Category Archives: Market News

FX Market Update 11-8

Market Briefs

• EUR/USD -0.12%, USD/JPY -0.13%, GBP/USD -0.11%, EUR/GBP -0.02%
• DXY +0.08%, DAX -0.34%, FTSE -1.06%, Brent -0.58%, Gold +0.12%
• EUR 2.5 billion vanilla option expiries 1.1750-65 today
• DE Jul final CPI y/y, 1.7% vs f’cast 1.7%, prev 1.7%
• DE Jul HICP final y/y, 1.5% vs f’cast 1.5%, prev 1.5%
• China should be neutral if N.Korea fires first on U.S. – Global Times
• China’s July fiscal spending pace slows, but revenues rise
• China’s money rates slightly up on central bank-led cash drain
• Oil drops as IEA sees slow market rebalancing
• Gold buoyed by U.S.-N. Korea tensions

Looking Ahead – Economic Data (GMT)

• 12:30 US CPI (Jul) (mkt 1.8%, prev 1.6%)
• 12:30 US Core CPI (Juk) (mkt 1.7%, prev 1.7%)
• 17:00 Baker-Hughes Oil Rig Count (weekly) (prev 765; -1 w/w, +384 y/y)

Looking Ahead – Events, Other Releases (GMT)

• 13:40 Fed’s Kaplan speaks at certified public accountants event
• 15:30 Fed’s Kashkari speaks at moderated Q&A event
• 15:45 FedTrade operation 15-year Fannie Mae / Freddie Mac (max $475 mn)

Currency Summaries

EUR/USD

• EUR/USD trading a 1.1749-78 range so holding close to today’s expiries
• U.S. CPI data ahead follows softer than f/c PPI release yesterday
• EUR longs likely inclined to book profits after 1.1910-1.1889 reverse
• U.S. rates moving lower and providing support for the uptrend
• 2 year Fed fundd at 2017 low:

USD/JPY

• USD/JPY 108.91-109.26 range in Asia and Europe. June low 108.81
• Early bias higher but pair then gravitates back towards 109.00
• USD 1.6 billion vanilla options expiries @ 109.00 today
• Softer US rates evident ahead CPI data today:
• Soft PPI data yesterday likely influencing the dovish view
• Early Aug lows @ 109.85 now resistance. 2017 low @ 108.13 key below

EUR/CHF

• CHF continues to benefit from risk aversion on the back of N.Korea concerns
• VIX at highest level since Nov, world stocks set for worst week since Nov
• EUR/CHF dropped to threaten 1.1261 (Wednesday low) during European am
• 1.1261 = 50% retracement of 1.0984 (July 13 low) to 1.1537 (Aug 4 high)
• Asia low was 1.1300 (1.1301 was Thursday’s low).
• 1.1300 option expiry for 10am ET NY cut, EUR 200mn strike

GBP/USD

• Cable eased towards 1.2950 during Ldn am after holding sub-1.30 in Asia
• Bids near 1.2950 based cable losses on Tuesday & Thursday
• Offers above 1.30 kept lid on cable Thursday (after 1.2950 threatened)
• Morgan Stanley sees EUR/GBP at 1.00 at start of 2018
• 0.9805 marks all-time high for EUR/GBP (Dec 2008)
• Bids ahead of 0.9000 propped cross on Wednesday & Thursday

USD/CAD

• 1.2724 = European am low for USD/CAD after 4wk high of 1.2753 in Asia
• Ascent to 1.2753 courtesy of risk aversion on N.Korea concerns
• 1.2725, 1.2735, 1.2740 & 1.2745 expiries for NY cut (closest-to-market)
• USD 1.35bln = cumulative size of the 1.2725-45 option expiries
• WTI fell to 16-day low just shy of 48.00/barrel during European am

AUD/USD

• 0.7850 expiry for NY cut is helping to anchor AUD/USD after losses in Asia
• AUD 347mn strike. 0.7839 = 23-day low in Asia on risk aversion/proxy flow
• AUD is lead EM Asia currency proxy. VIX at highest level since Nov
• World stocks set for worst week since Nov on N.Korea concerns

NZD/USD

• 0.7291 = European am high for NZD/USD after 0.7253 revisited in Asia
• 0.7253 was Thursday’s 4wk low after RBNZ jawboning on NZD
• AUD/NZD extended south from 1.0862 to 1.0775 during the European am
• 1.0862 = 3mth high Thursday. AUD hurt by EM Asia currency proxy flow

FX OPTIONS

• USD/JPY 109.00 (1.64BLN), 109.75 (660M)
• EUR/USD 1.1700 (1.17BLN), 1.1750/55 (1.33BLN), 1.1760/65 (1.15BLN)
• EUR/JPY 127.25 (320M), 128.25 (400M), 131.00 (264M)
• EUR/GBP 0.9000 (875M), 0.9300 (623M) EUR/CHF 1.1300 (200M)
• AUD/USD 0.7850 (347M), 0.7900 (643M), 0.7930 (365M)
• USD/CAD 1.2650 (535M), 1.2725 (445M), 1.2735 40 (655M)

COMMENT

USD/JPY has more room to move down

USD/JPY has room to move lower. The absence of Tokyo traders contributed to the break below 109.00. Japanese names have been the main buyers all week and though some doubtless left bids over the holiday, buying was likely reduced as was liquidity. The number of speculative longs, which have certainly been pared this week, are likely to be very large. Risk aversion has been blamed for a lot of the slide this week and overshadowing a key driver, U.S interest rates. Despite strong NFP and JOLTS data, the expected path of U.S. rates has dropped. Fed funds price just 40bp of tightening in the next two years, matching earlier August and June lows. U.S. PPI missed the Rtrs poll forecast suggesting risk to rates from today’s CPI is also to the downside. Reduced Japanese demand may allow for a test towards the 2017 low at 108.13. Should 108.00 break there is little to support USD/JPY ahead of major Nov 2016 high/lows 106.95-106.50.

CHART

USD/JPY pushing an accommodating envelope

Pressure on the 30-day lower Bollinger and the widening of the envelope has freed up room for USD/JPY to go lower this week. Thursday’s sharp fall from 110.18 to 109.15 was contained by the lower Bollinger at 109.13 and a further test of 108.85 earlier Friday saw another rebound, albeit modest. USD/JPY is currently tracking lower within a lower Bollinger and 10-DMA channel with the short-term average on top at 110.14. We would look to fade the 10-DMA on any adjustment but the technical picture is beginning to favour a short play on a break below the 108.81 low from the June 14 hammer candle. Weekly charts also show the market being held up by a Bollinger line and a cloud base at 108.61 and 108.83 respectively. If the market can close below the weekly cloud, the 108.13 low from April becomes vulnerable.

FX Market Update 9-8

Market Briefs

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

Looking Ahead – Economic Data (GMT)

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

Looking Ahead – Events, Other Releases (GMT)

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

Currency Summaries

EUR/USD

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

USD/JPY

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

EUR/CHF

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

GBP/USD

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

USD/CAD

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

AUD/USD

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

NZD/USD

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

FX OPTIONS

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

CHART

USD/CHF bull trend faces severe damage

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

FX Market Update 8-8

Market Briefs

• EUR/USD +0.11%, USD/JPY -0.17%, GBP/USD -0.02%, EUR/GBP +0.14%
• DXY -0.1%, DAX +0.03%, FTSE -0.07%, Brent +0.52%, Gold +0.27%
• DE Jun Trade balance (EUR) SA, 21.2 bln vs f’cast 21.0 bln, prev 20.3 bln
• DE Jun Imports m/m SA, -4.5% vs f’cast 0.2%, prev 1.2% rvsd 1.3%
• DE Jun Imports m/m SA, -2.8% vs f’cast -0.30%, prev 1.4% rvsd 1.5%
• China July exports, imports weaker than expected, cloud global outlook
• BOJ should dial back stimulus even if inflation misses target – ex-dep gov Iwata
• No-confidence vote signals “High Noon” for South Africa’s Zuma
• Tillerson in Thailand presses for more action on North Korea
• Oil prices steady as Saudi cuts September supplies
• Gold rises as dollar eases, focus on U.S. inflation data

Looking Ahead – Economic Data (GMT)

• 10:00 US NFIB Small Business Optimism Index (Jul) (prev 103.6)
• 12:55 US Redbook Same-Store Sales Index (weekly) (prev +2.8% y/y)
• 14:00 US JOLTS job openings (Jun) (mkt 5.775 mn, prev 5.666 mn)

Looking Ahead – Events, Other Releases (GMT)

• 12:00 South Africa vote of no-confidence in Pres. Zuma
• 15:45 FedTrade operation 15-year Fannie Mae / Freddie Mac (max $475 mn)

Currency Summaries

EUR/USD

• Another slow day with EUR/USD close to 1.1800
• European range 1.1802-18 after 1.1792-1.1824 in Asia
• Bond markets undermining EUR/USD:
• EUR 548mln 1.1800 vanilla option expiries today
• Weak mix for French & German trade as both imports/exports fall
• NFP impact on rates marginal:

USD/JPY

• USD/JPY very slightly lower 110.50-65 in Europe
• Continuing consolidation expected within NFP data range 109.85-111.05
• Today USD 490 mln option expiries at 111.00. No major US data
• Rates not providing expected NFP boost:
• USD 12 billion speculative longs continue to weigh on USD/JPY

EUR/CHF

• EUR/CHF met headwind just shy of 1.15 after extending north from 1.1461
• 1.1461 was pullback low from Monday’s 1.1502 high
• Resistance levels beyond 1.1500/02 include 1.1537 & 1.1561
• 1.1537 was last Friday’s 31-month high, 4.8% above prior week’s low
• Swiss July adjusted jobless rate 3.2%, as expected

GBP/USD

• Cable has traded a meagre 21 pip range thus far Tuesday, 1.3032-1.3053
• Peak of that range = pip shy of 21DMA. 1.3059 was Monday’s high
• Bids tipped towards 1.3000 (July 26 low). 1.3008 = 38.2% of 1.2589-1.3267
• 1.2589 = June low after UK election shock. 1.3267 = 11mth high Aug 3
• Aug 3 peak scaled before GBP tanked on dovish BoE hold
• Quarter-yard 1.3000 option expiry for 10am ET NY cut (1400GMT)

USD/CAD

• Spot elicited support pre-1.2650 in Asia after extending south from 1.2715
• 1.2654 = Asia low. 1.2657-1.2671 = European am range
• 1.2715 was Monday’s 24-day high (three cents above recent 25mth low)

AUD/USD

• Huge 0.7950 option expriy for the 10am ET NY cut, AUD 2.5bln strike
• Offers tipped pre-0.7950 (Monday’s high was 0.7949)
• RBA’s Kent due to speak Wednesday. RBA Governor Lowe speaks Friday

NZD/USD

• NZD continues to suffer on expectations of dovish RBNZ hold this week
• 0.7351-0.7369 = Tuesday range-to-date after Monday’s drop to 0.7348
• AUD/NZD up to 1.0779 in Asia, highest level since July 20
• NZD could rally if RBNZ message less dovish than expected Wednesday

FX OPTION EXPIRIES

• EUR/USD 1.1800 (548M)
• USD/JPY 111.00 (490M)
• AUD/USD: 0.7950 (2.5BLN)
• GBP/USD: 1.3000 (245M)

COMMENT

Perhaps EUR/USD longs should book profits

It maybe prudent to use EUR/USD rallies to book a profit. The technical picture remains very bullish and political risks and some fundamentals support the pair. However, a core part of rationale thought to support a higher EUR/USD rate has been running in opposition to that move since July 21. UST/bund spreads have widened. In the not too distant past that would have fuelled short selling of EUR/USD, and it is certainly good cause to book a profit. The shift to wider UST/bund spreads has been led by very long-dated spreads and that is noteworthy because it was the 30 year spread that was first narrowed leading the turn for interest rates that undermined short EUR/USD positions earlier this year. Speculators are holding a big long EUR position and there is little time left now ahead of major CB events in September and Jackson Hole this month. There is never a bad time to take a profit. Chart UST/bund:

CHART

Oversold USD/SEK looks ripe for reversal

An oversold USD/SEK is ripe for a bullish reversal and a few technical pointers are coming together to support that view with the 30-week Bollinger leading the charge. USD/SEK has been below the Bollinger (8.15 Tuesday) for seven weeks and this is a strong indication of an oversold market. Last week’s price moves delivered a hammer candle and modest bullish confirmation so far this week. Weekly bearish momentum is fading and slow stochs have crossed to the topside. We would look to retracement levels off the mid-Dec 2016 9.4476 high and 8.0525 Aug 2017 low. The initial objective is the 23.6% Fibo at 8.3817 but would favour an eventual run to the 50% pullback level at 8.75. A rising 200-week moving average converging on the price could be a double-edged sword with a break to trigger a bearish resumption but provides a natural stop at 8.0062

FX Market Update 7-8

Market Briefs

• EUR/USD +0.27%, USD/JPY +0.13%, GBP/USD +0.15%, EUR/GBP +0.14%
• DXY -0.16%, DAX -0.41%, FTSE +0.1%, Brent -1.43%, Gold -0.04%
• EZ Aug Sentix Index, 27.7 vs f’cast 27.8, prev 28.3
• GB Halifax House prices 3m/yy, 2.1% vs f’cast 2.0%, prev 2.6%
• DE Industrial output m/m, -1.1% vs f’cast 0.2%, prev 1.2%
• China July FX reserves unexpectedly hit 9-month high as dollar weakens
• British election failure shakes confidence in May’s Brexit strategy – ORB poll
• Sunday Telegraph said UK ready to pay 40 billion euros to leave EU
• Oil slides from 9-week highs as market looks to OPEC
• Gold hovers near lows, investors wary about U.S. rates

Looking Ahead – Economic Data (GMT)

• 14:00 US Labor Market Conditions Index (Jul) (prev +1.5)
• 14:00 US Employment Trends Index (Jul) (prev 133.1)
• 19:00 US Consumer Credit (Jun) (mkt +$15.54 bln, prev +$18.4 bln)

Looking Ahead – Events, Other Releases (GMT)

• 15:45 Fed’s Bullard speaks on the U.S. economy and monetary policy; Nashville, TN
• 17:25 Fed’s Kashkari speaks in moderated audience Q&A session at Rotary Club event
• 18:30 FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.65 bn)

Currency Summaries

EUR/USD

• Slow session sees EUR/USD gravitate towards larger option expiries
• EUR 895 million vanilla expiries at 1.1800 today
• Asia trade bullish pattern 1.1771-1.1814, mostly over NA close @ 1.1774
• German industrial output down 1.1% in June vs 0.2% f/c, ignored
• Europe range 1.1778-1.1814. No U.S. data of note today

USD/JPY

• USD/JPY 110.65-85 in Asia and 110.65-87 in Europe
• Resistance at Friday’s post NFP best @ 111.05
• Support at last week’s twin lows @ 109.85
• Higher U.S rate outlook underpinning USD/JPY
• Large & mainly losing bullish bets weigh:

• USD 1.3bln 110.80 option expiries have anchored spot today

EUR/CHF

• EUR/CHF met headwind circa 1.1500 after rallying from 1.1458
• 1.1458 = early Europe low (1.1455 = July 31 high). 1.15 = former resistance
• Swiss annualized CPI inflation +0.3% in July, as expected
• SNB held CHF 714.33bln in fx reserves end July vs 693.682bln end June
• CHF value of SNB’s EUR fx reserves boosted by recent EUR/CHF surge
• Cross scaled 31mth peak of 1.1537 Friday (4.8% above prior week’s low)

GBP/USD

• Cable traded a meagre 21 pip range thru European am, 1.3038-1.3059
• Loss consolidation from recent 10mth high of 1.3267 = big-picture story
• Recent losses courtesy of dovish BoE hold Thursday & NFP beat Friday
• 1.3024 (Friday’s low) & 1.3000 (July 26 low) are support levels
• Fresh EUR/GBP bids expected around 0.9000 (former resistance level)

USD/CAD

• USD/CAD rose to a 20-day high of 1.2682 during the European am
• Ascent influenced by lower oil prices: WTI below 49 bucks/barrel
• 1.2631 was Asia low. 1.2667 was Friday’s high

AUD/USD

• AUD/USD dropped to threaten 0.7900 during the European am
• Losses influenced by NZD/USD fall on expectations of dovish RBNZ hold
• 0.7892 (Friday’s low after NFP beat) is AUD/USD support level below figure
• Dalian iron ore closed up 3% Monday having been up 7.3% at one stage

NZD/USD

• NZD/USD fell to an 18-day low of 0.7357 during the European am
• Expectations of dovish RBNZ hold this week helping weigh on NZD
• RBNZ survey showed fall in NZ inflation expectations (published 0300GMT)
• RBNZ OCR announcement & MPS Wednesday 2100GMT (9am local time)

FX OPTION EXPIRIES

• EUR/USD 1.1800 (895M)
• USD/JPY 110.80 (1.29BLN)
• GBP/USD 1.3075 (397M), 1.3000 (427M)
• EUR/SEK 9.63 (299M)
• EUR/NOK 9.40 (366M)

COMMENT

Losing spec bets are key to a lower USD/JPY

Speculative positions will continue to weigh heavily on USD/JPY and could see it fall back through the psychologically sensitive 110.00 level. Speculators have been bullish and long USD/JPY all year, taking on larger positions from the end of June. Unfortunately for them, USD/JPY peaked in early July and has headed lower since but they have clung to bad positions and half of those long, around 6 billion dollars, are losing money. A sector that is usually keen to make a quick buck is now likely trying to limit those losses. This should restrict the size of bounces and lead to further downside pressure under 110 and potentially key 2017 lows. Corps and option players who would have initially seen value buying around 110.00 have seen those orders filled and will doubtless look for better value before buying again. This should result in gradually descending USD/JPY ranges and eventually pressure on major 2017 lows, 109.12/108.81 in June and 108.13 April.

CHART

Charts point to potential USD/ZAR reversal

A Doji candle Friday and potential hanging man candle Monday suggest USD/ZAR could head lower–a brave call given the close proximity of the 200-DMA support line. A cloud twist on the horizon at 13.1375 value Aug 14 adds to the bearish argument. Fibo retrace levels off the 12.86 July 27 low and 13.4875 Aug 4 high present bear targets with 13.1738 50% pullback point just ahead of the daily cloud top at 13.1375. The 200-DMA at 13.3595 Monday presents the main hurdle to a price reversal and a bounce off the line could trigger a run back to the 30-DMA upper Bollinger line, currently at 13.5620. The weekly chart shows price stalling ahead of the 13.5181 55-WMA and 13.6250 high from mid-July. Those looking for a deeper pullback can target the base of the weekly range at 12.86

Futuro del peso mexicano 7-8

  • USD/MXN up since Jul 19 despite good Mexican data & ratings news
  • USD/MXN shorts little changed despite rise:
  • This week Banxico rate decision (f/c unch) follows CPI (f/c higher)
  • Softer commodities and then strong US jobs adding to bullish risks
  • 21-DMA @ 17.7370 supports. Resistance @ 18.00 & 55-DMA 18.0420
  • Above 18.05 likely peso longs run for cover, target Jul high 18.4065
 Futuro del peso mexicano 7-8

FX Market Update 4-8

Market Briefs

• EUR/USD +0.08%, USD/JPY +0.02%, GBP/USD +0.14%, EUR/GBP -0.04%
• DXY -0.12%, DAX +0.15%, FTSE +0.02%, Brent -0.75%, Gold +0.11%
• DE Jun Industrial orders m/m, 1.0% vs f’cast 0.5%, prev 1.0% rvsd 1.1%
• BoE’s Broadbent: UK “a little bit” better placed to cope with higher interest rates-BBC
• Broadbent: Brexit-related sterling fall is reason for higher rates of uk inflation
• Japan’s GDP seen expanding for 6th straight quarter on domestic demand
• Nothing cold about sub-zero rates, IMF researchers find
• Oil prices fall as OPEC oil exports rise
• Gold steady near 7-week highs ahead of U.S. jobs data

Looking Ahead – Economic Data (GMT)

• 12:30 CA Employment change (Jul) (mkt +10.0k, prev 45.3k)
• 12:30 CA Unemployment rate (Jul) (mkt +6.5%, prev 6.5%)
• 12:30 CA Trade balance C$ (Jun) ( mkt -1.35 bln, prev -1.09 bln)
• 12:30 US Nonfarm Payrolls (Jul) (mkt +183k, prev +222k)
• 12:30 US Private Nonfarm Payrolls (Jul) (mkt +180k, prev +187k)
• 12:30 US Manufacturing Payrolls (Jul) (mkt +4k, prev +1k)
• 12:30 US Unemployment Rate (Jul) (mkt 4.3%, prev 4.4%)
• 12:30 US Average Hourly Earnings (Jul) (mkt +0.3% m/m, prev +0.2% m/m)
• 12:30 US Workweek Hours (Jul) (mkt 34.5, prev 34.5)
• 12:30 US International Trade (Jun) (mkt -$45.0 bn, prev -$46.5 bn)
• 14:00 CA Ivey PMI (Jul) (prev 63.9)
• 14:00 CA Ivey PMI SA (Jul) (prev 61.6)
• 17:00 Baker-Hughes Oil Rig Count (weekly) (prev 766, +2 w/w, +392 y/y)

Looking Ahead – Events, Other Releases (GMT)

• 15:45 FedTrade operation 30-year Ginnie Mae (max $1.375 bn)

Currency Summaries

EUR/USD

• Tight 1.1868-89 range so far Fri as markets await NFP – Reuters poll 183k
• US yields weak, DXY consolidates just above Wed’s 92.548 l/term low
• Thur 1.1830 setback low supports, Bids ahead of Wed/Tues 1.1794/86 lows
• Initial resistance Wed’s 1.1910 30mth high, Little thereafter til 1.20 barrier
• 1.20 could trigger demand toward 50% of 2014-17 slide at 1.2167
• Decent gains for NFP risk premium this week – O/n vol is 8.5/73 pips
• Buyers O/n vol and downside likely hedging cash longs against strong NFP
• 920mln 1.1850 largest expiry today, more surround

USD/JPY

• Daily range just 1.0985-110.18 so far today. 1bln 109.50 option expiry
• USD/JPY support at 55WMA 109.72, not closed below since November
• Little on daily charts until 15/14 June lows 109.28/108.81, 17 Apr 108.13
• Thin 1.1140-56 daily cloud may start to attract, especially if strong NFP
• Thur/Wed hi’s 110.82/98 initial resistance. 1bln 110.95-1.1100 expiries
• Option vols waning and JPY call risk rev bias off highs now 0.85 from 1.1
• O/n vol looks expensive at 8.5/67 pips break even given 33pip daily range

EUR/CHF

• EUR/CHF pivoted 1.1500 thru European am as it consolidates recent gains
• 1.1524 was 31-month high Wednesday (1.1461 = subsequent low)
• 1.1524 = 4.6% above last week’s 1.1009 low (pre-Jordan’s 1.10 view)
• 1.18 & 1.20 among bull targets if the force remains with euro
• Swiss July inflation data due Monday, Swiss jobs data due Tuesday

GBP/USD

• 30DMA marks base of cable’s Friday range-to-date, 1.3130-1.3164
• 30DMA also propped cable after Thursday fall on dovish BoE hold
• 1.3113 = Thursday low. US July jobs report due 1230GMT, NFP f/c 183k
• Offers ahead of 0.9050 have capped EUR/GBP since dovish BoE hold
• 0.9050 = Oct 31 high. Cross revisited Thursday’s 0.9048 high in Asia
• 0.9000 is now a support point (former resistance level)

USD/CAD

• Meagre 19 pip range for USD/CAD during European am, 1.2559-1.2578
• Canada/US jobs reports 1230GMT will expand range. Canada jobs f/c +10k
• Canada jobs beat + NFP/AHE misses could deflate USD/CAD to/thru 1.2500
• Large 1.2500, 1.2550 & 1.2600 option expiries for 10am ET NY cut
• 1.2500 strike = USD 1.1bln. 1.2550 = USD 681mn. 1.2600 = USD 460mn

AUD/USD

• AUD/USD ticked up to 0.7980 European am high after upbeat RBA SoMP
• Offers are tipped ahead of 0.8000 (0.7993 was Wednesday’s high)
• Expected Friday White House announcement on China IP/trade postponed
• US/China trade friction was flagged as factor in AUD drop to 0.7914 Thursday

NZD/USD

• NZD/USD held below 0.7450 through the European am
• 0.7450 was Asia high. 0.7451 was Thursday’s high
• US jobs report due 1230GMT, NFP f/c 183k, AHE f/c +0.3%
• RBNZ is expected to keep OCR at 1.75% next week

FX OPTIONS

• Short dated EUR vols peak in to NFP, O/n USD calls to hedge long cash
• USD/JPY shorter dated vols and JPY calls off highs as downside holds
• GBP/USD vols on the back foot after UK MPC – huge 1.3200-25 expiry
• AUD vols have peaked as spot recovers. CAD vols hold cycle highs pre jobs
• No setbacks for EUR/CHF vols as yet, 4% spot rise still being absorbed

CHART

Charts begin to show recovery for USD/JPY

• Charts begin to show recovery for USD/JPY
• Slow stochs lift fm OS levels. Sppted ahead of lower 30-day Bolli at 109.79
• And also the 55-WMA at 109.72. 109.85 is today’s low
• Thin daily cloud, spanning 111.40/56 today, could attract spot higher
• And also the cloud twist by 111.60 on Monday
• 112.20 is the long target, by Kijun, 200-DMA & July 26 high. Stop at 109.30

FX Market Update 3-8

Market Briefs

• EUR/USD -0.08%, USD/JPY -0.13%, GBP/USD +0.11%, EUR/GBP -0.18%
• DXY +0.09%, DAX -0.39%, FTSE +0.06%, Brent +0.42%, Gold -0.23%
• ECB says wages, consumer goods holding back inflation: bulletin
• EZ Jul Markit Comp final PMI, 55.7 vs f’cast 55.8, prev 55.8
• EZ Jun Retail sales y/y, 3.1% vs f’cast 2.6%, prev 2.6% rvsd 2.4%
• GB Jul Markit/CIPS serv PMI, 53.8 vs f’cast 53.6, prev 53.4
• DE Jul Markit Comp final PMI, 54.7 vs f’cast 55.1, prev 55.1
• China welcomes U.S. seeking dialogue with North Korea
• In rare bipartisan display, U.S. Democrats back Trump on China trade probe
• China eyes widening yuan band amid reform pressures – sources
• China to report strong July economic data; trade numbers could fuel friction with US
• Japan hopes to hold economic talks with US in October – finmin
• MoF flow data wk-ended July 29 – Japanese again good buyers of for-bonds
• Net Y1.067 trln bought, Y137.4 bln stocks bought too, Y30.7 bln bills sold
• Foreign investors mixed on Japanese assets
• Japan July PMI services 52.0, comp 51.8, June 53.3, 52.9, new orders eased
• Oil up on tighter U.S. market, but OPEC supplies weigh
• Gold prices fall as investors turn to risk assets

Looking Ahead – Economic Data (GMT)

• N/A US Chain Store Sales (Jul)
• 11:30 US Challenger Job Cuts (Jul) (prev 31,105)
• 12:30 US Initial Jobless Claims (w/e Jul 29) (mkt 240k, prev 244k)
• 12:30 US Continued Claims (w/e Jul 22) (mkt 1.955 mn, prev 1.964 mn)
• 13:45 US Markit Services PMI (final Jul) (flash 53.2)
• 14:00 US ISM Non-mfg Index (Jul) (mkt 57.0, prev 57.4)
• 14:00 US Factory Orders (Jun) (mkt +2.9% m/m, prev -0.8% m/m)
• 14:00 US Factory Orders ex-Trans (Jul) (prev +0.2% m/m)

Looking Ahead – Events, Other Releases (GMT)

• 11:00 BoE MPC meeting
• 11.30 BoE Gov Carney press conf
• 15:45 FedTrade operation 15-year Fannie Mae / Freddie Mac (max $475 mn)

Currency Summaries

EUR/USD

• EUR/USD setback from Wed’s 2.5yr high 1.1910 based 1.1830 early London
• Better than f/cast EZ retail sales for June underpins since, 1.1841-51 after
• US Jobless claims, Factory orders, ISM non manf PMI stand out data later
• Bids touted in to 1.1800. Support Wed/Tues lows 1.1794/86. Tenkan 1.1764
• Little resistance until huge 1.20 barriers, then 1.2167, 50% of 2014-2017 fall
• Option vols at cycle highs, O/n vol pricing 75 pips break even over NFP Fri

USD/JPY

• Range has been 110.56-82 so far. Bids said to be in size sub 110.50
• Trading circa the 110.66 pivot point this session
• More bids likely closer to 110, recall Tue’s 109.92 low on 110 barrier brk
• Larger NY Cut Expiries: 110.00-10 (1B) & 111.75-80 (936M)
• Upside risk grows due to “cloud twist” circa 111.37-39 Thu

EUR/CHF

• EUR/CHF elicited support pre-1.1455 after extending south from 1.1524
• 1.1455 was Monday’s high. 1.1524 = 31mth high Wednesday
• More short positions were squeezed en route to 1.1524
• 1.1524 = 4.68% above last week’s 1.1009 low (before Jordan’s 1.10 view)
• Recent cross surge influenced by German/euro zone economic data beats
• Euro zone June retail sales +0.5% vs +0.1% f/c

GBP/USD

• Cable ascended thru 1.3250 after modest UK service PMI beat
• 53.8 vs 53.6 f/c. 1.3267 = 11mth high after stops above 1.3250 tripped
• EUR/GBP dropped to threaten 0.8922 on modest UK service PMI beat
• 0.8922 = intra-week low. Key resistance 0.90 (option barrier level)
• BoE MPA, MPC minutes & QIR 1100GMT, Carney 1130GMT-1230GMT
• Relatively dovish BoE message could inflate EUR/GBP thru 0.90

USD/CAD

• More shorts squeezed during USD/CAD rise to 1.2618 European am high
• 1.2618 = 2wk peak (1.2452 = Tuesday’s low; 1.2414 = recent 25mth low)
• Canada July jobs data due Friday, alongside July’s US employment report

AUD/USD

• AUD/USD consolidated losses below 0.7941 through the European am
• 0.7941 was Wednesday’s low. 0.7914 = eight-day low in Asia
• US/China trade friction flagged as factor in AUD/USD losses
• Democrats back Trump on China trade probe (Wednesday)

NZD/USD

• NZD/USD revisited 0.7393 in early European trade. 0.7393 = 2wk low in Asia
• 0.7400 option expiry for NY cut, NZD 118mn strike (closest-to-market)
• Next week’s key NZ event risk is RBNZ meeting (Aug 10 local time)

FX OPTIONS

• GBP O/n vols well bid in to BoE MPC and inflation – Cable is 87 pips
• EUR/GBP o/n 55 pips but excludes NFP. EUR/USD o/n vol 15.0/75 pips
• Plenty of US data today, NFP Fri. EUR vols cycle highs, 1.20 barriers eyed
• USD/JPY vols rich vs realised as spot holds mid 110’s
• Commod related vols all higher, AUD, NZD and ACD vols cycle highs

COMMENT

EUR/USD 1.20 knockout could extend the rally

Plenty of talk about large 1.2000 barriers in EUR/USD of late, but a lot of these are RKO triggers attached to EUR call vanilla options in the 1.1600-1.1700 area. If market makers have exposure to these options, then a 1.20 break would leave them net short of gamma with the need to cover. This would trigger a renewed bout of EUR demand as well as another boost for shorter-dated implied vols. It could even be fears of a near-term 1.20 breach that are giving EUR/USD implied vols another lift to cycle highs in London this morning. While there has been talk of profit taking offers above 1.2000, it would seem prudent to gauge the demand for EUR if and when 1.20 breaks, to try and maximise profits on cash longs. If market makers are driven to cover, then there’s no reason why the key 1.2167 – 50% Fibo of 1.3995-1.0340 drop, could not be achieved soon after.

CHART

No respite for USD index, sub-90.00 beckons

The dollar index remains under pressure and looks set for an eventual drop below 90.00. Fourteen-week momentum remains negative as has been the case since March, reinforcing the underlying negative bias and the persistent headwinds facing the dollar. Dollar bears are bracing for a battle circa the 200-WMA at 92.313 and then 91.931, the 38.2% retrace of the 72.696 to 103.82 (2011 to 2017) rise. A close below these levels on a weekly basis would pave the way to 88.258, the 50% retrace of the same 72.696 to 103.82 rise. Widening 30-week lower and upper Bolli bands are indicative of the continued increase in statistical volatility, as the lower band is pointing south, reinforcing the underlying negative skew. Only a sustained recovery above last week’s 94.285 peak will reverse the trend.

FX Market Update 2-8

Market Briefs

• EUR/USD +0.27%, USD/JPY +0.35%, GBP/USD +0.22%, EUR/GBP +0.13%
• DXY -0.07%, DAX -0.18%, FTSE -0.31%, Brent -0.04%, Gold -0.17%
• EZ Jun Producer prices y/y, 2.5% vs f’cast 2.4%, prev 3.3% rvsd 3.4%
• GB Jul Markit/CIPS cons PMI, 51.9 vs f’cast 54.5, prev 54.8
• Trump close to decision on addressing Chinese trade practices
• China, BRICS trade ministers vow to fight protectionism
• BoJ Funo: Must maintain powerful monetary easing to hit price target
• Easy money allowing govt to maintain growth policy, allow structural reforms
• Big Japanese banks bulging at seams with pent-up cash – Nikkei
• Three of five top Japanese department stores see sales up in July – Nikkei
• Japan July monetary base up to record Y468.3444 trln, average +15.6% y/y
• Bearish cocktail knocks oil prices off recent highs
• Gold edges away from 7-week high as dollar steadies

Looking Ahead – Economic Data (GMT)

• 11:00 US MBA Weekly Mortgage Application Indices
• 12:15 US ADP National Employment Report (Jul) (mkt +185k, prev +158k)
• 13:45 ISM-New York Business Conditions Index (prev 55.5)
• 14:00 Conference Board Help-Wanted OnLine (Jul) (prev -45.8k)
• 14:30 US EIA Weekly Petroleum Status Report

Looking Ahead – Events, Other Releases (GMT)

• 13:45 FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.65 bn)
• 15:00 Fed’s Mester speaks at community bankers association luncheon
• 19:30 Fed’s Williams speaks on “Monetary Policy’s Role in Fostering Sustainable Growth”

Currency Summaries

EUR/USD

• USD off lows, helped by drop in commods, but EUR stays firm
• Solid EUR/USD support Tues 1.1786 setback low, 1.1794 Asia today
• Early London break Mon/Tues 1.1845-46 highs and 1.1850 barriers for 1.1869
• Broad based EUR strength drives, EUR/CHF, EUR/JPY new cycle highs
• Little resistance now until 1.1900 barriers, setback to 1.1830’s
• Fresh wave of USD weakness probably needed for 1.1900 test/break

USD/JPY

• USD/JPY range Wed has been 110.25-110.93 so far
• Limited downside reaction on Tues when 110 barriers were finally taken out
• 109.92 was lowest seen. Talk semi-official & real money bids in size sub 110
• On the hour USD/JPY broke 110 a doji candlestick line was left
• Doji was signalling near-term indecision (confusion)
• Decent buying, but capped by offers ahead of 111.00 & circa 110.97 pivot

EUR/CHF

• EUR/CHF up to 31mth high 5 pips shy of 1.15 during European am
• 1.1495 = over 4% higher than last week’s 1.1008 low, pre-Jordan
• Jordan said CHF significantly overvalued vs EUR at 1.10
• 1.1455 (Monday’s high) is now a support level
• Swiss July mfg PMI 60.9, highest for six years. 53.8 = long-term average

GBP/USD

• UK July construction PMI miss is helping to keep cable sub-1.3250
• 51.9 vs 54.5 f/c, lowest for 11 months. 1.3250 = option barrier level
• Cable rose to test 1.3245 into 0830GMT UK construction PMI release
• 1.3245 was 11mth high Tuesday. 1.3190-1.3216 = Asia range
• Quarter-yard 1.3250 option expiry Thursday
• BoE event risk Thursday, rate vote will be initial focus: 6-2 expected

USD/CAD

• USD/CAD retreated to 1.2552 from early Europe 12-day high of 1.2589
• 1.2586 = Asia high. 1.2452 was Tuesday’s low, before oil price fall hurt CAD
• Large 1.2550 & 1.2500 option expiries Friday, half-yard & yard strikes

AUD/USD

• AUD/USD held below 0.7975 (Asia high) through the European am
• 0.7953 was European am low. 0.7941 = Asia low (0.7936 = July 28 low)
• Mooted offers close to 0.80 (large option expiry) may cap if 0.7975 vaulted

NZD/USD

• NZD threatened 0.7416 during European am as NZ jobs data digested
• 0.7416 was 1wk low in Asia after Q2 jobs growth fell 0.2% vs +0.7% f/c
• RBNZ is expected to keep OCR at 1.75% next week (Aug 10)

FX OPTIONS

• EUR firmer, USD recovers, EUR/USD breaks 1.1850 barrier, vols bid
• USD/JPY vols look high amid spot recovery and low realised
• EUR/JPY buyers of gamma and topside amid firmer spot
• CAD gamma performs, as does AUD to keep related vols at cycle highs
• Next Day GBP vols bid in to UK MPC and inflation report

CHART

EUR/JPY bulls reaching for 134.32 Fibo

Euro bulls have persistently dominated the yen with the close at the end of July above the major 129.55 Fibonacci highlighting their current control. The bullish cycle from April’s 114.86 setback low remains very much intact and 14-month momentum is increasingly positive, reinforcing the depth of the present bullish structure. The monthly close above 129.55, which is 50% retrace of the 149.79 to 109.30 (2014 to 2016) fall, means there is growing scope for a test of 134.32 (61.8% of the same 149.79 to 109.30 drop). Bulls should continue to keep an eye on 129.55 as a direction gauge, as a failure at the end of August to close above it will be detrimental to the bullish outlook

FX Market Update 1-8

 Market Briefs

• EUR/USD -0.23%, USD/JPY +0.09%, GBP/USD +0.08%, EUR/GBP -0.35%
• DXY +0.07%, DAX +0.53%, FTSE +0.85%, Brent -0.06%, Gold -0.12%
• EZ Q2 GDP flash prelim y/y, 2.1% vs f’cast 2.1%, prev 1.9%
• EZ Jul Markit final PMI, 56.6% vs f’cast 56.8%, prev 56.8%
• GB Jul Markit/CIPS mfg PMI, 55.1 vs f’cast 55.4, prev 54.3 rvsd 54.2
• GB Jul Nationwide house price y/y, 2.9% vs f’cast 2.7%, prev 3.1%
• DE Jul Markit/BME mfg PMI, 58.1 vs f’cast 58.3, prev 58.3
• DE Jul Unemployment rate SA, 5.7% vs f’cast 5.7%, prev 5.7%
• China factory activity accelerates in July on strong export orders – Caixin PMI
• U.S. small business borrowing highest in nearly two years
• Japan foreign direct investment jumped to record $169.6 bln in ’16 – Nikkei
• Japan April-June GDP on track for 2.6% annual pace – Nikkei
• Japan July mfg PMI – final 52.1, 8-month low, flash 52.2, June final 52.4
• Oil hits 2-month high, further U.S. inventory drop seen
• Gold dips on profit taking after touching 7-week high

Looking Ahead – Economic Data (GMT)

• N/A US Light Vehicle Sales (Jul) (mkt 16.80 mn SAAR, prev 16.5 mn SAAR)
• N/A US Domestic Car Sales (Jul) (mkt 4.50 mn SAAR, prev 4.27 mn SAAR)
• N/A US Domestic Light Truck Sales (Jul) (mkt 8.67 mn SAAR, prev 8.77 mn SAAR)
• 12:30 US Personal Income (Jun) (mkt +0.4% m/m, prev +0.4% m/m)
• 12:30 US Personal Consumption Expenditures (Jun) (mkt +0.1% m/m, prev +0.1% m/m)
• 12:30 US PCE Price Index (Jun) (prev -0.1% m/m)
• 12:30 US Core PCE Price Index (Jun) (mkt +0.1% m/m, prev +0.1% m/m)
• 12:55 US Redbook Same-Store Sales Index (weekly) (prev +2.1% y/y)
• 13:30 CA Markit mfg PMI SA (Jul) (prev 54.7)
• 13:45 US Markit Manufacturing PMI (final Jul) (flash 53.2, prev 52.0)
• 14:00 US ISM Manufacturing PMI (Jul) (mkt 56.5, prev 57.8)
• 14:00 US Construction Spending (Jun) (mkt +0.4% m/m, prev 0.0% m/m)
• 14:30 Dallas Fed Texas Service Sector Outlook Index (prev 10.1)
• 14:30 Dallas Fed Services Revenues Index (prev 14.8)

Looking Ahead – Events, Other Releases (GMT)

• 15:45 FedTrade operation 30-year Ginnie Mae (max $1.375 bn)

Currency Summaries

EUR/USD

• EUR/USD 1.18 barrier break peaked 1.1845 Mon/1.1846 Tues
• Backs off to 1.1811 before EZ CPI, 1.1816-32 after EZ GDP in line
• EUR drifts back to 1.1807, dip buyers expected in to 1.1800
• 1bln 1.1800 option expiry NY cut. Hourly kin-sen support 1.1785
• US consumption and ISM manf PMI key data from US today
• DXY support Mon’s 14mth 92.784 low. Yeilds indifferent for now
• Option vols peak with spot but ongoing demand for strikes 1.20+

USD/JPY

• USD/JPY has been under severe strain, but as yet 110 barriers remain intact
• Dollar has taken a beating on WH “dysfunction” stemming from Scaramucci firing
• Macro name was said to have sold plenty in order to take out 110 barrier
• Halted @110.01, 110 barriers still protected by large option related bids
• 110 brk will Increase volatility, big stops said below
• 110.43 has been the high today, risk of a temporary short squeeze

EUR/CHF

• EUR/CHF eased to an intra-day low of 1.1392 during the European am
• 1.1392 = base since Monday’s 30-month high of 1.1455
• Month-end buying flagged as factor in Monday’s rise from 1.1336 to 1.1455
• 119 pip rise followed last week’s 3.2% EUR/CHF surge to 1.1405
• Profit-taking on longs may have influenced retreat from 1.1455
• Bids mooted at 1.1350-70. Key psychological resistance 1.15

GBP/USD

• Cable rose to 11mth high of 1.3240 after UK July mfg PMI beat at 0830GMT
• 55.1 vs 54.4 f/c, mfg export orders 58.2, highest since Apr 2010
• 1.3235 was Asia high, 1.3200 = ensuing pullback low (pre-UK mfg PMI)
• US political developments have influenced recent GBP/USD appreciation
• Cable vaulted 1.3200 after Scaramucci exit news Monday
• Obstacles beyond 1.3240 include 1.3250 (option barrier level) & 1.33

USD/CAD

• USD/CAD fell to 1.2452 European am low as WTI held above 50 bucks
• 1.2512 was Asia high. Bids may emerge near 1.2420 if fall extends
• Talk that hedge funds were buyers of USD/CAD near 1.2420 last week
• Mooted HF demand followed rapid CAD gainst after BoC hike July 12
• Interest rate futures suggest 70% chance of another BoC hike in October

AUD/USD

• Large 0.8000 option expiry is helping to anchor AUD/USD as RBA dust settles
• Option rolls off Wednesday, AUD 859mn strike. 0.7992 = European am low
• 0.8038 = post-RBA high. 0.8043 was pre-RBA high after Caixin mfg PMI beat

NZD/USD

• NZD/USD dropped to threaten 0.7470 ahead of the North American open
• 0.7470 was Monday’s low. 0.7524 was Asia high
• Global Dariy Trade auction result expected circa 1430GMT, may impact NZD

FX OPTIONS

• EUR/USD targets 1.20, EUR calls and vols bid for now. Big 1.18 expiry
• USD/JPY wary of 110 barrier break/short gamma, keeps vols bid
• Cable awaits UK MPC and inflation report Thursday
• AUD/USD circles big 0.8000 expiry Wed, minimal post RBA vol setbacks
• NZD vols regain ground. CAD vols realising nicely, keeps gamma bid

COMMENT

Battered dollar set to buckle further

There’s growing risk that the dollar index will dive through 90.000 after White House dysfunction sank the index to a new 92.784 low on Monday, reaching levels not seen since early May. The market heavily sold the dollar when it emerged that President Trump had fired recently installed communications director Scaramucci. This plays into the narrative and concerns that the Trump administration is in a quagmire politically and legislatively. The healthcare bill failure last week had already put the dollar index on the path for a test of the 91.931 Fibonacci level and latest developments heighten the downside risk. Dollar bulls will be hoping that new chief of staff, retired General John Kelly, will bring an extended period of order to the White House. Only a sustained recovery of the dollar in coming weeks will reverse the current negative outlook.

CHART

EUR/USD gear up for 1.2167 test

EUR/USD bulls are setting their sights on 1.2167 – 50% Fibonacci of the 1.3995 to 1.0340 drop (2014-2017) after a monthly close above 1.1736, the 38.2% retrace of the same fall, to hit a new 2017 high at 1.1846 Tuesday. EUR/USD is still trading well above the 30-month upper Bolli band currently at 1.1698, signalling that the market is transitioning to a new equilibrium. Fourteen-month momentum registered a positive reading for July, for the first month since January, highlighting the bullish outlook. The diverging 30-month lower and upper Bolli bands highlight the risk of increased statistical volatility. If the market falls back below 1.1736 for a sustained period of time, this will suggest that medium-term bull’s advantage is eroding and the risk will grow for an overshoot to the downside

Market News Update 31-7

(JPM on overnight) There were a few interesting headlines although markets aren’t moving dramatically. The core Eurozone CPI for Jul firmed by a bit more than expected (+1.2% vs. the St +1.1%) while China’s Jul NBS PMIs showed very mild signs of softening vs. June (neither number is dramatically altering the macro narrative). In Washington the narrative is shifting away from healthcare and to taxes but it will prob. Be some time (at least a couple of months) before a credible and plausible plan emerges (and meanwhile Trump isn’t dropping repeal/replace and could undermine the ACA exchanges further by withholding subsidy payments). 
 
(Bloomberg) The greenback has fallen hard on Trump’s watch and currency traders are now betting on even more declines. Is Trump necessarily “bad” for the dollar, that global symbol of U.S. economic might? Probably no more than he is “good” for stocks. And you can argue much of the dollar’s slide — now the longest in six years — has to do with the vagaries of central-bank policy and interest rates.
 
(JPM on Fed policy) The market assumes (and the Fed statement on 7/26 largely confirmed) balance sheet shrinkage will commence at the Sept. meeting (9/19-20) w/the next hike occurring at the Dec (12/12-13), Jan (1/30-31), or Mar (3/20-21) meetings. If US inflation stays tepid the Dec hike could easily be pushed into 2018. 
 
 (Politico) The White House is working on a set of economic measures aimed at punishing China according to sources cited by Politico. A range of options are on the table, including
trade restrictions and economic sanctions. Trump has long accused China of engaging in unfair trade practices and increasingly is dissatisfied w/Beijing’s policy towards North Korea.
 
(WSJ) OPEC has a compliance problem –many OPEC members are violating the recent production agreement, a trend that undermines the cartel’s relevance on the global oil stage 
 
 (Reuters) Hedge funds and money managers boosted their bullish wagers on U.S. crude oil to the highest in three months, data showed on Friday, as U.S. shale showed signs of a slowdown and Saudi Arabia pledged to cut exports in August.