announcement – Ottawa
• N/A ECB Governing council meeting – Frankfurt
• N/A ECB’s Juncker speaks on ESM fund bailout – Brussels

Currency Summaries

EUR/USD

• EUR/USD becalmed. Asia 1.1817/48, Europe 1.1812-43 after 1.1801-67 in NA
• Lower bund yield, wider spreads to UST making little or no impact
• Rates weighing on those long EUR, but bad day for stocks likely aids EUR
• CB activity also working to underpin EUR. Russia latest to up intervention
• Rebalancing of USD buying across EM in major FX pairs will prop EUR
• ADP data @ 13.15GMT. EUR 1.7bln exp 1.1800-25 today

USD/JPY

• Spot collapsed from 112.62 to hit 111.99 ahead of latest consolidation
• Risk aversion, BoJ commentary & positioning saw bouts of selling in Asia
• BoJ Takako Masai: Japanese inflation skewed to downside
• USD/JPY bears zero in on Fibonacci levels under 112
• USD/JPY longs at risk but mitigated by EBS sales since Nov 28
• Risk off sentiment shows up in Nikkei index which closed down almost 2%

EUR/CHF

• Friday’s 1.1737-11.1601 range continues to contain EUR/CHF trade
• Cross remains supported ahead of the rising daily cloud, 1.1529/1.1594
• While above the cloud the slow EUR/CHF rise is likely to persist
• Plays 1.1660-1.1693 in Europe. 1.1702 was Tuesday peak
• USD/CHF has gained through the cloud since Friday’s 100-DMA rebound
• Cloud top at 0.9877 while Wed’s high is 0.9888 in Europe. 0.9856 the low
• Bull focus remains on 61.8% & Nov 9 low at 0.9922/23 ahead of NFP Fri

EUR/GBP

• Cable fell to 1.3362 (1wk low) during European am amid Brexit uncertainty
• DUP leader Foster says will not be rushed on Brexit border text
• Clock is ticking towards “deadline of deadlines” for Brexit divorce offer
• EUR/GBP up to 0.8853 intra-day high during European am
• 0.8868 was Tuesday’s six-day high, before drop to 0.8782
• Telegraph-‘Johnson & Gove lead cabinet revolt’ re: soft Brexit fears

USD/CAD

• USD/CAD fell to 1.2657 during the European am. 1.2707 was Asia high
• Bids expected near 1.2644 (55DMA) & 1.2624 (Tuesday’s six-week low)
• BoC is expected to keep its key interest rate at 1.0% at 1500GMT
• CAD could gain if accompanying BoC statement relatively hawkish

AUD/USD

• AUD/USD held above 0.7572 & below 0.7600 through the European am
• 0.7572 was Asia low after Australian Q3 GDP data miss
• Bids expected near 0.7550 (0.7551 was last Friday’s low)

NZD/USD

• NZD/USD extended north to a 1wk high of 0.6916 during European am
• 0.6870 was Asia low. 0.6908 was Tuesday’s high
• AUD/NZD extended south to 1.0966 during the European am
• 1.1090 was Asia high, before Australian Q3 GDP data miss

FX OPTIONS

• GBP options remain sought amid Brexit uncertainties and spot volatility
• 2-week vol most sought over FED, MPC and EU summit, 10.25 or 214 pips
• EUR/USD stagnation in 1.18-1.19 range weighs on vols
• 3-month EUR vols and puts bid since Monday – likely date of Italy elections
• USD/JPY flow still pre FED expiry strikes between 111-113
• 2-week ZAR 28.0/4.8% over ANC election. O/n CAD 16.0/84 pips over BoC

COMMENT

Fed – Loose financial conditions unlikely to reverse

Yesterday BofA announced plans to buyback an additional $5bn of shares by June 2018. Also yesterday Mastercard approved a new share repurchase program of up to $4bn as well as raising its dividend. The twin themes of share buybacks and increased dividend payments are seen as a boon for financials and tech stocks, especially on the back of tax reforms. However, this does not explain the recent divergence in the performance of the tech sector compared to financial stocks. This is a divergence that has played out in an outperformance of S&P500 vs Nasdaq, as well as increased inflows into financial ETFs over tech ETFs. However, this rotation into financials from tech should be seen as temporary as tech companies dominate the league when it comes to cash held abroad (APPL and MSFT being first and second place).

Remember, however, that when it comes to financials returning cash to investors, its not about the tax code but also the Fed’s decision earlier in the year. The passage of the annual stress tests saw the Fed allow banks to payback 100% of their projected net income over the next four quarters, compared with 65% after last year’s results. This is the first time the figure is 100% since the financial crisis.

The loosening of financial conditions looks unlikely to reverse quickly as equity markets move higher and bond bears find little mileage and USD remains range bound. We think this will allow the Fed, despite discomfort over subdued wages/inflation, to continue to normalize policy by hiking interest rates every quarter until they reach 3.25/3.50% (see “Fed – No reason to pause, risks still asymmetric”; Dec 4 nL8N1O41NX). The risk remains tilted toward the Fed accelerating normalization via its balance sheet, but this is a more likely scenario for 2019. US FCI 01122017

CHART FOCUS

EUR/GBP setup bearish but warning signs emerge

EUR/GBP weekly charts retain a bearish bias and longer term short players can continue to target the 61.8% Fibo of the April to September 0.8315 to 0.9307 rise at 0.8694. Attempts since September to break lower have based in the mid to lower 0.8700s but the weekly cloud twist circa 0.8550 this week could help fuel a deeper move south. Closer to market EUR/GBP is caught between two MAs. The lack of a sustained break/close under the 200-DMA, at 0.8801 on Wednesday, is limiting further weakness while the falling 10-DMA at 0.8857 is capping the upside. There has been no significant move under the 200-DMA since May and short players can consider covering another rebound from there for profit. A break above the 10-DMA would hint at a more substantial rebound but bears should not be too concerned until a sustained break and close inside the daily cloud, which spans 0.8881/0.9020 Wednesday, occurs

FX Market Update 5-12

Market Briefs

• EUR/USD -0.01%, USD/JPY 0.04%, GBP/USD -0.49%, EUR/GBP 0.48%
• DXY -0.06%, DAX -0.68%, FTSE 0.01%, Brent -0.24%, Gold 0.01%
• EZ Markit Comp Final PMI Nov, 57.5, 57.5 f’cast, 57.5 prev
• EZ Markit Svcs Final PMI Nov, 56.2, 56.2 f’cast, 56.2 prev
• EZ Retail Sales YY Oct, 0.4%, 1.5% f’cast, 3.7% prev
• DE Markit Comp Final PMI Nov, 57.3, 57.6 f’cast, 57.6 prev
• DE Markit Svcs PMI Nov, 54.3, 54.9 f’cast, 54.9 prev
• FR Markit Comp PMI Nov, 60.3, 60.1 f’cast, 60.1 prev
• FR Markit Svcs PMI Nov, 60.4, 60.2 f’cast, 60.2 prev
• GB Markit/CIPS Svcs PMI Nov, 53.8, 55.0 f’cast, 55.6 prev
• IT Markit/ADACI Svcs PMI Nov, 54.7, 53.2 f’cast, 52.1 prev
• EU to decide on tax haven blacklist, assess US tax reform
• ECB QE data offers further incentive to snap-up Italian bonds
• Oil steadies above $62, expected fall in US inventory supports
• Gold steadies above $1,275/oz as dollar stabilises

Looking Ahead – Economic Data (GMT)

• 12:30 US International Trade (Oct) (mkt -$47.5 bn, prev -$43.5 bn)
• 12:55 US Redbook Same-Store Sales Index (weekly) (prev +4.8% y/y)
• 13:30 CA Trade Balance C$ (Oct) (-2.70B f’cast) (-3.18B prev)
• 13:45 US Markit Services PMI (final Nov) (flash 54.6)
• 14:00 US ISM Nonmanufacturing PMI (Nov) (mkt 59.0, prev 60.1)
• N/A US Atlanta Fed GDPNow (Q4) (prev +3.5% q/q AR)

Looking Ahead – Events, Other Releases (GMT)

• 11:45 FedTrade operation 30-year Ginnie Mae (max $1.405 bn)
• 14:00 Riksbank’s Stefan Ingves will speak at a conference – Stockholm
• 15:00 Senate banking committee vote meetinG for Fed chair – Washington
• N/A ECB’s Constancio participates in a meeting – Brussels
• N/A EU Economic and Financial Affairs meeting – Brussels

Currency Summaries

EUR/USD

• Closed NY 1.1862, 1.1876-42 range today. 1.1830 Mon’s low
• Support daily cloud top 1.1833, 30 Nov low/38.2% of 1.1553-1.1961 1.1809/05
• Initial resistance Mon’s 1.1897 hi, Fri’s 1.1940 hi before 27 Nov 1.1961 range peak
• DXY 93.03-30, Fri/Mon low/hi 92.60/93.36, 100DMA resistance 93.35 now
• US 10yr yld 2.37 vs 2.42 Fri/Mon, 10yr DE/UST 205 vs wide since April 209 Mon
• EU PMI and retail sales fail to excite, looking ahead to US trade and PMI later
• 1-week implied vol break even not pricing much at 86 pips – also gets NFP
• Option risk reversals hold firm EUR call bias, but 3mth better for puts (Italy election)

USD/JPY

• USD/JPY range has been 112.38-112.69 so far
• Asia predominantly sold on EBS to 112.38, 2 ticks above Monday’s 112.36 low
• London bought market in the 112.50s on arrival but failed to crack 112.70
• Bulls face uphill task as Monday’s price action is against them
• Mon’s daily candle had big upper shadow, small real body & no lower shadow
• Technical & positioning supply likely to cause drop below 112
• There is talk of a decent bid below 112.00 which might limit a deeper fall
• NY cut expiries: 112.00 (1.2B), 112.25-35 (430M) & 113.00 (816M)

EUR/CHF

• Slow rise in EUR/CHF likely to persist, fresh 1.1702 rebound high early Europe
• Some intraday easing to 1.1674 but bid returns. Tenkant at 1.1668 helps prop
• Above 1.1641 30-DMA keeps bull trend alive. Ichi cloud supportive, 1.1518/85
• Long players continue to target 1.1737 then the prior floor at 1.20
• 1.1737 = highest since 0.8500 was hit after the SNB removed the 1.20 floor
• Marginal new recovery high for USD/CHF at 0.9869, threatens 0.9867 cloud top
• No clear break seen yet but move above likely as dollar maintains Monday gains
• Thurs high the 21-DMA at 0.9882/83 now key pre-NFP Friday

EUR/GBP

• Cable fell 90 pips to a six-day low of 1.3370 in early European trade
• EUR/GBP simultaneously rose half-a-penny to 0.8868 (six-day high)
• Pound’s losses spurred by absence of Brexit breakthrough Monday
• Britain confident of Brexit deal as May scrambles to win over DUP
• 1.3431 = cable high since 1.3370. 0.8828 = EUR/GBP low since 0.8868
• UK Nov service sector PMI 53.8 vs 55.0 f/c. UK Oct service PMI 55.6

USD/CAD

• USD/CAD down to 6wk low of 1.2641 ahead of North American open
• 1.2656 was Monday’s low (1.2717 = subsequent rally high)
• BoC is expected to keep interest rates unchanged Wednesday

AUD/USD

• A large 0.7645 option expiry for NY cut is helping to anchor AUD/USD
• AUD 622mn strike. 0.7637-0.7650 range for AUD/USD since 0700GMT
• 0.7654 = 3wk high in Asia after Aussie retail sales beat & RBA event risk

NZD/USD

• NZD/USD gravitated from 0.6872 to 0.6900 during the European am
• 0.6900 option expiry for NY cut, NZD 386mn strike. 0.6908 = Asia high
• Spencer said RBNZ has become more flexible on inflation targeting

FX OPTIONS

• GBP options sought amid ongoing GBP volatility and event risk
• 2-week gets EU summit, Cable vol break even 200 pips, EUR/GBP 133 pips
• 3mth EUR puts firmer as expiry (5 March) is likely date for Italy election
• Short dated G10 majors vols propped by impending NFP and CB risk
• Market not pricing much however, suggesting no spot break-out expected pre X-mas

COMMENT

ECB – Mystery unresolved, EONIA ripples beyond O/N

O/N EONIA has come off its highs from last week but it has yet to fully normalise back to around -0.36%. At -0.32%, the fixing yesterday suggests the distortion in the overnight rate has eased, especially as this move has come on the back of declining volumes. After €4.2bn traded on Thursday and €4.4bn Friday, volumes on the O/N were €3.8bn on Monday. However, it has started to ripple to 1wk and 2wk EONIA, where rates are elevated as concern remains that the distortions on the O/N rate will persist. Take a look at the chart below if you are on Thomson Reuters Eikon. While there is a consensus that the explanation for the distortion is related to excess liquidity at a Greek bank (there is only one in the panel for EONIA) uncertainty remains as to why it happened. If the source is related to settlement issues around the recent Greek bond exchange then it might be that the MRO operation that settles tomorrow (new Greek bonds settle today) will help relieve the situation. However, if the Greek banks are now actively moving to wean themselves off expensive ELA funding and thus have excess liquidity, then we may be looking at periods of more persistent distortions.

What is clear is that once the MRO settles on Wednesday, the fix for tomorrow will be keenly watched. If O/N EONIA fails to stabilise then we could be looking at distortions that are a function of an excess liquidity situation at a single Greek bank. The latest episode underscores the ECB’s desire to deliver a new O/N benchmark rate based on a wider sample of transactions beyond the interbank market by 2020 (see ECB – EONIA puzzles, new benchmark before 2020; Dec 1. EONIADEC2017 :

CHART FOCUS

USD/TRY on track for a deeper fall, cloud beckons

USD/TRY looks to be on track for a deeper retreat according to technicals and the pullback could test as low as the 3.70s. The daily Ichi cloud spans 3.7381/3.6554 on Wednesday: a rising and relatively thick cloud often provides decent support and the top of the cloud could prop this correction. With that in mind longer term players can use current easing as an improved opportunity to join the underlying bull trend while above the daily cloud. Intraday price action is pulling farther away from the 10-DMA, which had provided a rough prop since the mid September bounce. The average has flipped to resistance at 3.9209 and showing signs of rolling over. An Harami reversal is playing out on the weekly charts after USD/TRY made a fresh all time high on November 22 at 3.98 but Friday’s close will be watched carefully for confirmation. Overbought weekly trend indicators also favor the correction theory. Note that a break inside the aforementioned daily cloud risks a more substantial reversal and the bears will take over. USD/TRY weekly

FX Market Update 4-12

Market Briefs

• EUR/USD -0.33%, USD/JPY 0.74%, GBP/USD -0.31%, EUR/GBP 0.01%
• DXY 0.39%, DAX 1.14%, FTSE 0.7%, Brent -0.66%, Gold -0.54%
• DXY techs: breaks back inside daily cloud but capped at 93.355 100DMA
• EZ Sentix Index Dec, 31.1, 33.6 f’cast, 34.0 prev
• EZ Producer Prices MM Oct, 0.4%, 0.3% f’cast, 0.6% prev
• EZ Producer Prices YY Oct, 2.5%, 2.6% f’cast, 2.9% prev
• GB Markit/CIPS Cons PMI Nov, 53.1, 51.0 f’cast, 50.8 prev
• Japan consumer confidence at 4-year high on stocks, job market
• BOJ is resolved to keep ultra-easy policy, says Kuroda
• China says 2018 growth target to reflect new changes in economy
• Oil falls after US drilling picks up
• Gold price slides towards four-week lows, at risk from higher dollar

Looking Ahead – Economic Data (GMT)

• 13:45 ISM-New York Report on Business (Nov) (prev 51.6)
• 14:00 Factory Orders (Oct) (mkt -0.4% m/m, prev +1.4% m/m)
• 14:00 Factory Orders ex-Trans (Oct) (prev +0.7% m/m)
• 14:00 Core Capital Goods Orders (Oct) (prev -0.5% m/m)

Looking Ahead – Events, Other Releases (GMT)

• 11:45 FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.510 bn)
• 12:00 Riksbank executive board meeting – Stockholm
• N/A ECB’s Draghi and Coeure participate in a Eurogroup meeting – Brussels

Currency Summaries

EUR/USD

• EUR/USD reversed early London 1.1865-37 dip, peaked 1.1878, settles 1.1850’s
• Seemingly lacking direction, awaits NY open. Daily cloud top supports 1.1833
• Bull bias remains intact whilst 30 Nov 1.1809 low holds, bids surround here
• DXY supported by US Tax plan advancement, but pinned to 92.50-93.50 range
• 100DMA caps DXY today 93.36. US/DE 10yr yield spread 206 vs early 209 wide
• Market looking ahead to data/risk events, props related vols leading to NFP, FED, ECB
• Risk reversals hold a clear topside bias, curve by multi year highs for EUR calls

USD/JPY

• Monday’s USD/JPY range has been 112.36-113.07 so far
• Capped by 113.13 cloud top & 113.25 Fibo — 61.8% of 114.73 to 110.85 fall
• USD/JPY knife edge, longs are exiting at lofty levels
• Spot collapsed to 111.40 on Friday Trump-Flynn headlines, before recovering
• There was a big spike in volume on EBS the hour USD/JPY collapsed to 111.40
• The sustained recovery since has been on meagre EBS volume Fri & Mon
• This highlights the fact that the recovery on Fri & Mon are not confirmed

EUR/CHF

• USD/CHF rose Monday from Friday’s 0.9736 low in line with a firmer dollar
• USD up across the board after U.S Senate tax plan approval over the weekend
• USD/CHF plays 0.9822-45 in Europe. 0.9780-0.9849 has been the day’s range
• Base of the daily Ichi cloud at 0.9731 lends support, propped Friday
• Top of the cloud is at 0.9865, could see a retest there
• EUR/CHF is higher after Friday’s massive drop fm 1.1737 to 1.1601
• Bidding interest naturally seen at fig & tech support from daily cloud
• The cloud is rising and spans 1.1486-1.1581 Monday. Break inside is unlikely
• 1.1615-1.16700 Mon, 30-D Bolli top @ 1.1710 is resist, then Fri 1.1737 peak
• 1.1737 = highest since 0.8500 was hit after the SNB removed the 1.20 floor
• Domestic sight depos fall w/e Dec 1, no need for SNB action

EUR/GBP

• Cable slid to 1.3418 in early London trade, before rallying to 1.3458
• 1.3432-1.3514 was Asia range (low before high)
• Bids expected near 1.3400 (1.3406 was Nov 30 low)
• GBP could drop sharply if no Brexit talks breakthrough Monday
• IMM specs flipped to net long GBP for 1st time in 4wks in week to Nov 28
• UK Nov construction PMI 53.1 vs 51.0 f/c. Follows UK mfg beat Friday

USD/CAD

• USD/CAD fell from 1.2726 to threaten 1.2683 during the European am
• 1.2683 was Friday’s low. 1.2673 was Nov 23 low. 1.2666 = Nov low
• BoC is expected to keep interest rates unchanged this week

AUD/USD

• AUD/USD met fresh headwind pre-0.7610 after rising from 0.7580
• 0.7580 = early Europe low. 0.7609 = European am high
• Offers ahead of 0.7610 also kept lid on pair in Asia
• More offers tipped pre-0.7650 (0.7645 was last week’s high)
• Large 0.7645 option expiry Tuesday, AUD 622mn strike

NZD/USD

• NZD/USD based at 0.6840 after extending south from 0.6913
• 0.6913 was Friday’s high after USD hurt by Flynn news
• RBNZ Governor Spencer to speak on Tuesday at 1.15pm local time
• “Low inflation and its implications for monetary policy”

FX OPTIONS

• Event risk a prop for shorter dated vols, NFP Friday, FED, ECB, BOE next week
• 2-week the favoured long as gets all risk events and EU leaders summit
• Brexit at the fore, PM May meets EU Barnier and Junker today, GBP vols bid
• EUR/USD risk reversals still firmly biased to EUR strength
• USD/JPY holds broader range to cap vol demand but JPY call bias pressured of late

COMMENT

USD/JPY bulls maybe stymied by decent supply above 113

While USD/JPY bulls are looking to seize control, there are still significant obstacles above which may lead to a reversal back below 112.00. There seems to be plenty of supply ahead of the daily cloud top at 113.13 and the important 113.25 Fibonacci level — 61.8% retrace of the 114.73 to 110.85 November fall. These technical offers are intermingled with those USD/JPY longs seeking to exit positions at these relatively elevated levels. While IMM net short yen positions as of November 28 fell from 122,602 to 110,640 contracts, this still represents a rather large equivalent cash position of US 12.4 billion. This has been mitigated to some extent by the net USD/JPY selling seen on EBS throughout last week and Monday, there are likely to be further significant sell offers and stops associated with these oversized longs which will likely limit further gains. Only a daily close above the 113.25 level will provide fuel bulls for the next leg higher. Mon’s EBS Flow Chart:

CHART FOCUS

USD/ZAR a story of two clouds

Slight conflict on weekly and daily clouds but on balance fading the daily cloud top with a modest objective and a stop and reverse tight above is the favoured strategy. Big down candle and break into the falling weekly cloud last week. Mild recoveries from a 13.5575 Nov 29 low weakened the bear candle but still have downside conclusions from weekly chart. Dailies contained and also have bearish pointers but with some caution. Price is within the 13.5483-13.8115 daily cloud but the cloud is thickening and rising and USD/ZAR is tracking the cloud top closely. There is room for the market to reach 14.0950, where the cloud starts to decline and thin on Dec 21. However, a couple of close to market hurdles in the form of 10 and 55DMAs at 13.8055 and 13.7985 respectively add to the bear potential

FX Market Update 30-11

Market Briefs

• EUR/USD -0.14%, USD/JPY 0.4%, GBP/USD 0.35%, EUR/GBP -0.49%
• DXY 0.25%, DAX 0.78%, FTSE 0.25%, Brent 1.46%, Gold -0.17%
• GBP/USD recovery from Nov 28 1.3221 low reaches 1.3480
• EZ Inflation, Flash YY Nov, 1.5%, 1.6% f’cast, 1.4% prev
• EZ Infl Ex Food & Enr Flash Nov, 1.1%, 1.0% f’cast, 1.1% prev
• EZ Unemployment Rate Oct, 8.8%, 8.9% f’cast, 8.9% prev
• DE Unemployment Chg SA Nov, -18k, -10k f’cast, -11k prev
• DE Unemployment Total NSA Nov, 2.368M, 2.389M prev
• DE Unemployment Rate SA Nov, 5.6%, 5.6% f’cast, 5.6% prev
• DE Unemployment Total SA Nov, 2.476M, 2.495M prev
• DE Retail Sales YY Real Oct, -1.4%, 2.8% f’cast, 4.1% prev
• GB Nationwide House Prices Nov, 0.1, 0.2% f’cast, 0.2% prev
• GB Nationwide House Prices YY Nov, 2.5%, 2.7% f’cast, 2.5% prev
• FR CPI (EU Norm) Prelim YY Nov, 1.3%, 1.3% f’cast, 1.2% prev
• Swiss Q3 GDP growth picks up to 0.6 q/q, 1.2% y/y, above f/c
• Swiss KOF indicator rises to 110.3 in November vs rvsd 109.8
• OPEC, allies set to agree oil cut extension to end of 2018
• UK consumer sentiment sinks to 16-month low, house prices weak
• Oil edges up as OPEC signals deal extension
• Gold hits one-week low as positive US data weighs

Looking Ahead – Economic Data (GMT)

• 12:30 US Initial Jobless Claims (w/e Nov 25) (mkt 240k, prev 239k)
• 12:30 US Continued Claims (w/e Nov 18) (mkt 1.904 mn, prev 1.904 mn)
• 12:30 US Personal Income (Oct) (mkt +0.3% m/m, prev +0.4% m/m)
• 12:30 US Personal Consumption Expenditures (Oct) (mkt +0.3% m/m, prev +1.0% m/m)
• 12:30 US Core PCE Price Index (Oct) (mkt +0.2% m/m, prev +0.1% m/m)
• 13:00 CA Current Account C$ (Q3) (-19.50B f’cast, -16.32B prev)
• 13:45 US Chicago PMI (Nov) (mkt 63.0, prev 66.2)
• N/A US Dallas Fed Trimmed Mean PCE (Oct) (prev +1.8% y/y)
• N/A US Atlanta Fed GDPNow (Q4) (prev +3.4% q/q AR)

Looking Ahead – Events, Other Releases (GMT)

• 13:30 Fed’s Mester to chair panel at conf. – Washington
• 15:45 FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.510 bn)
• 17:30 Fed’s Randal Quarles speaks at conf. – Washington
• 17:30 Eurogroup’ Dijsselbloem and Luxembourg’s Gaston Reinesch attend a conf. in Luxembourg
• 18:00 Fed’s Dallas President Kaplan participates in Q&A in Dallas

Currency Summaries

EUR/USD

• EUR/USD off from early London 1.1876 peak to 1.1831 ahead of EZ inflation data
• Data below f/c at 1.5 vs 1.6%, EUR briefly touched 1.1809, recovers 1.1830 since
• Draw from 2.8bln 1.1840-45 expiries NY cut. Pivots 10dma/daily Tenkan 1.1823/37
• Next supports 1.0805 (38.2% retrace of 1.1553-1.1961 rise). 100/55 DMA 1.1783/77
• Daily cloud spans 1.1786-1.1866. Options still buying topside cover above 1.2000
• Personal income, consumption key from US today, also core PCE 13.30GMT

USD/JPY

• USD/JPY range has been 111.89-112.48 so far, Ldn sold ahead of 112.50
• No talk of downside sell stops, some speculation long liquidation over
• Market has made a decent recovery from 111.88 to reach 112.44 so far
• Near-term bias is on upside, but solid tech resistance above
• Japanese importers and some investors countinue to buy on dip
• Daily close above 112.90 cloud top will signal that bulls are in control

EUR/CHF

• EUR/CHF offered through London, in line with a falling EUR/USD
• Plays 1.1694 to 1.1652 last. The 21-DMA is close support at 1.1639
• 30-DMA at 1.1634 remains key for the underlying uptrend. Close above required
• USD/CHF was up initially to 0.9882 but lower ahead of NY to 0.9849
• Expect the rising daily cloud top at 0.9833 to provide some support

EUR/GBP

• Further GBP gains Thursday on more Brexit optimism re: Times article
• Britain nears deal with EU in Irish border Brexit talks – The Times
• EUR/GBP down to four-week low of 0.8777 during the European am
• Low first plumbed after stops tripped on break below 0.8795 (200DMA)
• 0.8777 revisited after softer than expected EZ Nov inflation data
• GBP/USD up to new 2mth high of 1.3480 in Asia. 1.3448 = European am low

USD/CAD

• USD/CAD gushed to a 4wk high of 1.2900 during the European am
• CAD weakness precedes OPEC meeting in Vienna (starts 1100GMT)
• 1.2875 was Wednesday’s high as oil prices fell for a third day
• Above-figure resistance 1.2910-15 (late Oct/early Nov highs)
• Big 1.2850 expiry for NY cut, USD 1.4bln strike. 1.2857 = early Europe low

AUD/USD

• AUD/USD dropped to threaten 0.7557 (Asia low) during the European am
• 0.7592 was Asia high. 0.7552 was Wednesday’s eight-day low
• Additional supports 0.7532 (recent 5mth low) & 0.7500 (option barrier level)
• RBA is expected to keep its cash rate at 1.5% next week (Dec 5)

NZD/USD

• NZD/USD revisited 0.6833 (Asia 8-day low) during the European am
• AUD/NZD topped out just shy of 1.11 in Asia after rallying from 1.0990
• Kiwi losses influenced by big slide in ANZ business confidence index

FX OPTIONS

• 1mth expiry weighed by post X-mas and New Year holidays
• Near term event risk/vol support from NFP, FED, ECB, MPC, EU summit
• GBP call demand at the fore on Brexit optimism, 1.45 strikes seen
• EUR/USD calls remain bid, despite spot setback. JPY calls sold vs USD
• Big EUR/USD expiry at 1.1840-45 (2.8bln) and USD/CAD 1.4bln at 1.2850

COMMENT

Brexit sentiment will keep pound volatile in December

Brexit sentiment will keep GBP traders on their toes in December, beginning with Monday’s deadline for Britain to make an acceptable “divorce bill” offer to the EU, agree on the rights of EU citizens in Britain and ensure no hard border is set up with Ireland nL8N1NZ4QE. An EU summit follows on Dec 14-15, when the EU will decide if “sufficient progress” has been made on those “phase one” Brexit issues to open talks on a future EU/UK trade deal. The pound has risen in the past 48 hours on hopes Britain’s divorce bill offer will be acceptable and a hard border in Ireland can be avoided, with GBP/USD rising two-and-a-half cents to a two-month high of 1.3480 and EUR/GBP falling two pence to a four-week low of 0.8777. If the pound continues to rise against the euro, it would reduce the amount of euros the UK government needs to buy to settle its EU divorce bill (0.7743 = mid-point of EUR/GBP lifetime range).
GBP index:

CHART FOCUS

GBP/USD bulls have the 2017 peak in sight

GBP/USD continues to storm higher and there is potential for a full retracement to the 2017 peak from September 20 at 1.3659. The 61.8% Fibo of the September 1.3659 to 1.3027 drop at 1.3418 was breached Wednesday but did not manage to close above. The price has sailed through that level again today and bulls are hopeful of a close above 1.3418 on Thursday to open the path for a full retracement to the aforementioned 1.3659 peak. The 76.4% Fibo of the same 1.3659-1.307 fall is the next resistance level at 1.3510 for the bulls to overcome. On a note of caution cable has rallied above the upper Bollinger, around the 30-DMA. Historically price does not stray far or for too long outside the band and some corrective action could be seen ahead of a fresh leg north. The 30-DMA is support at 1.3219 and only a break back below there will deter the bears. Until then buying dips to rejoin the bull trend is the favored strategy.

FX Market Update 29-11

Market Briefs

• EUR/USD -0.03%, USD/JPY 0.09%, GBP/USD 0.49%, EUR/GBP -0.52%
• DXY 0.01%, DAX 0.97%, FTSE -0.56%, Brent -0.86%, Gold 0.06%
• EZ Business Climate Nov, 1.49, 1.53 f’cast, 1.44 prev
• EZ Economic Sentiment Nov, 114.6, 114.6 f’cast, 114.0 prev
• EZ Industrial Sentiment Nov, 8.2, 8.7 f’cast, 7.9 prev
• EZ Services Sentiment Nov, 16.3, 16.8 f’cast, 16.2 prev
• EZ Consumer Confid. Final Nov, 0.1, 0.1 f’cast, -1.1 prev
• EZ Cons Infl Expec Nov, 16.0, 14.7 prev
• EZ Selling Price Expec Nov, 11.1, 8.6 prev
• German inflation accelerates in November, state data suggest
• Euro zone stability risks contained but remain aplenty: ECB
• FR Consumer Spending MM Oct, -1.9%, -0.1% f’cast, 0.9% prev
• FR GDP Detailed QQ Q3, 0.50%, 0.50% f’cast, 0.50% prev
• GB BOE Consumer Credit Oct, 1.451B, 1.500B f’cast, 1.606B prev
• GB Mortgage Lending Oct, 3.392B, 3.600B f’cast, 3.848B prev
• GB Mortgage Approvals Oct, 64.575k, 65.000k f’cast, 66.232k prev
• GB M4 Money Supply Oct, 0.6%, -0.2% prev
• BOJ’s Nakaso says c.bank has tools, expertise to exit easy policy
• Oil falls on uncertainty over OPEC deal, rise in US inventories
• Gold price firms on softer dollar but narrow range holds

Looking Ahead – Economic Data (GMT)

• 12:30 Real GDP (Q3 preliminary) (mkt +3.2% q/q AR, advance +3.0% q/q AR)
• 12:30 Real Final Sales (Q3 preliminary) (mkt +2.4% q/q AR, advance +2.3% q/q AR)
• 12:30 Core PCE Deflator (Q3 preliminary) (mkt +1.4% q/q AR, advance +1.3% q/q AR)
• 13:00 DE CPI Prelim (Nov) (0.3%MM, 1.7% YY f’cast; 0.0%, 1.6% prev)
• 13:00 DE HICP Prelim (Nov) (0.2%MM, 1.7%YY f’cast; -0.1%, 1.5% prev)
• 14:00 Pending Home Sales Index (Oct) (mkt 107.1, +1.0% m/m; prev 106.0, 0.0% m/m)
• 14:30 EIA Weekly Petroleum Status Report

Looking Ahead – Events, Other Releases (GMT)

• 13:30 Fed’s Dudley participates in a discussion – New Brunswick
• 14:00 BoE’s Carney speaks at a discussion – London
• 14:45 BoE’s Ramsden speaks at a dicsussion – London
• 15:00 Fed’s Yellen speaks at Congressional committee – Washington
• 17:00 Bundesbank’s Weidmann speaks at an event – Essen
• 18:50 Fed’s Williams speaks at Arizona State University – Phoenix
• 19:00 Fed issues Beige book on economic condition – Washington
• 20:00 Dutch cen bank’s Knot speaks at a conference – London

Currency Summaries

EUR/USD

• Slightly better than f-cast EU sentiment data, Nov cons conf in line 0.1
• ECB stability report – risk contained but remain aplenty
• Minimal change to EUR/USD in 1.1860’s vs early Europe recovery high 1.1882
• Sppt daily tenkan 1.1837 (clsd above Tue), Asia low 1.1839, Tue low 1.1725
• 10dma underpins 1.1824. Initial resistance Tue 1.1920 high before Mon 1.1961
• A rack of US data today, stand out is Q3 GDP 13.30GMT, 3.2% fc vs 3.0% prior

USD/JPY

• Risk not off despite NK missile test, USD/JPY trades tight 111.38-67 range
• There was net selling of USD/JPY on the EBS in Asia, London more neutral
• Japanese importer and investor bids in recent days have propped USD/JPY
• But recovery stymied by 200-DMA and recent high at 111.69
• There are 1.3 yards of 111.00 NY cut expiries which may attract later
• If a break above 111.69 occurs, there are buy stops clustered above 111.75

EUR/CHF

• EUR/CHF up from Thurs NY 1.1648 low. Plays 1.1680-1.1656 in Europe
• Above the 30-DMA at 1.1631 is bullish for the cross. Dble top now at 1.1722/23
• 1.1723 = highest since 0.8500 was hit after the SNB removed the 1.20 floor
• 1.20, the former SNB floor, remains a broader target for longs
• USD/CHF off from Tues 0.9853 high, 0.9850-0.9820 Wednesday range
• Price action is above the 200-DMa at 0.9804 which has been a pivot recently
• Rising daily Ichi cloud also supportive, top at 0.9793
• CH investor sentiment rises to 7-year high of 40.7 pts in Nov

EUR/GBP

• GBP continues to benefit from hopes of imminent Brexit divorce bill deal
• Cable extended north to 1.3431 (two-month high) during the European am
• Retreat from 1.3431 based two pips shy of 1.3388 (Tuesday’s high)
• 1.3221 was Tuesday’s low–before GBP boosted by Brexit-related optimism
• EUR/GBP fell to a 19-day low of 0.8837 during the European am
• UK Oct consumer credit growth cooled to 18mth low. GBP 1.45bn vs 1.5 f/c

USD/CAD

• USD/CAD helped to 1.2845 European am 27-day high by lower oil prices
• WTI 57.50/barrel, 50 cents lower on day (at 6am ET)
• 1.2825 (Tuesday’s high) is now a support point. 1.2808 = early Europe low
• Large 1.2850 option expiry Thursday, USD 1.26bln strike

AUD/USD

• AUD/USD fell to 1wk low of 0.7576 during European am as copper price fell
• Copper down to nine-day low of USD 6,761/tonne during the European am
• AUD/USD bids tipped at 0.7560 (0.7555 was Nov 22 low)
• More bids expected near 0.7532 (last week’s five-month low, Nov 21)

NZD/USD

• NZD/USD met headwind at 0.6930 after extending north from 0.6885
• 0.6885 = Asia base/low since Tuesday’s 18-day high of 0.6945
• AUD/NZD extended south to 6wk low of 1.0948 during European am
• 1.1035 was Asia high. 1.0962 was Tuesday’s low

FX OPTIONS

• Cable call options at the fore as sentiment turns to Brexit optimism
• Cable vols up, while the GBP put bias on risk reversals takes a hit
• EUR/USD risk reversals hold stong topside bias, market short above 1.2000
• USD/JPY option activity suggests more spot ranging expected near term
• Antipodean and CAD vols heavy with little to excite as spot ranges hold

COMMENT

Cable bulls’ dreams of 1.40 test might come true

Cable could extend north towards 1.40 into Q1 if the positive mood music over Brexit keeps playing through next month’s EU summit (Dec 14-15). GBP/USD rose two cents to a two-month high of 1.3431 in less than 24 hours on the back of Tuesday’s reports that Britain and the EU are close to a deal on the Brexit “divorce bill”. Positioning should be no barrier to further GBP gains: IMM specs held a virtually neutral position on the pound in the week to Nov 21. By way of comparison, the IMM net spec EUR long position was at a six-week high of 95,437 contracts in the week to Nov 21. GBP/USD was last at 1.40 shortly after Britain’s vote to leave the EU on 23 June 2016 (1.5022 was the high before the referendum result). 1.3980 was the recovery rally high from the 1.3228 low plumbed on 24 June 2016. 1.3659 marks the peak since that day (20 Sept 2017).

CHART FOCUS

USD/ZAR technical picture hints at supply fade

Still a case for a test of the 13.4313 daily cloud base but daily candles are beginning to highlight some market uncertainty and the some of the upside supply is fading away. Tuesday’s long lower wick candle and potential confirmation from a hammer today are likely to set a more bullish tone. Still much wood to chop this session but close could be pivotal. A close above the daily cloud and the 55DMA, 13.6694/13.7705 respectively, could shake up the short-term technical picture. Can’t ignore the heavily bearish weekly chart however, so fading rebounds is the favoured strategy. Price is deep inside the weekly Ichimoku cloud and eyes a band of support between 13.3470 30WMA and 13.4770 21WMA. Key resistance at 13.9963 weekly cloud top and 14.0395 100WMA line. ZAR Weekly

FX Market Update 28-11

Market Briefs

• EUR/USD -0.08%, USD/JPY 0.2%, GBP/USD -0.08%, EUR/GBP 0.01%
• DXY 0.13%, DAX 0.33%, FTSE 0.55%, Brent -0.86%, Gold -0.06%
• DE Import Prices MM Oct, 0.6%, 0.6% f’cast, 0.9% prev
• DE Import Prices YY Oct, 2.6%, 2.6% f’cast, 3.0% prev
• FR Consumer Confidence Nov 102, 101 f’cast, 100 prev
• EZ Money-M3 Annual Growth Oct, 5.0%, 5.1% f’cast, 5.1% prev
• EZ Loans to Households Oct, 2.7%, 2.7% prev
• EZ Loans to Non-Fin Oct, 2.9%, 2.4% f’cast, 2.5% prev
• No more pain for UK banks in 2017 BoE tests, but Brexit risks ahead
• Japan govt keeps view that moderate economic recovery continuing
• Tough OPEC meeting looms amid spectre of oil deficit
• Oil falls on doubts over OPEC, pipeline restart
• Gold inches lower; Fed chair hearing, US tax reforms in focus

Looking Ahead – Economic Data (GMT)

• 12:00 US Revised Building Permits (Oct) (as reported 1.297 mn SAAR)
• 12:30 US Advance Goods Trade Balance (Oct) (prev -$64.1 bn)
• 12:30 US Advance Wholesale Inventories (Oct) (prev +0.3% m/m)
• 12:30 US Advance Retail Inventories (Oct) (prev -0.1% m/m)
• 12:55 US Redbook Same-Store Sales Index (weekly) (prev +4.1% y/y)
• 13:00 US FHFA House Price Index (Sep) (prev +6.6% y/y)
• 13:00 US S&P Corelogic Case-Shiller 20-City Home Price Index (Sep) (prev +5.9% y/y)
• 13:30 CA Producer Prices MM Oct, 0.5% f’cast, -0.3% prev
• 14:00 US Consumer Confidence Index (Nov) (mkt 124.0, prev 125.9)
• 14:00 US Richmond Fed Manufacturing Index (Nov) (prev 12)
• 14:00 US Richmond Fed Services Index (Nov) (prev 24)
• 14:30 US Texas Service Sector Outlook Survey (Nov) (prev 18.6)

Looking Ahead – Events, Other Releases (GMT)

• 13:45 FedTrade Operation 30-year Fannie Mae / Freddie Mac (max $1.645 bn)
• 14:15 Fed’s Dudley participates in a Q & A – New York
• 14:30 Treasury Sec’y Mnuchin speaks before conf. in New York
• 14:30 Ireland’s Lane to announce review of mortgage rules – Dublin
• 15:00 Senate hearing on Powell’s chairmanship – Washington
• 15:15 Fed’s Harker speaks at a conference – Philadelphia
• 16:30 BoC’s Poloz and Wilkins hold a press conference – Ottawa
• 20:00 RBNZ publishes Financial Stability Report – Wellington
• N/A ECB releases monthly data on lending and money supply

Currency Summaries

EUR/USD

• EUR/USD trades up to 1.1920 in early European dealing but then heads south
• Steady slide reaches 1.1875 following softer than expected EZ M3 data
• M3 5.0% in October vs expectation of no change from prior 5.1%
• Loans to non financial institutions improve 2.9% vs 2.4% f/c & prior 2.5%
• Daily Ichimoku cloud 1.1877-1.1826. 100-HMA 1.1875. 200-HMA 1.1819
• Softer yields one factor weighing. 10-yr bund 0.33% lowest since Nov 9

USD/JPY

• USD/JPY recovers from Monday’s 110.85 base, Asia’s 110.94 low
• USD/JPY bears hesitant after Monday’s 111.03 Fibo fail
• Japanese importers and some investors among the buyers below 111.00
• Note there is good tech support at the daily cloud base now at 110.71
• London on buying spree on EBS, but , but 111.38 caps so far
• Expect further supply at 111.46, an hourly high posted on Monday

EUR/CHF

• EUR/CHF holding below the 1.1723 Nov 17 peak. 1.1722 high Monday
• 1.1723 = highest since 0.8500 was hit after the SNB removed the 1.20 floor
• 1.20, the former SNB floor, remains a broader target for longs
• Cross offered in Europe, 1.1696-1.1673 but safely above 30-DMA at 1.1629
• Tenkan support is closer to market at 1.1655 and a potential prop
• USD/CHF continues to pivot the 200-DMA at 0.9806. Above there Tuesday
• 0.9835-0.9811 through Europe. Ichi cloud, 0.9779/0.9667, remains supportive
• Focus on Fed confirmation for Powell, U.S. tax reform plan into NY

EUR/GBP

• Cable fell to threaten 1.3285 during European am as the USD gained
• 1.3285 was Nov 23 low. 1.3278 = Nov 24 low (1.3279 = Nov 20 high)
• Cable traded at 1.3358 at 0611GMT when EUR/GBP was at 0.8919
• EUR/GBP met headwind pre-0.8957 (100DMA) after rising from 0.8919
• 0.8926-0.8978 was Monday’s range (0.8978 = 12-day high)
• IMM specs flipped to virtually neutral position on GBP in week to Nov 21

USD/CAD

• USD/CAD up half-a-cent to 1.2808 (1wk high) during the European am
• Ascent influenced by further decline in oil prices: WTI down 55c to 57.55
• Prior fall in oil prices helped inflate USD/CAD to 1.2769 Monday
• BoC Financial System Review 10.30am ET, press briefing 11.30am ET+

AUD/USD

• AUD/USD elicited support at 0.7589 after breaking below 0.7600 (Asia low)
• 0.7589 = 50% retracement of 0.7532 (Nov 21 low) to 0.7645 (Monday’s high)
• More bids are tipped at 0.7560 (0.7555 was Nov 22 low)
• AUD losses influenced by lower commodity prices: copper -1.85%
• Dalian iron ore closed down 1.2% Monday. Shanghai nickel fell 4%

NZD/USD

• NZD/USD scaled 18-day peak of 0.6945 late Asia after more kiwi buy-backs
• 0.6918 = subsequent low. 1.0990 is now an AUD/NZD resistance level
• Stops below 1.0990 tripped in Asia, en route to 1.0962 (six-week low)

FX OPTIONS

• Little event risk pre NFP, Fed, ECB, UK MPC, EU summit, leaving vols heavy ahead
• 1mth expiry post X-mas to weigh there. EUR/USD calls well bid however
• EUR/USD market short topside strikes above 1.2000 to prop vols if tested
• USD/JPY vols weak amid spot consolidation. Barriers start at 110.00
• ZAR short dated vols hit amid spot recovery. 16-20 Dec vols bid over ANC election

COMMENT

BoE – Countercyclical buffer raised again

The BoE has raised the countercyclical buffer from 0.5% to 1.0% that will force banks to hold an extra GBP6bn in capital. The buffer was raised from zero to 0.5% in June this year and the BoE is warning that the buffer might need to be raised again next year with a decision likely before June 2018. The 1% level on the countercyclical buffer will mean banks will need to hold just under GBP11.5bn in capital. The hike in the countercyclical buffer was expected but highlights that in additional to the traditional interest rate channel the BoE is also dealing with financial stability risks. This is a strategy that has been employed by other central banks in this post-GFC environment allowing banks to rely on the buffers should the environment deteriorate.
While the BoE is focused on the countercyclical buffer as related to risks beyond Brexit there is no reason why it can’t be relied upon in the event of a disorderly Brexit.

CHART FOCUS

EUR/SEK 10.00 break fading but not forgotten

Potential for a clearer break above the 10.00 level as a bid returns to EUR/SEK. Beginning to see bull pressure returning to EUR/SEK following a modest pullback from the significant 10.0165 Nov 21 high. The much touted breach of the 10.00 level proved disappointing as profit taking quickly reversed the market back to 9.8265. However, the pullback is unlikely to have dented the market’s appetite for a more significant break above 10.00. Key level above 10.0165 remains the 10.0855 2016 high and this likely to be pivotal. Above here and the air gets thin. A stand out high from February 2010 at 10.25 serves as a target should price accelerate above 10.0855. There is talk of option structures around the 10.10 level that might slow a break but with key resistance removed the way should open up for another climb.

FX Market Update 27-11

Market Briefs

• Rand shrugs off Friday’s S&P downgrade: USD/ZAR off 3.15% at 13.7350
• EUR/USD 0.03%, USD/JPY -0.24%, GBP/USD 0.07%, EUR/GBP -0.07%
• DXY -0.09%, DAX 0.27%, FTSE 0.35%, Brent -0.39%, Gold 0.46%
• Euro rally, German politics bolster bloc’s bond markets
• German government talks likely a month away, Merkel ally says
• IT Consumer Confidence Nov, 114.3, 116.4 f’cast, 116.1 prev
• IT MFG Business Confidence Nov, 110.8, 111 prev
• Oil slips on US drilling but OPEC cuts support market
• Gold edges higher as dollar hits 2-month low vs euro

Looking Ahead – Economic Data (GMT)

• 14:00 New Home Sales (Oct) (mkt 620k SAAR, prev 667k SAAR)
• 14:30 Dallas Fed Texas Manufacturing Outlook Survey (Nov) (prev 27.6)

Looking Ahead – Events, Other Releases (GMT)

• 11:15 ECB’s Constancio participates in a discussion – Frankfurt
• 14:30 BoE’s Haldane speaks in Brimingham
• 15:45 FedTrade Operation 30-year Ginnie Mae (max $1.280 bn)
• 23:00 FRB New York’s Dudley speaks on “The U.S. Economy: 10 Years after the Crisis”; New York
• 22:30 FRB Minneapolis’s Kashkari (2017 voter, dove) participate in moderated Q&A; Winona, MN
• N/A EU Foreign Affairs Council meeting

Currency Summaries

EUR/USD

• EUR/USD up early in Europe to 1.1956, Nov 24 high 1.1944. Asia today 1.1946
• Shallow dips are encouraging specs to buy and add to core longs
• Resistance @ 76.4% retr 1.2092-1.1553 decline @ 1.1965, then 1.20 options
• 1.20 traded quite recently so major option defence is unlikely
• Expected data this week may add impetus to the rally
• EZ M3, PMI and biz climate all seen strong, US cons conf & ISM seen softer

USD/JPY

• Ldn session saw 111.46-111.16 drop, despite EBS decent buying initially
• There has been decent bouts of buying on EBS at other points in Ldn session
• Solid USD/JPY buys since hit 111.16, but spot bounded by 111.34 supply
• Soft, but semi-official bid supports ahead of 111.00
• Only a sustained break above 111.46 Ldn high will unmask Asia’s 111.69 peak
• 200-DMA caps @111.71, 111.03 buoys — 50% Fibo 107.32-114.73

EUR/CHF

• EUR/CHF bid again after last wk’s fall, regained 30-DMA, 1.1680-1.1712 Europe
• Eyeing Nov 17 1.1723 trend high. 1.20 a realistic trgt for EUR/CHF bulls
• 1.1723 = highest since 0.8500 was hit after the SNB removed the 1.20 floor
• Swiss domestic sight depos rise, 477.945bln vs 475.147 w/e Nov 24
• USD/CHF found sppt from close by Ichi cloud after a bearish wk last week
• Cloud top at 0.9762, session low at 0.9780. Recovery to 0.9815 in Europe
• US Tax plan, Fed speakers/replacements & ISM main events for dollar this week

EUR/GBP

• Cable rose from 1.3311 to threaten 1.3360 during the European am
• 1.3360 was Friday’s eight-week peak. 1.34 among bull targets
• EUR/GBP pivoted 0.8950 through the European am
• Large 0.8950 option expiry for 10am ET NY cut, GBP 501mn strike
• BoE chief economist Haldane due to speak in Birmingham at 1430GMT
• Sunday Times-Brexit divorce bill to be kept secret

USD/CAD

• USD/CAD slid through 1.2700 to a low of 1.2682 during the European am
• 1.2673 was US Thanksgiving Day low (before Canada retail sales miss)
• 1.2666 = Nov low-to-date. BoC is expected to keep rates on hold next week

AUD/USD

• AUD/USD rose from 0.7604 to threaten 0.7638 during the European am
• 0.7638 was US Thanksgiving Day high. 0.7650/65 resistance beyond
• 0.7650 = Nov 14 high. 0.7665 = Nov 13 high. 0.7593 was Asia low
• Shanghai steel rose to a six-week high on Monday, AUD-positive
• RBA is expected to keep its cash rate at 1.5% next week (Dec 5)

NZD/USD

• NZD/USD rose from 0.6859 to threaten 0.6905 during the European am
• 0.6905 = Nov 23 high. 0.6919 (Nov 15 high) & 0.6936 resistance beyond
• Large AUD/NZD 1.11 option expiry for 10am ET NY cut, AUD 1.58bln strike
• RBNZ Financial Stability Report due Wednesday

FX OPTIONS

• 3-week vols get FED, ECB, MPC, EU summit to underpin. 1mth post X-mas weighs
• EUR/USD vols up, risk reversals multi year highs EUR calls as topside beckons
• GBP focus on EU summit and hope for Brexit trade talks to move on, 3wk vol 200 pips
• USD/JPY vols and JPY call bias heavy, market not pricing any imminent spot break-out
• AUD vols heavy as ranges hold. ZAR gamma sold from Fri’s peaks after ratings d-grade

COMMENT

Data may add impetus to the tech driven EUR/USD rally

Data may add impetus to the tech driven EUR/USD rally. EUR/USD closed above its daily Ichimoku cloud top at 1.1877 and a 61.8% retracement of the 1.2092-1.1553 correction at 1.1886. The last similar close over the cloud in April was the launch pad for big gains from around 1.0600. EUR/USD has reached 1.1956, just shy 76.4% 1.2092-1.1553 at 1.1965. Potential is eyed to 1.2167, 50% retracement of the major ECB inspired drop from 1.3995 that reached 1.0340 in January. Trading data is not fashionable but specs often seize on news that suits their cause. EZ M3 is f/c 5.1% over ECB’s 4.5% reference rate and headline EZ CPI is eyed 1.6% y from 1.4%. EZ Nov PMI may beat October which was the highest in almost 7 years. U.S ISM is f/c softer. A big improvement is f/c for the eurozone’ s business climate, U.S consumer confidence seen lower. The potential for market stopping options is slight as too little time has passed since 1.20 and 1.21 last dealt. EURUSD weekly chart:

CHART FOCUS

USD/JPY stymied by 200-DMA, bears eye 110.25 Fibo

USD/JPY bias remains on the downside as bears gear up for an eventual break below 111.03 — 50% retracement of the 107.32 to 114.73 (Sept to Nov) rise — which will unmask 110.25 — 61.8% of the same rise. The 10 and 30-DMAs are increasingly bearish aligned and fourteen-day momentum is persistently issuing negative readings, highlighting the underlying bearish market structure. The big drop last Wednesday from 112.50 to 111.14 continues to weigh heavily on the market. The 30-day lower and upper bollinger-bands are diverging, meaning the scope for heightened actual volatility continues with the directional risk skewed to the downside. Recent USD/JPY recovery attempts have been stymied by the 200-DMA, which is currently at 111.71. Only a daily close back above the 200-DMA, will hint that the anticipated next leg lower will be delayed