FX Market Update 21-8

Market Briefs

• EUR/USD -0.16%, USD/JPY -0.15%, GBP/USD +0.02%, EUR/GBP -0.19%
• DXY 0.09%, DAX -0.4%, FTSE -0.16%, Brent -0.42%, Gold +0.28%
• German growth could top expectations this year: Bundesbank
• U.S., S.Korea begin computer-simulated drills amid N.Korea tension
• Oil prices fall after rally encourages profit-taking
• Gold little changed as investors focus on geopolitics, cbank meetings

Looking Ahead – Economic Data (GMT)

• 12:30 Chicago Fed National Activity Index (Jul) (prev +0.13)

Looking Ahead – Events, Other Releases (GMT)

• 15:45 Fed Trade operation 30-year Fannie Mae / Freddie Mac (max $1.65 bn)

Currency Summaries

EUR/USD

• Very slow session bereft data and news unfolds on Monday
• EUR/USD 1.1731-69 in Asia and 1.1731-55 Europe
• EUR 730mln vanilla option expiries at 1.1700. EUR 918mln 1.1795-00
• Traders reduce bets but still long EUR:
• Wait-and-see mood evident ahead Jackson Hole Thu/Fri this week

USD/JPY

• USD/JPY soggy weighed by further Nikkei decline
• N-225 down 0.4% in Asia, futures down 40 pips in Europe
• Large and losing long bets vulnerable:
• USD/JPY 108.92-109.42 Asia & 108.90-109.29 in Europe
• Both ranges well within NA’s Friday chop between 108.61-109.60
• USD 1.1bln option expiries today 109.00-50

EUR/CHF

• USD inches up vs CHF after a tight Asia session. 0.9647-74 Ldn range
• The rise helps USD/CHF back into the daily cloud & tests the 10-DMA at 0.9667
• Break lower followed by big rebound/positive close Friday favors further gains
• EUR/CHF firmer as well. Up to 1.1359 fm 1.1323. Sppted by 30-DMA at 1.1259 Fri
• Fall in sight depos last wk. Shows SNB stood aside despite fall
• Swiss Trade data Tues. Markit PMIs on Wed likely the main data event

GBP/USD

• GBP TWI opens 75.20 compared 2017 low @ 75.10
• GBP drifts up slightly, likely modest profit taking
• Specs are short GBP but have cut bets by 2/3 in last few months
• Corp buying also a likely factor underpinning pound at these levels
• Data free session today. Activity likely suppressed ahead Jackson Hole

USD/CAD

• USD/CAD dropped Fri as USD suffered and oil closed 3.0+% higher
• 1.2691-1.2558 Fri’s range, closed 1.2585, todays range 1.2567-1.2602
• 21DMA 1.2606 caps for now. Support Fri’s low, 4/3 Aug low 1.2554/53
• WTI back off 0.27%, USD looking consolidative-DXY tight 93.418/582
• 1wk vol is 7.5 in to Jackson hole – break even 104 pips
• 1mth vol gets FOMC – 7.45 from 7.2 Fri, break even 218 pips

AUD/USD

• Tight range for AUD today 0.7912-34, pivots 21DMA 0.7926
• Support 10DMA/Tenkan-sen 0.7889-85 and Fri’s 0.7870 low
• Fri/Thurs daily range highs 0.7944/62 resistance
• Mixed interest in options – most strikes in 0.7850-0.7950 range
• 1 week vol Jackson hole 8.3/74 pips. 1mth gets FOMC – 8.65 vs 8.3 Fri
• 1mth risk reversals now 0.65 AUD puts (0.2 to 1.0 early August)

NZD/USD

• NZD/USD tight 0.7305-23 range today, pivots 55DMA 0.7317
• 10DMA/Frios low support 0.7300/0.7278. Thurs/Fri highs 0.7335-36
• Nearest expiry 0.7340 (305mln). AUD/NZD 108.19-51 range
• AUD/NZD expiry 1.0900 (609mln) looks a reach
• Support 10DMA/Fri’s low 1.0806/01. Resistance Wed’s 4mth hi 1.0878

FX OPTIONS

• Event risk gives shorter dated and 1mth implied vols a lift today
• Jackson hole buoys 1 week, tho Monday is UK hol. 1 month gets FOMC
• Range bound spot trading sapping overall demand for vols however
• USD/JPY notable fears of an eventual test of 108.00 barriers
• JPY call bias firmer and outright demand for downside strikes

COMMENT

Stocks to lead USD/JPY down

The weight of losing bets on a higher USD/JPY combined with soft stocks suggests USD/JPY tests key support. Stocks are also set to test major support and while there is cause to buy initial tests of these supports for both USD/JPY and stocks, a break would spark a much bigger decline. USD/JPY traders have been long dollars and losing money for weeks but are now faced by the developing bearish picture for the Nikkei. Tokyo futures have dumped around 500 points since staging a bearish break below the daily Ichimoku cloud. A test of the 200-DMA and 50% retracement of the April/June rise 19250/40 looks very likely. Like USD/JPY, equity traders are also long, but unlike FX traders stock traders are likely making money. Booking a profit is a far easier decisions and made more likely by the proximity to Jackson Hole. As a result stocks will heap pressure on losing USD/JPY bets likely resulting in a 108 test.

CHART FOCUS

Cable remains on track for a deeper retreat

Cable has inched lower through the weekly cloud top and the cloud base at 1.2382 remains a viable downside objective. Prices made a new weekly low at 1.2832 on Friday and bears are hopeful that the spiral lower will continue this week. That said, the dip below the daily cloud base to Friday’s five week low was short lived and such action also formed a Doji on the daily candles, which represents indecision in the market. That signal is, so far, lacking confirmation and loss consolidation is the likely scenario ahead of a fresh break lower. Short players are looking for a close under the base of the daily cloud at 1.2851 to open up the lower levels. The lower Bollinger around a 30-DMA at 1.2804 is further support below the cloud while the 55-DMA at 1.2930 remains resistance and a good level to place an offer

Advertisements
%d bloggers like this: