Category Archives: Market News

Futuro del peso mexicano 17-5

Mexico Foreign Min Videgaray: reiterates will reach a NAFTA agreement when the conditions are right, talks continue – There is no fatal date for when a NAFTA deal needs to be reached
10 year note 3.106
50 HMA= 506
100 HMA= 509
Futuro del peso mexicano 17-5

FX Market Update 2-5

Market Briefs
• EUR/USD 0.05%, USD/JPY -0.03%, GBP/USD 0.32%, EUR/GBP -0.27%
• DXY -0.07%, DAX 1.13%, FTSE 0.46%, Brent -0.03%, Gold 0.55%
• EZ Apr Markit Mfg Final PMI, 56.2, 56.0 f’cast, 56.0 prev
• DE Apr Markit/BME Mfg PMI, 58.1, 58.1 f’cast, 58.1 prev
• GB Apr Markit/CIPS Cons PMI, 52.5, 50.5 f’cast, 47.0 prev
• Close Xi aide to meet U.S. trade delegation in Beijing
• German economy minister urges EU unity in trade conflict with U.S.
• Pro-Brexit lawmakers pressure British PM May over customs plan
• EU proposes to set aside euro zone money in next budget
• EZ Q1 GDP Flash Prelim YY, 2.5%, 2.5% f’cast, 2.7% prev,2.8% rvsd
• EZ Q1 GDP Flash Prelim QQ, 0.4%, 0.4% f’cast, 0.6% prev, 0.7% rvsd
• EZ Mar Unemployment Rate, 8.5%, 8.5% f’cast, 8.5% prev
• FR Apr Markit Mfg PMI, 53.8, 53.4 f’cast, 53.4 prev
• IT Q1 GDP Prelim QQ, 0.3%, 0.3% f’cast, 0.3% prev
• IT Q1 GDP Prelim YY, 1.4%, 1.4% f’cast, 1.6% prev
• IT Apr Markit/ADACI Mfg PMI, 53.5, 54.5 f’cast, 55.1 prev

Looking Ahead – Economic Data (GMT)
• 11:00 U.S. MBA Mortgage Applications, -0.2% prev
• 11:00 U.S. Mortgage Market Index, 398.5 prev
• 11:00 U.S. Mortgage Refinance Index, 1,145.5 prev
• 11:00 U.S. MBA 30-Yr Mortgage Rate, 4.73% prev
• 12:15 U.S. Apr ADP National Employment, 200k f’cast, 241k prev
• 18:00 U.S. Fed Funds Target Rate, 1.5-1.75% f’cast, 1.625% prev

Looking Ahead – Events, Other Releases (GMT)
• 11:40 ECB’s Ignazio Angeloni’s speaks at FT-Fitch Global Conference – London
• 12:00 Sweden Central Bank’s Stefan Ingves speaks at FT Global Conference – London
• 18:00 Fed’s FOMC announces decision on interest rate

Currency Summaries

• Traders widely paring longs with EUR/USD falling to 1.1981 Monday
• Today’s data to remind a more neutrally positioned market why it should buy
• Slow grind higher through early Europe with a 1.2032 high but offered there
• EZ GDP in-line 2.5% from 2.8%, strongest rate in 10 years
• Eurozone unemployment seen unchanged at 8.5%, last lower in Dec 2008
• EZ PMI f/c unch @ 56.0. Similar level springboard EUR/USD’s H1 2017 rally
• German PMI f/c 58.1, only seems weak vs stellar data recently seen over 60

• More near-term USD/JPY shorts taken out since last Wed remain vulnerable
• Session range has been 109.65-109.92, as spot hits highest level since Feb 5
• Profit taking in Asia blamed for USD/JPY failing to reach 110.00
• Talk also that Japanese exporters near 110.00 may impede upward progress
• Tue’s rise was the twelfth biggest one-day gain of 2018, however
• Bulls have momentum, eyes 200-DMA, 61.8% Fibo at 110.23, 110.24 respectively

• Cable extended north from 1.3581 to eye 1.3667 on UK construction PMI beat
• 52.5 vs 50.5 f/c. First UK economic data beat for over a fortnight
• 1.3667 was Tuesday’s Ldn am low. 1.3581 = early Europe 4mth low
• Drop to 1.3581 was spurred by Brexit-related news re: BBC report
• Hard Brexit faction in Tory party deny issuing threat over EU customs union
• 1.3588 was Tuesday’s low after UK mfg PMI miss. UK service PMI Thursday

• And now the adj as USD/CHF comes off its 0.9971 trend high
• Broad pullback in the USD albeit tentative at best so far
• Position adjusting ahead of tonight’s FOMC conclusion cited
• USD/CHF plays 0.9969 to 0.9938 and is offered into New York
• EUR/CHF easing with spot and eyes range lows at 1.1926
• Cross plays 1.1960-1.1940, Monday’s 1.1936 initial support
• Swiss Mar sales down 1.8% y/y vs -0.2% Feb, Apr PMI 63.6 vs 60.3

• USD/CAD elicited fresh support pre-1.2800 after sliding from 1.2857
• 1.2803 = European am low. 1.2857 was Asia low
• Monday’s low was 1.2807–before rise to 2mth high of 1.2914 Tuesday

• Profit-taking on shorts helped inflate AUD/USD to 0.7529 European am high
• 0.7476 was Asia low (four pips shy of Tuesday’s 11-month low)
• FOMC statement due 1800GMT, hawkish hold expected
• Large 0.7500 option expiry Thursday, AUD 950mn strike

• NZD/USD rose from 0.7006 to threaten 0.7034 during the European am
• 0.7034 was Asia high, before it dropped to threaten 0.6991
• 0.6991 was Tuesday’s 2018 low. 0.7000 expiry Thursday, NZD 232mn strike
• Large AUD/NZD 1.0725 option expiry Friday, AUD 700mn strike

FX Options
• Dollar gains falter pre Fed, potential for hawkish statement to reignite bid
• FOMC risk premiums on the low side, but no hike expected until June
• USD call options most notable against Euro, strikes to 1.1500
• USD/JPY topside flows remain light, exporters to limit any gains above 110 barrier
• GBP off lows, 1.35 barriers look safe, limited hedging flows below 1.3500, vols peak

Dollar bulls seek close above Fibo after big rise

The dollar has started off May with a bang and rising momentum means further gains are likely. The USD index, which tracks the greenback versus a basket of six currencies, registered the third biggest one-day points rise of 2018 on Tuesday. This led to a probe of the 92.515 Fibo — 61.8% retrace of the 95.150 to 88.251 (October to February) fall — a weekly close above which will pave the way to 93.522 — 76.4% retrace of the same rise. The ultimate target for bulls seeking a bigger recovery is the 200-WMA which currently comes in at 94.577. This week’s 91.480 low provides further support for the index as it is near the 30-WMA at 91.624. Fourteen-week momentum is increasingly bullish, after flipping from negative to positive last week, further highlighting the new found robust outlook for USD. Therefore bears will only be comfortable if they manage to force a weekly close back below the 30-WMA. 2018 Top 10 One-Day USD Index Rises Chart:

GBP/USD 200-DMA could force a short squeeze
Sterling bears are still very much in control but a looming 200-DMA support point might force some profit-taking in cable. The average is at 1.3534 today and has supported cable since a bullish breakout in April 2017. However, it’s worth noting that the market paid scant regard for the 100-DMA, which had also provided long-term support. The price convincingly broke the average on April 27 with a 1.3% decline. Counter-trend positioning at market or just ahead of the 200-DMA with a tight stop might prove profitable. Poor UK data with implications for the BoE rate outlook has shaped a 12-day sterling bear run culminating in a 1.3581 trend low early Tuesday. A subsequent small rebound to 1.3648 might feed into a stronger adjustment back inside the 30-DMA Bollinger envelope, the lower line is at 1.3705 today and serves as an initial target. The 100-DMA at 1.3880 is also a viable retracement level. A low at 1.3460 from early November provides a natural stop point not too far from the 200-DMA.

FX Market Update 26-4

Market Briefs

• EUR/USD 0.12%, USD/JPY -0.10%, GBP/USD 0.09%, EUR/GBP 0.03%
• DXY 0.01%, DAX 0.23%, FTSE 0.21%, Brent 0.70%, Gold -0.04%
• ECB expected to take confident tone despite slowing economy
• DE May GfK Consumer Sentiment, 10.8, 10.8% f’cast, 10.9% prev
• GB Mar UK Finance Mortgage Approvals, 37.567k, 38.120k prev, 38.035k rvsd
• GB Apr CBI Distributive Trades, -2, 5 f’cast, -8 prev
• British PM May feels more heat over EU’s customs union
• German economic growth to bounce back in second quarter – DIW
• Spain’s unemployment rate rises slightly in first quarter

Looking Ahead – Economic Data (GMT)
• 12:30 U.S. Initial Jobless Claims, 230k f’cast, 232k prev
• 12:30 U.S. Continued Jobless Claims, 1.850 mln f’cast, 1.863 mln prev
• 12:30 U.S. Jobless Claims 4-Wk Avg, 231.25k prev
• 12:30 U.S. Mar Durable Goods, 1.6% f’cast, 3.0% prev
• 12:30 U.S. Mar Durables Ex-Transport, 0.5% f’cast, 1.0% prev
• 12:30 U.S. Mar Durables Ex-Defence MM, 1.1% f’cast, 2.5% prev
• 12:30 U.S. Mar Wholesale Inventories Advance, 1.0% prev
• 12:30 U.S. Mar Retail Inventories Advance, 0.2% prev

Looking Ahead – Events, Other Releases (GMT)
• 11:45 ECB Governing Council meeting, followed by interest rate announcement – Frankfurt
• 12:30 ECB’s Mario Draghi holds a press conference after interest rate meeting – Frankfurt

Currency Summaries
• EUR/USD trading on hold ahead today’s ECB rate call and Draghi statement
• Pair matches the March 1 low at 1.2155 before basing ahead 1.2150 barriers
• Subsequently drifts back up to 1.2187 just below Asia’s 1.2188 peak
• Option pricing suggests a range close to 75 pips today
• EUR 5 billion vanilla option expiries at 1.2200 a big potential magnet
• Breaks 1.2150-1.2250 to meet support, resistance close by 1.2100/1.2300

• USD/JPY bulls remain on control as the wider 10-yr UST-JGB spread
• Spot has seen a 109.22-109.49 range so far this session
• Scope for further gains towards the 200-DMA at 110.27
• Daily cloud top comes in at 109.01, this should prop corrective moves
• Offers ahead of option KOs at 109.50, larger ahead of 110.00 may slow gains
• Note 109.65 is 50% Fibo of 114.43-104.56. 110.24 is 61.8% of 113.75-104.56

• GBP/USD fell to a six-week low of 1.3895 in early European trade
• Losses preceded Commons debate about EU’s customs union
• 1.3941 = high water-mark since 1.3895. Key resistance 1.40
• Cable met headwind pre-1.40 after Shire/Takeda M&A news Wednesday
• EUR/USD price action on ECB/Draghi will influence GBP/USD
• Risk of drop to 1.3866 (100DMA) will increase if EUR/USD swoons

• USD/CHF matches Wed’s 0.9848 high and the bid is holding
• Spot plays a tight 0.9818-0.9848 range early Europe
• UST yields coming easier, 10s at 3.0053% from Wed’s 3.0350% top
• EUR/CHF steady to firm and again watching spot for direction
• ECB decision not expected to rock the boat but some caution noted
• Cross plays 1.1950 to 1.1985 with a bid into New York

• USD/CAD rose from 1.2829 to a high of 1.2858 during the European am
• Offers expected near 1.2900 if the pair extends north
• 1.2897 was Wednesday’s three-week peak

• AUD/USD elicited fresh support ahead of 0.7550 during the European am
• 0.7553 was Thursday’s four-month low. 0.7581 = subsequent high
• RBA is expected to keep its cash rate at 1.5% next week (May 1)

• NZD/USD plumbed fractionally fresh 2018 low of 0.7056 during European am
• 0.7058 was Wednesday’s low. 0.7077 was Asia high

FX Options
• Buyers Friday EUR/USD vol, downside strikes, clearly concerned about ECB risk
• No change expected from ECB, but proximity of 1.2150 barriers a worry
• O/n USD/JPY at 10.5 vol or 48 pips suggests limited BoJ concerns
• Friday Cable break-even around 75 pips over UK GDP – will affect May hike odds
• 1-week vols capture May 2 FOMC but no added FX risk premium

UK PMIs to set tone for GBP pre-BoE verdict
Next week’s Markit/CIPS UK April PMI numbers will determine investor sentiment for sterling as they will provide final guidance ahead of the BoE interest rate verdict on May 10–which is currently seen as a coin toss between hike and hold. The manufacturing PMI leads on Tuesday, with the construction PMI following 24 hours later. The most important of the three PMIs, covering the service sector, is due May 3 (the service sector is the dominant segment of the UK economy). A trio of PMI beats would be positive for GBP and a welcome boost for hawks advocating a May 10 rate rise after the dovish shift in BoE expectations on Carney’s April 19 comments–which hit the pound. Ahead of the weekend, sterling may take a fresh hit if the first ONS estimate of UK Q1 GDP growth due on Friday at 0830GMT comes in lower than the 0.3% consensus expectation. Eleven out of the 41 respondents to a survey forecast 0.2% growth, with SEB tipping a meagre 0.1%. BOEWATCH:

Good news ignored, risk rerating, cash/bills favoured
A hallmark of the current earnings season is the way in which the market has ignored good news preferring to cut exposure especially to the FAANGs.

You only have to look at the price action on Netflix last week, Alphabet on Monday or Twitter yesterday to see the way in which sharp gains give way to sellers and a lower price. We will get another chance to view this in action when Microsoft, Amazon and Intel release their results today with Apple releasing its earnings on May 1.The way in which the market is approaching the earnings season suggests that the rerating of risk continues. The price action is a further indication of the way in which the market has shifted since the short vol blow-up in early February. It is also an indication that other potentially overstretched positions in the market are also at risk (Short bonds? Short dollar? Long oil?) as markets seek a more comfortable equilibrium in positioning. It remains attractive to hold a larger allocation in cash/bills that are offering an attractive return and more importantly the potential for less sleepless nights.

Futuro del peso mexicano 26-4

  • USD/MXN opened NY 18.81 v 18.85 Wed cls, up a touch; o/n 18.895-18.8065
  • Risk rising, DXY flat, US 10-yr moves below 3%, barely (2.994%), equities up
  • NAFTA waters calm, Mex elex biggest source of risk as leftist AMLO leads
  • USD/MXN support 18.8065 Thurs low, 18.7537 100-DMA, 18.53/52 200/55-DMA area
  • Res 55-HMA 18.8507, 18.9307 daily pivot, 18.9891 upper 21-h Bolli
525.30= 50 HMA
528=100 HMA
Futuro del peso mexicano 26-4

FX Market Update 25-4

 Market Briefs

• EUR/USD -0.14%, USD/JPY 0.20%, GBP/USD -0.09%, EUR/GBP -0.07%
• DXY 0.21%, DAX -1.55%, FTSE -0.69%, Brent -0.03%, Gold -0.49%
• The dollar hit a four-month high after U.S. benchmark Treasury yields rose above 3%
• France to consider curbs on credit growth in June – central bank chief
• French central bank urges liquidity stress tests for funds
• French jobless total falls during the first quarter
• FR Apr Consumer Confidence, 101, 100 f’cast, 100 prev
• German government cuts 2018 growth forecast to 2.3 percent
• China unveils fresh measures to boost rental housing, pave way for REITs

Looking Ahead – Economic Data (GMT) 
• 11:00 U.S. MBA Mortgage Applications, 4.9% prev
• 11:00 U.S. Mortgage Market Index, 399.4 prev
• 11:00 U.S. MBA Purchase Index, 262.4 prev
• 11:00 U.S. MBA 30-Yr Mortgage Rate, 4.66% prev
• 11:00 U.S. Mortgage Refinance Index, 1,149.5 prev

Looking Ahead – Events, Other Releases (GMT) 
• 20:15 BoC’s Stephen Poloz and Carolyn Wilkins participate in Senate Standing Committee – Ottawa

Currency Summaries
• EUR/USD 1.2188-1.2238 in Asia and 1.2187/18 in Europe
• Pair trapped by hedging for EUR 1.7bln option expiries 1.2200-20 today
• Aside options, interest to trade suppressed by event risk with ECB tomorrow
• Support @ Mar 1 low 1.2155. Resistance @ cloud top 1.2341/Apr 24 high 1.2345

• USD/JPY has seen a 108.79-109.27 range so far on Wednesday
• Month-end demand and the widening 10-yr UST-JGB spread fuels USD/JPY bulls
• Rising 10-year UST yield has resulted in a widening of the UST-JGB spread
• USD set for more gains as 10-year UST yield underpins
• Limited BoJ expectations leaves rates to guide USD/JPY

• Cable met headwind pre-1.40 after eliciting M&A news boost in Asia
• Shire willing to back $64bln Takeda bid. 1.40 is a former support level
• 1.3934 is low water-mark (during European am) since 1.40 threatened
• Tuesday’s range was 1.3919-1.3987 (1.3919 = five-week low)
• Recent GBP losses spurred by dovish shift in BoE expectations on Carney
• May 10 BoE monetary policy announcement is coin toss between hike/hold

• All about higher U.S. yields and CB policy divergence
• USD/CHF rises to another new high of 0.9826 as 10-yr UST ylds hit 3.0090%
• Techs remain o/b with pullback risk but pullbacks likely limited
• EUR/CHF extends rebound out of Monday’s 1.1927 pullback low: 1.1997 Wed high
• Expect offers to emerge again around the 1.20 former SNB floor
• However, if U.S. yields continue higher a good chance the 1.2039 Jan 2015 high is met

• USD/CAD extended north to 3wk high of 1.2868 in early European trade
• Greenback gains influenced by further rise in UST yields: 10yr above 3%
• Offers may emerge near 1.2900 if USD/CAD extends north
• 1.2896 is 61.8% of 1.3124 (March 19 high) to 1.2528 (Apr 17 low)

• AUD/USD extended south to fresh 4mth low of 0.7563 in early European trade
• Decline influenced by further rise in UST yields: 10-year north of 3%
• AUD/USD offers expected near 0.7600 and 0.7620 (Tuesday’s high)
• Large 0.7600 option expiry Thursday, AUD 567mn strike

• NZD/USD extended south to test 0.7073 in early European trade
• 0.7073 = 2018 low (Jan 4). 0.7106 was Tuesday’s low
• USD supported by rise in UST yields: 10-year north of 3%

FX Options
• EUR/USD 5bln 1.22 expiries Wed/Thurs dominate price action in to ECB
• EUR vols stay bid, downside sought, clearly fears of deeper spot declines
• USD/JPY topside progress falters, vol longs book profits after recent gains
• Cable vols stay firm after recent volatility and impending GDP Friday
• Tame Implied vol premums for ECB and BoJ suggest limited expectations
• Bigger US yield and USD gains needed to maintain broader G10 vol demand

Japan’s unhedged investments pose risk for USD/JPY
The emergence of risky investment strategies from Japan’s usually conservative insurance sector poses significant downside risk for USD/JPY should the pair break lower. Japan’s life companies are planning to buy more foreign assets without hedges which should initially shore up USD/JPY support. However, life inurers face an opposing force with the JPY demand generated by the nation’s exporters generating significant USD/JPY resistance. It’s hard to say who may break first and a 105-110 range may be a good bet for the mid-term, yet should the break come lower it will have major ramifications for JPY and Nikkei. Life insurers think the cost of hedging has grown too big so plan to buy fewer hedged assets but should USD/JPY buck their outlook and break in accord with the downtrend since November (50% November-March drop is 109.65), they will incur losses that will hit earnings. That will hit the Nikkei, fuel risk aversion and a bid for the JPY, and could result in a similar JPY surge to that which followed the implosion of carry trades in 2007. USD/JPY and Nikkei

USD/ZAR carving out uptrend as U.S. yields rise
USD/ZAR made a convincing break higher early on Wednesday to a 16-week high of 12.4300 and though there are some overbought indications on the daily chart, ZAR will remain on the defensive as long as U.S. yields are rising. The 10-year UST yield hit a near 4-year high of 3.009% earlier in the session and this looks to have given USD/ZAR another leg up. Key support is now at the former range top at 12.1575. A 38.2% Fibo retrace level taken off the November to February 21% drop provides a target at 12.6805 and if a new bull trend takes off, the retrace could extend to the 50% level at 13.0425. However, with little top tier data scheduled for South Africa and States, Wednesday could see profit- taking stall the dollar’s run in the high 12.40s but fresh bidding will hold pullbacks around 12.35. A nationwide one-day strike by left-wing SAFTU could lean on the ZAR but so far there’s little evidence of major impact

FX Market Update 24-4

Market Briefs

• EUR/USD -0.03%, USD/JPY 0.09%, GBP/USD 0.08%, EUR/GBP -0.11%
• DXY -0.01%, DAX 0.39%, FTSE 0.27%, Brent 0.23%, Gold 0.25%
• DE Apr Ifo Business Climate, 102.1, 102.7 f’cast, 114.7 prev, 103.3 rvsd
• DE Apr Ifo Current Conditions, 105.7, 106.0 f’cast, 125.9 prev, 106.6 rvsd
• DE Apr Ifo Expectations, 98.7, 99.5 f’cast, 104.4 prev, 100.0 rvsd
• FR Apr Business Climate Mfg, 109, 110 f’cast, 111 prev, 110 rvsd
• Japan says trade talks with US under new framework won’t start until June
• Iran warns Trump it might withdraw from Non-Proliferation Treaty
• Oil tops $75, highest since 2014 OPEC meeting that led to pump war
• ECB’s Villeroy de Galhau warns of U.S. protectionist threat
• EU downplays prospect of bespoke Brexit trade deal for banks
• UK finance minister beats target for cutting budget deficit
• IT Apr Consumer Confidence, 117.1, 116.9 f’cast, 117.5 prev
• IT Apr MFG Business Confidence, 107.7, 108.7 f’cast, 109.1 prev, 108.9 rvsd
• UK Apr CBI Trends-Others, 4, 6 f’cast, 4 prev

Looking Ahead – Economic Data (GMT)
• 14:00 U.S. Mar New Home Sales-Units,0.630 mln f’cast, 0.618 mln prev
• 14:00 U.S. Mar New Home Sales Chg MM, 1.9% f’cast, -0.6% prev
• 14:00 U.S. Mar Build Permits R Number, 1.354 mln prev
• 14:00 U.S. Mar Build Permits R Chg MM, 2.5% prev
• 14:00 U.S. Apr Consumer Confidence, 126.0 f’cast, 127.7 prev
• 13:00 U.S. Feb CaseShiller 20 YY, 6.3% f’cast, 6.4% prev
• 13:00 U.S. Feb CaseShiller 20 MM SA, 0.7% f’cast, 0.8% prev
• 14:00 U.S. Apr Rich Fed Comp Index, 15 prev
• 14:00 U.S. Apr Rich Fed Mfg Shipments, 15 prev
• 18:25 U.S. w/e 21 Apr Redbook YY, 3.0% prev

Looking Ahead – Events, Other Releases (GMT)
• N/A EU General Affairs Council meets to discuss Brexit – Luxembourg

Currency Summaries
• EUR/USD 1.2246-1.2198 in NA reaches 1.2185 in Asia and 1.2182 after IFO
• IFO drops to 102.1 in April below 102.7 f/c and compared to prior 103.3
• EUR/USD traded 1.2197-82 in reaction before profit-taking set in
• Hedging for EUR 1bln 1.2200 option expiries is now sen anchoring EUR/USD
• EUR 800 mln expiries 1.2235-50 may attract those short for IFO pare bets
• Support @ Mar 1 low 1.2155/1.2150 barriers. Resistance @ cloud base 1.2236

• USD/JPY remains bid Mon’s rally, US yields high, Japan importer demand
• Importer demand likely to continue to Tokyo month-end Friday
• Exporter offers said to be ahead of 109.00 options barriers
• Range has been a narrow 108.67-108.91 range, though bulls eye barriers
• Descending 100-DMA near 109.00, daily Ichi cloud top 109.32

• Cable firmed to 1.3955 after all-but revisiting 1.3919 during the European am
• 1.3919 = fresh five-week low in Asia (1.3928 was Monday’s low)
• GBP continues to suffer on dovish shift in BoE expectations on Carney
• Cable was trading just under 1.42 when Carney interview broadcast Apr 19
• BoE MPA on May 10 is a coin toss between hike and hold
• EUR/GBP eased to test 0.8745 (Monday’s low) after German IFO miss

• USD/CHF maintains its bid despite easier U.S. yields early Tues
• However, USD-CHF yield spreads are still widening
• Spot plays to a new trend high at 0.9790 from early 0.9769 lows
• Some disappointment surrounding Swiss Mar trade data
• Weaker CHF supporting the surplus but a contraction seen versus Feb
• EUR/CHF pullback from 1.2005 bangs into the 10DMA at 1.1924
• Remains to be seen if an overbought USD/CHF can still slow the cross decline
• Risk to 1.1885 Apr 12 high but would expect fresh bidding at this level

• USD/CAD eased from 1.2851 to 1.2826 during the European am
• 1.2860 was three-week peak in Asia (1.2858 was Monday’s high)
• 1.2800 and 1.2770 (last Friday’s high) are support levels under 1.2826

• AUD/USD met fresh headwind pre-0.7620 after firming from 0.7593
• 0.7593 was early Europe low. 0.7613 = rally high from 0.7577
• 0.7577 = 4mth low in Asia after Aussie headline CPI 1.9% vs 2.0% f/c

• NZD/USD eased to a fresh 16wk low of 0.7106 in early European trade
• 0.7106 is three pips under 50% of 0.6781 (Nov low) to 0.7437 (Jan high)
• AUD/NZD scaled a fractionally fresh 1mth peak of 1.0693 early Europe
• 1.0691 was Asia high. 1.0700 option expiry for NY cut, AUD 400mn strike

FX Options
• USD demand falters for now and related option/vol demand peaks
• EUR/USD held by huge 1.22 vanilla expiries. 1.2150 barriers underpin
• USD/JPY 1-month vol paid 6.4 to 7.7 since last week, but sold 7.5 since
• Limited hedging demand for strikes above 109.00 just yet
• Cable vol setbacks limited ahead of Fridays UK GDP, key for May hike probability

Every BoE MPC vote could be crucial for GBP May 10 

Sterling is at the mercy of a coin-toss BoE interest rate decision on May 10, which may be as close as 5-4 for a hike or a hold. Assuming BoE hawks Saunders and McCafferty repeat their March 22 votes for a hike, three more MPC members need to join them to get the Bank Rate to 0.75%. Vlieghe looks the most likely, having said on March 23 that rates will probably need to rise once or twice a year over the next few years. BoE chief economist Haldane might be another hawk in waiting, after saying in February that BoE rate rises could come faster than expected. This leaves Carney–who spurred a dovish shift in BoE expectations through his comments that hurt GBP last Thursday–Broadbent, Tenreyro, Cunliffe and Ramsden. The latter pair voted against last November’s hike, although Ramsden is no longer perceived as a dove after saying in February that he sees the case “for rates rising somewhat sooner rather than somewhat later”.

EUR/USD girding for retreat to 1.2075-90N
Rising U.S. bond yields and a potentially dovish ECB add to headwinds facing EUR/USD and the daily chart is building for another leg down, a view which is supported by longer-term charts. Downside targets on the EUR/USD weekly chart are showing up at 1.2092, September 2017 high, and 1.2075 30-WMA. and longer-term charts are supporting this view. A rebound pattern on the weeklies, early March and early April, would be negated by a close below 1.2155, low from March 1. This would draw further significance by coinciding with a close below the 21-WMA, currently 1.2210. Fourteen-week bull momentum is fading fast having confirmed a bull bias since late December. Monthly action is moving sideways below the 200-MMA after failing to maintain upside breaks in January, February and March. Rejection at the 1.2483 average this month has led to a decent pullback and EUR/USD is once more threatening a close below the monthly Ichimoku cloud top at 1.2226. Worth noting that the 100-MMA is poised to cross below the 200-MMA, which would give a further bear signal

FX Market Update 23-4

Market Briefs

• EUR/USD -0.46%, USD/JPY 0.54%, GBP/USD -0.31%, EUR/GBP -0.18%
• DXY 0.43%, DAX -0.28%, FTSE -0.09%, Brent -0.27%, Gold -0.48%
• The 10-year U.S. Treasuries yield hit its highest level since January 2014 at 2.99%
• EZ Apr Markit Comp Flash PMI, 55.2, 54.9 f’cast, 55.2 prev
• EZ Apr Markit Serv Flash PMI, 55, 54.6 f’cast, 54.9 prev
• EZ Apr Markit Mfg Flash PMI, 56, 56.1 f’cast, 56.6 prev
• DE Apr Markit Mfg Flash PMI, 58.1, 57.5 f’cast, 58.2 prev
• DE Apr Markit Serv Flash PMI, 54.1, 53.7 f’cast, 53.9 prev
• DE Apr Markit Comp Flash PMI, 55.3, 54.8 f’cast, 55.1 prev
• FR Apr Markit Mfg Flash PMI, 53.4, 53.5 f’cast, 53.7 prev
• FR Apr Markit Serv Flash PMI, 57.4, 56.5 f’cast, 56.9 prev
• FR Apr Markit Comp Flash PMI, 56.9, 55.9 f’cast, 56.3 prev
• Trade war negative for economy says Fed’s Williams – El Pais
• Euro zone debt, deficit drop in 2017 as economy grows
• Greece attains primary surplus of 4.0 pct of GDP in 2017- statistics service
• EU willing to provide some financial market access for Britain – City minister
• Mexico’s Nieto hopes for reworked NAFTA deal soon

Looking Ahead – Economic Data (GMT) 
• 13:45 U.S. Apr Markit Mfg PMI Flash, 55.0 f’cast, 55.6 prev
• 13:45 U.S. Apr Markit Svcs PMI Flash, 54.0 f’cast, 54.0 prev
• 13:45 U.S. Apr Markit Comp Flash PMI, 54.2 prev
• 14:00 U.S. Mar Existing Home Sales, 5.55 mln f’cast, 5.54 mln prev
• 14:00 U.S. Mar Existing Home Sales % Chg, 0.2% f’cast, 3.0% prev
• 12:30 CA Feb Wholesale Trade MM, 0.5% f’cast, 0.1% prev

Looking Ahead – Events, Other Releases (GMT)
• 14:00 ECB’s Benoit Coeure participates in a conference on ‘Resolution in Europe: The Unresolved Questions’ – Frankfurt
• 19:30 BoC’s Stephen S. Poloz and Carolyn A. Wilkins participate in House of Commons Standing Committee on Finance – Ottawa

Currency Summaries
• EUR/USD off 0.45% early Europe with a 1.2226 low recorded
• EUR/USD traders add around EUR 2.3 bln to long positions in last 2 weeks
• Most are losing as EUR/USD is 22 pips above its low for the last two weeks
• The entire 19bln long position is subject to a cost of about 1 pip per day
• For those long since Jan that’s a big issue, costing close 0.75% IMM/FX
• Close below daily cloud base @ 1.2236 is likely to cue up a 1.20 test
• Last similar cloud break saw EUR/USD 1.1920-1.15553 Oct/Nov 2017

• USD/JPY overcomes 108.00 option barriers, triggers buy stops above
• Range has been 107.67-108.28 so far this session
• Japanese importers seen late in buys for April, month-end approaching fast.
• Higher US yields very supportive, Nikkei off but holding on 22K handle.
• Falling risk aversion also weighs on the yen

• Cable fell to 1.3958 during the European am as more USD shorts squeezed
• 1.3958 = 5wk low. IMM specs net USD short rose to 6yr+ high last week
• Net GBP long biggest since July 2014 (as of Tues Apr 17)
• USD strength influenced by proximity of 10-year UST yield to 3.0%
• GBP still suffering from dovish shift in BoE expectations on Carney
• Pound could be heading for its first April fall vs USD since 2004

• USD/CHF continues higher and drawing support from rampant U.S. yields
• Spot plays 0.9748 to 0.9776 vs Friday’s 0.9751 close
• U.S 10-YT yield hits 2.9980%, just shy of much touted 3.0% level
• EUR/CHF heavy having failed to hold 1.20 breaks last week
• Offers had been touted around the former SNB floor at 1.20
• Overbought techs also at play but pullbacks likely shallow
• Latest SNB sight depo data shows increases for domestic and total depos

• USD/CAD rose to 2wk high of 1.2805 during the European morning
• More greenback shorts squeezed during the climb
• Proximity of 10-year UST yield to 3.0% is lending support to USD

• AUD/USD slid to a four-month low of 0.7634 during the European am
• Losses influenced by proximity of 10-year UST yield to key 3% level
• 0.7659-0.7683 was Asia range to follow Friday’s fall to 0.7655
• Australian Q1 inflation data due Tuesday 0130GMT, core CPI f/c 1.8%
• US bank said buy EURAUD at 1.6000 as TOTW, stop 1.5825, target 1.6325

• NZD/USD extended south to 0.7167 during the European morning
• 0.7167 = one-month low. 0.7199-0.7219 was Asia range
• More USD shorts squeezed during the slide to 0.7167
• IMM speculators’ upped net USD short position to 6yr+ high last week

FX Options
• EUR/USD downside hedging remains limited, certainly while 1.2150 barriers hold
• USD/JPY vols off lows with spot above 108.00, no hurry to cover further gains yet
• GBP/USD vols best performers last week after 600 pip round trip for spot
• UK May rate hike hopes may now ride on Fri’s UK GDP being strong
• AUD/USD vols higher as 0.7600 barriers look increasingly vulnerable

US yield boost for dollar index may be short-lived
The rise in the 10-year UST yield to 2.9960 on Monday as it extends its push towards the much-touted 3% level is underpinning the USD index but that boost may prove short-lived. Hourly charts show the DXY being towed by higher yields from April 17, which tied in with a rebound in oil prices on April 18 but daily action is less convincing. While yields are breaking range tops the DXY remains comfortably below its 90.932 February to April range high. Levels to watch topside for the DXY are at the 30-DMA upper Bollinger at 90.552 and then 90.597 high from April 6. The big level to watch is at 91.004, the high from Jan 17. A 50% Fibo retrace off the October 2017 95.15 high to 88.2530 February 2018 low comes in behind at 91.7015. Note the potential for a bull break above a three-month range top and cloud top break in light crude oil, which will figure prominently on bond traders inflation radar screens. US 10YT yield vs DXY Daily Chart:

AUD/USD risks deeper fall as US yields rise 
AUD/USD risks deeper losses with barriers at 0.7600 looking more vulnerable as U.S. inflation concerns boost UST yields and the greenback. Higher U.S. yields and a stronger dollar place more burden on currencies with higher debt that are dependent on foreign funding such as the Australian dollar. One U.S. bank is even looking for AUD/USD to target the December 2016 low at 0.7160, AUD/USD failed to get legs above 0.7800 last week, helped in part by the 200-DMA currently 0.7815, where short stops are now gathering. The U.S. name highlights recent lacklustre Australian data and subdued underlying inflation, which should keep the RBA on hold for the foreseeable future and makes Tuesday’sCPI data key for short-term direction. Initial AUD/USD targets are the 2018 low at 0.7643, before the trend line off the 2016 low around 0.7615-20 ahead of those 0.7600 barriers. A breach of 0.7600 targets the December 2017 low at 0.7501 before early June 2017 double base at 0.7372-74, May 9‘s 0.7329 low and December 2016 lows at 0.7160 thereafter

FX Market Update 20-4

Market Briefs

• EUR/USD -0.39%, USD/JPY 0.28%, GBP/USD -0.19%, EUR/GBP -0.26%
• DXY 0.26%, DAX 0.06%, FTSE 0.47%, Brent 0.18%, Gold -0.36%
• Bank of England rate rises should be gradual, not glacial – Saunders
• Japan warns G20 protectionism will disrupt markets
• SNB’s Jordan says no reason to change monetary policy
• U.S. Treasury weighs emergency powers to curb Chinese investments -official
• China March industrial power consumption down 1.4 pct on year
• EU’s Barnier says still some 25 pct of work to do on Brexit
• DE Mar Producer Prices YY, 1.9%, 2.0% f’cast, 1.8% prev
• DE Mar Producer Prices MM, 0.1%, 0.2% f’cast, -0.1% prev

Looking Ahead – Economic Data (GMT) 
• 12:30 CA Mar CPI Inflation YY, 2.4% f’cast, 2.2% prev
• 12:30 CA Mar CPI Inflation MM, 0.4% f’cast, 0.6% prev
• 12:30 CA Mar CPI BoC Core YY, 1.5% prev
• 12:30 CA Mar CPI BoC Core MM, 0.7% prev
• 12:30 CA Feb Retail Sales MM, 0.3% f’cast, 0.3% prev
• 12:30 CA Feb Retail Sales Ex-Autos MM, 0.3% f’cast, 0.9% prev

Looking Ahead – Events, Other Releases (GMT)
• 11:30 German Federal Bank’s Jens Weidmann, Bundesbank’s Claudia Buch and Deutsche Bundesbank’s Andreas Dombret participate at Spring Meeting – Washington
• 13:40 Chicago Fed’s Charles Evans speaks on current economic conditions and monetary policy – Chicago
• 15:15 FRB San Francisco’s Williams in chat at UC Berkeley – Pebble Beach, CA
• 15:25 BoC’s Carolyn A. Wilkins participates in panel discussion – Washington
• 15:45 FedTrade Operation 30-year Fannie Mae / Freddie Mac (max $670 mn)
• 16:45 G20 Finance Ministers speaks on the sidelines of Spring Meeting – Washington

Currency Summaries
• EUR/USD dragged down by hedging for EUR 1.6bln option expiries at 1.2300
• EUR/USD opens 1.2341 prints a 1.2353 peak then drops to 1.2293
• High risk pair closes below 21/55-DMAs 1.2332-30 and daily cloud top 1.2354
• Closing breaks target cloud base 1.2336 and April 5/6 lows 1.2219/15
• Pair likely anchored by 1.2300 expiries until 15GMT

• USD/JPY 107.36-107.73 range, up in Asia on Gotobi demand, USTs underpin
• Japanese importers bought after the fix, decent exporter offers ahead 108
• Bulls seek daily close above key Fibo in order to accelerate
• Outlook bullish, but U.S-China protection needed
• Decent USD/JPY strikes above could attract

• Cable extended south to a fresh 2wk low of 1.4037 in early European trade
• Losses fuelled by dovish shift in BoE expectations on Carney
• Probability of BoE rate rise on May 10 is now close to 50-50
• GBP/USD was just under 1.42 when Carney interview broadcast Thursday
• MPC hawk Saunders says BoE rate rises should be gradual, not glacial
• EUR/GBP down half-a-penny since threatening 0.88 in early European trade

• EUR/CHF marginal new trend high at 1.2005
• Profit taking again taking the edge off a 1.20 break
• Pullback limited as fresh demand meets 1.20 supply
• Daily techs are overbought and deeper pullback risk increasing
• Cross plays a tight 1.1968-1.2005 early Friday
• USD/CHF also makes a new high, 0.9726 but again looking stretched

• USD/CAD extended north to a 10-day high of 1.2685 during the European am
• 1.2657 was Asia low (1.2660 was Wednesday’s high after dovish BoC)
• Canada Mar inflation and Feb retail sales data due 1230GMT
• CPI f/c +2.4% YY vs +2.2% f/c. Retail sales f/c +0.3% MM
• Large 1.2650 and 1.2700 expiries for NY cut, USD 1bln and 903mn strikes

• AUD/USD extended south from 0.7813 to 0.7687 during the European am
• 0.7687 = 11-day low. 0.7813 was Thursday’s high (just shy of 200DMA)
• Greenback continues to benefit from higher UST yields: 10-year at 2.91%
• Large 0.7700 option expiry for 10am ET NY cut, AUD 1bln strike

• NZD/USD extended south to a 17-day low of 0.7216 during the European am
• 0.7216 is the 100DMA. 0.7395 was eight-week high last week (Apr 13)
• Recent NZD losses influenced by soft NZ Q1 inflation data

Option Expiries For Friday NY Cut
• EUR/USD: 1.2300-05 (1.6B), 1.2375 (565M), 1.2400 (323M), 1.2420 (641M)
• GBP/USD: 1.4000 (285M), 1.4100 (232M), 1.4150 (572M), 1.4200 (531M)
• EUR/GBP: 0.8710 (200M), AUD/USD: 0.7700 (1B), 0.7725 (374M), 0.7750 (317M)
• USD/CAD: 1.2600 (1.4B),1.2630 (631M), 1.2650/60 (1.6B), 1.2700 (903M), 1.2750 (1.2B)
• USD/JPY: 106.85-107.00 (704M), 108.00 (636M)

Sterling faces pivotal May after dovish Carney
Volatile trading in sterling next month is all but guaranteed after BoE Governor Carney on Thursday dampened expectations for a 25bp rate hike on May 10. A May rate rise is now close to a 50-50 bet, according to the BOEWATCH page on Reuters Eikon. A hike on May 10 was widely expected before Carney’s forward guidance on rates, even after this week’s UK earnings miss, sub-forecast UK March CPI inflation number and soft UK ONS March retail sales data. The dovish shift in expectations on Carney means GBP should catch a knee-jerk bid if the BoE does hike on May 10, before its “take two” reaction to the tone of the accompanying message (ie, ‘hawkish hike’ or ‘dovish hike’). Sterling will fall if the BoE keeps the Bank Rate at 0.5%–a decision which would also increase the GBP event risk of the next-but-one BoE monetary policy announcement on June 21. Next week’s key UK event risk is the first ONS estimate of UK Q1 GDP on April 27. BOEWATCH:

EUR/GBP bears caught in a trap as reversals loom
EUR/GBP gains are poised to extend as the monthly candle chart is warning of a bear trap for bears with April displaying a long lower wick and potential for a hammer signal. Key levels and viable bull targets are seen at 0.8863 10MMA, 0.8964 tenkan and March’s 0.8968 high. Weekly charts are also sounding alarm bells for sterling bulls and given the speed of EUR/GBP’s turn this week it is likely significant EUR/GBP shorts remain in the market. On the weekly chart, a bullish engulfing line looks set to hold into the close but would need a follow- up bullish confirmation next week to complete the signal. Upward momentum may be slow, however, as a band of weekly resistance runs from the 10-WMA at 0.8796 to the 55-WMA at 0.8821 with the weekly cloud base in the mix at 0.8806. Weekly tenkan and kijun lines look poised to cross bullishly while slow Stochastics have already confirmed a direction change. Fourteen-week bear momentum is still holding but seen fading fast

FX Market Update 19-4

Market Briefs

• EUR/USD -0.05%, USD/JPY 0.16%, GBP/USD -0.08%, EUR/GBP 0.02%
• DXY 0.06%, DAX -0.03%, FTSE 0.29%, Brent 0.64%, Gold -0.14%
• Currency trading volumes hit record highs in first quarter
• Japan contemplates post-Abe world, but rivals’ positions still murky
• Trump, Japan’s Abe agree to intensify trade talks
• China says ready to deal with any fallout from U.S. trade row
• Moody’s says Russian economy resilient to latest U.S. sanctions
• BOJ warns of risk from lax bank loans to “middle risk companies”
• EZ Feb Current Account SA, EUR, 35.1 bln, 37.6 bln prev, 39.0 bln rvsd
• EZ Feb Current Account NSA, EUR, 22.7 bln, 12.8 bln prev, 12.6 bln rvsd
• GB Mar Retail Sales YY, 1.1%, 2.0% f’cast, 1.5% prev
• GB Mar Retail Sales Ex-Fuel YY, 1.1%, 1.4% f’cast, 1.1% prev, 1.2% rvsd
• GB Mar Retail Sales MM, -1.2%, -0.5% f’cast, 0.8% prev

Looking Ahead – Economic Data (GMT)
• 12:30 U.S. Initial Jobless Claims, 230k f’cast, 233k prev
• 12:30 U.S. Continued Jobless Claims, 1.848 mln f’cast, 1.871 mln prev
• 12:30 U.S. Jobless Claims 4-Wk Avg, 230.00k prev

Looking Ahead – Events, Other Releases (GMT)
• 12:00 FRB’s Lael Brainard speaks on “Regulatory Reform” – Washington
• 12:45 IMF’s Christine Lagarde holds news conference before IMF-World Bank meeting – Washington
• 13:30 FRB’s Randal Quarles testifies before the Senate Banking Committee hearing – Washington
• 14:45 FedTrade Operation 30-year Ginnie Mae (max $465 mn)
• 15:00 ECB’s Ignazio Angeloni speaks at European Breakfast series – Washington
• 16:00 Norges Bank’s Oystein Olsen speaks for the financial markets association – Oslo
• 16:30 BoE’s Jon Cunliffe speaks at 2nd Annual Global Finance Forum – London
• 16:30 Eurogroup head Mario Centeno speaks on “Completing the European Project” – Washington
• 17:15 Norges Bank’s Jon Nicolaisen speaks at 36th Annual Monetary and Trade Conference – Philadelphia
• 18:45 BoC’s Carolyn A. Wilkins participates in panel discussion at IMF – Washington
• 22:00 Swedish cenbank’s Stefan Ingves and Per Jansson attend IMF-World Bank event – Washington
• 22:45 Cleveland Fed’s Loretta Mester speaks on outlook and policy at Univ of Pittsburgh – Pittsburgh

Currency Summaries
• EUR/USD boosted to 1.2400 on MNSI story about Jun’s importance for ECB
• Source says ECB will give more clarity on forward guidance in June
• Adds if financial conditions deteriorate could boost bond buys
• EUR/USD slips back to a session low 1.2354
• EUR 6 billion of vanilla expiries between 1.2300 and 1.2400 today
• Huge size and likely active hedging of options are anchoring EUR/USD
• EZ c/a narrows from EUR 39bln in Jan to EUR 35.1bln in Feb

• Abe-Trump summit non-event, worst fears on trade put aside for now
• Outlook bullish, but U.S-China option protection needed
• Focus on matching 107.78 Feb 22/Apr 13 highs, stops 107.80+, 108.00+
• Session 107.19-107.52 range, spot stymied by Japanese exporter offers so far
• Spot remains propped by thick daily cloud, expect gains
• Decent support at 107.00 which was the low on Wednesday

• Cable fell to 1.4161 as more longs headed for exit on sub-f/c UK retail sales
• Retail sales fell 1.2% in March against an expected decline of 0.5%
• Prior GBP position adjustments on UK earnings miss and sub-f/c UK CPI
• 1.4161 = one-week low, 48 hours after post-Brexit vote day high of 1.4377
• Rise to 1.4377 influenced by hawkish BoE expectations pre-UK earnings miss
• EUR/GBP extended north to 8-day high of 0.8735 during the European am

• EUR/CHF again stalled by profit taking ahead of the 1.20 level
• Cross plays 1.1976-1.1997 early Thurs: 1.20 test expected but patience needed
• Former SNB floor attracting offers but l/t 1.20+ objectives debated
• 50% Fibo Oct 2007 1.6828 high-Jan 2015 0.8500 low comes at 1.2664
• USD/CHF squeeze above the 200DMA, 0.9657, helping underpin the cross

• USD/CAD elicited support pre-1.2600 after falling from 1.2645 (Asia high)
• 1.2606 = European am low. 1.2600 option expiry for NY cut, USD 415mn strike
• Larger 1.2600 option expiry Friday, USD 1.3bln strike
• 1.2660 was eight-day high Wednesday after BoC’s dovish hold
• Poloz-Recovering from NAFTA uncertainty could take time (WSJ interview)

• Offers pre-0.7817 (200DMA) curtailed AUD/USD rise from 0.7765
• Prior supply ahead of 200DMA also capped pair last Friday (Apr 13)
• 0.7765 was low after soft Australia employment data
• More shorts squeezed during AUD/NZD rise to 1.0664 (3wk high)

• NZD/USD dropped to threaten 0.7300 again during the European am
• 0.7304 was Wednesday’s low and the Apr 10 low
• NZD weakness influenced by dovish comments from RBNZ governor Orr
• Orr said he expected “very benign inflation going forward without doubt”
• RBNZ Governor spoke to Radio New Zealand after 1.1% NZ CPI number

Option Expiries for Thursday NY cut
• EUR/USD: 1.2300-10 (2B), 1.2315-25 (1.3B), 1.2350-60 (1.1B), 1.2400 (1.6B)
• USD/CHF: 0.9530 (226M), 0.9650 (251M)
• GBP/USD: 1.4075-90 (545M), 1.4255 (256M), 1.4300 (232M), 1.4350 (295M)
• EUR/GBP: 0.8580 (475M), 0.8630 (233M), 0.8650 (419M), 0.8700-20 (671M)
• AUD/USD: 0.7700-10 (1.9B), NZD/USD: 0.7225 (210M), USD/CAD: 1.2600 (380M)
• USD/JPY: 106.50 (695M), 107.00 (342M), 107.60 (340M), 108.00 (525M)

EUR/CHF longer-term bull objectives up for debate 
Overbought technicals that have developed as EUR/CHF has rallied are warning that the cross’ gains above 1.20 may be limited, initially, but there’s much debate about the likely longer-term objective once the former SNB floor buckles. A long-term 50% Fibo off the October 2007 1.6828 high and January 2015 0.8500 low comes at 1.2664 and provides a viable bull target for 2018. SNB intervention, which has been keeping the CHF soft, is now likely over but at the same time the central bank is unlikely to spoil the EUR/CHF rally with restrictions. Expect profit-taking on EUR/CHF longs once the 1.20 level trades. There’s possible scope to the 1.2039 January 2015 sell-off point before stalling but pullbacks will probably be limited as fresh positioning underpins. Monetary policy divergence between the SNB and ECB will likely keep EUR/CHF inflated for the remainder of 2018. Keep an eye on a bid USD/CHF too as the spot market squeeze above the 0.9657 200-DMA helps underpin the cross. EUR/CHF

Central Bank flows may turn the USD higher
Shifting central bank flows are set to underpin a much weakened U.S. dollar and with other volumes low, and traders heavily short, CBs could even turn the greenback onto a higher path. With EUR/CHF at 1.2000 the chance of further SNB intervention seems remote, removing a prior key support for the euro. China’s tolerance of a stronger yuan suggests that it too will not be building reserves supporting USD/CNY, while logically CNY’s rise on a trade weighted basis will weigh on big components of the basket like euro and yen. India, Indonesia and HKMA have been selling dollars (HK USD 6.5 bln) and any rebalancing of reserves will see dollars purchased versus liquid currencies like euro and JPY. Other interests in FX have waned with vols the lowest since early January, so CB flows, which are large anyway, may have a big influence. With specs sitting short of 27 billion dollars, (mostly versus euro), CB flows that will initially support the dollar could spark a change in its fortunes.