US T 30Y Bond 12-10

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

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

Market Briefs

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

Looking Ahead – Economic Data (GMT)

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

Looking Ahead – Events, Other Releases (GMT)

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

Currency Summaries

EUR/USD

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

USD/JPY

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

EUR/CHF

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

GBP/USD

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

USD/CAD

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

AUD/USD

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

NZD/USD

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

FX OPTIONS

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

COMMENT

UK CPI data rise could seal deal for BoE Nov hike

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

CHART FOCUS

Dollar bulls should brace for more bouts of weakness

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

Futuro del peso mexicano 12-10

 

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

Futuro del peso mexicano 12-10

 

 

FX Market Update 11-10

Market Briefs

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

Looking Ahead – Economic Data (GMT)

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

Looking Ahead – Events, Other Releases (GMT)

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

Currency Summaries

EUR/USD

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

USD/JPY

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

USD/CHF

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

GBP/USD

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

USD/CAD

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

AUD/USD

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

NZD/USD

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

FX OPTIONS

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

COMMENT

Italy politics may ruffle euro’s post-Catalonia calm

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

CHART FOCUS

USD/ZAR bears gain momentum after Tenkan break

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

Futuro del peso mexicano 11-10

  • USD/MXN opens NY 18.7780 v 18.8350 Tues cls; o/n range 18.7290-18.8345
  • Tuesday’s hard-NAFTA rhetoric shrugged off pair trades 17.73 in early NY
  • Fed Sep meet mins at 2PM, exp’d Fed hikes as Banxico holds weighs on peso
  • USD/MXN res 18.8345 Wed high, 18.8394 200-DMA, 18.8660 upper 21-h Bolli
  • Supt 18.7250 Wed low, 18.7079 lwr 21-h Bolli, 18.6150 hrly cloud top

Futuro del peso mexicano 11-10

USD / JPY 10-10

As a direct result of Fri’s poke to another new high for the past month’s impressive rebound, the 240-min chart below shows that the market has identified 29-Sep’s 112.21 low as the latest smaller-degree corrective low it now has to sustain gains above to maintain a more immediate bullish count.  It’s failure to do so will confirm a bearish divergence in momentum, stem the rally and expose at least an interim correction of the rally from 08-Sep’s 107.31 low.  Per such we are considering 112.20 our new short-term but key risk parameter from which traders are advised to rebase and manage the risk of a cautious bullish policy.

 

USD JPY 10-10

FX Market Update 10-10

Market Briefs

• EUR/USD 0.42%, USD/JPY -0.28%, GBP/USD 0.38%, EUR/GBP 0.08%
• DXY -0.33%, DAX -0.05%, FTSE 0.21%, Brent 0.93%, Gold 0.51%
• DE Aug Trade Balance, EUR, SA 21.6B vs 19.5B, f’cast 20.0B, r’vsd 19.3B
• GB Sept BRC Retail Sales YY 1.90% vs 1.30%
• GB Aug Construction O/P Vol YY 3.5% vs -0.4%, f’cast 0.2%, r’vsd 2.7%
• GB Aug Industrial Output YY 1.6% vs 0.4%, f’cast 0.8%, r’vsd 1.1%
• GB Aug Manufacturing Output YY 2.8% vs 1.9%, f’cast 1.9%, r’vsd 2.7%
• GB Aug Goods Trade Balance GBP -14.24B vs -11.58B, f’cast -11.20B, r’vsd -12.83B
• China says will have no problem meeting 2017 growth target, may beat it
• BOJ Governor Kuroda pledges to stick with quantitative easing

Looking Ahead – Economic Data (GMT)

• 10:00 US NFIB Small Business Optimism Index (Sep) (prev 105.3)
• 12:15 CA Sept House Starts, Annualized f’cast 210k, prev 223.2k
• 12:55 US Redbook Same-Store Sales Index (weekly) (+4.1% w/w)

Looking Ahead – Events, Other Releases (GMT)

• 14:00 FRB Minneapolis’s Kashkari speaks at regional economic conditions conference; Minneapolis, MN
• 16:00 Catalonia regional leader Carles Puigdemont to address a session
• 18:30 FedTrade operation 15-year Fannie Mae and Freddie Mac (max $500 mn)
• 00:00 FRB Dallas’s Kaplan participates in moderated Q&A session; Stanford, CA

Currency Summaries

EUR/USD

• Mon’s hawkish ECB Lautenschlaeger boosts EUR/USD in Asia (range 1.1740-80)
• Europe adds to those gains slightly reaching 1.1789
• Weaker USD/CNY influences lower USD/EM. Weighs slightly big USD
• EUR dips on unexpectedly soft French IP which fell 0.3% vs +0.4% f/c
• Strong industrial output (5.7% yy vs 2.8% f/c) later boosts EUR
• No U.S. data to influence proceedings today. EUR 580mn expiries @ 1.1750

USD/JPY

• USD/JPY slips from 112.83 to break 112.40 where a pivot point resides
• USD/JPY bears seem to be homing in on Sep 29 112.22 low, 112.27 lowest
• Scope for losses to the 112.00 psychological level if 112.22/32 breaks
• Heavy trading volume in the 112.60s means tough to get back above there
• Failure above 113 heightens downside risk
• Spot heavy as NK threat lurks in the background

USD/CHF

• USD/CHF was a little lower Tuesday in Europe, 0.9790-0.9770
• Prior highs/prev 38.2% Fibo at 0.9770 came back under pressure but hold
• Broader uptrend intact but below the 10-DMA at 0.9746 risks a deeper slide
• Bulls need a break of the 200-DMA at 0.9830 and Fri’s 0.9840 peak
• EUR/CHF continues to rise, new rebound high at 1.1525 late Asia/early Europe
• Now a little easier, 1.1525-1.1511, but holds above pivotal 21-DMA at 1.1482
• Not much resistance until the 1.1588 Sep 25 German vote collapse day high
• Swiss headline jobless rate flat at 3.0 pct in Sept

GBP/USD

• Cable rose to a high of 1.3203 on better than expected UK output data
• Aug construction output +0.6% vs flat f/c. Mfg output +0.4% vs +0.2% f/c
• Annualized industrial output +1.6% vs +0.8% f/c. 1.3186 = pre-data high
• Offers expected near 1.3220 (stop-loss city after 1.3220 break Oct 5)
• 1.3200 & 1.3210 option expiries today & Thursday, GBP 871mn strikes
• Fifth round of Brexit talks continue today. EU summit next week

USD/CAD

• USD/CAD has fallen to 1.2495 from 1.2555 (Asia high)
• 1.2527-1.2558 was Monday’s range (Canada holiday Monday)
• Canada Sept housing starts data due 1215GMT, 210k f/c
• Canada Aug building permits data due 1230GMT, -1% f/c
• Large 1.2500 option expiry Thursday, USD 749mn strike

AUD/USD

• AUD/USD met headwind pre-0.78 after its early Ldn break thru 0.7790
• 0.7797 = early Ldn high. 0.7798 = Oct 6 high. 0.7790 was Asia high
• More offers expected near 0.7820, 23.6% of 0.8105 (Sept 20 top) to 0.7733

NZD/USD

• AUD/NZD extended north to test 1.1022 in early European trade
• 1.1022 = 61.8% of 1.1142-1.0827 (Sept range). 1.1020 was Monday’s high
• NZD/USD respected its 0.7056-0.7088 Asia range thru the European am
• NZ First leader Peters says won’t announce coalition choice on Thursday
• Also refused to be drawn on whether to expect an announcement by Friday

FX OPTIONS

• NZD related short dated vol gains highlight coalition concerns
• Japan election favours risk revesals to hedge low tail risk
• USD/JPY vols at m-term lows as 20bln 112-113 expiries contain spot
• GBP vols/puts peak but setbacks limited, with GBP bias still lower
• EUR/USD vols languish at post ECB setback lows. No Catalonia risk premium

COMMENT
China FX policy unlikely to bow broader USD for long
China’s FX policy is unlikely to lead the broader dollar lower for long as authorities seem less inclined towards a stronger currency. Wider USD/EM is also likely to track rising U.S. rates. After a week-long Chinese holiday when USD rose broadly, a higher USD/CNY was logical when markets reopened. Instead, the pair has moved swiftly lower, seemingly influenced by the authorities. It’s prudent to bet this is no sea-change in thinking over currency, but a move inspired by rapid fluctuations in CNY’s value. The CNY’s rapid rise was vocally opposed by China when USD/CNY was in the low to mid-6.40s. With investors holding large yuan longs, the following USD/CNY rally unfortunately proved just as rapid as the prior fall. This seems to have inspired a more covert operation to lift the CNY. Given the clear message about CNY gains only a month ago, when USD/CNY was less than 2% from current levels, it’s sensible to assume China wants less volatility not a stronger currency.

CHART FOCUS
GBP/CHF set to charge higher, upper Bolli beckons
Technicals favor a GBP/CHF return towards the upper 30-day Bollinger at 1.3292 following the rebound from the 30-DMA. Friday and Monday saw the price spike just under the average but close back above and subsequently climb to test 1.2904 on Monday. The cross holds close to the high on Tuesday, and also Tenkan and 38.2% Fibo at 1.2912/1.2915. 1.2915 is the 38.2% Fibo retracement of the 1.3196-1.2742 September to October drop. The 38.2% retrace is the minimum technical requirement for a correction and those looking to play the GBP/CHF long side again are hopeful of a move above the Fibo to pave the way to further gains. A close above the 38.2% could bring the 50% and 61.8% Fibos into play at 1.2969 and 1.3023, respectively. On a note of caution, keep an eye on the 30-DMA, now support, at 1.2802 as a close under the line risks further weakness and would deter the bulls

Futuro del peso mexicano 10-10

  • USD/MXN opens NY 18.6040 v 18.68 Mon’s NY cls; o/n 18.65-18.5550
  • Mex election (Jul 1 ’18) adds to NAFTA, Trump wall & US rate angst
  • 9-mos vol/25RR higher , captures opaque MX election
  • USD/MXN supt 18.5693 hrly cloud top, 18.5550 Tues low, 18.3609 10-DMA
  • Res 18.6074 10-HMA, 18.6463 daily pvt, 18.70 Mon high, 200-DMA 18.8516 caps
  • Pre-election vol steadies, 9-mos 7 out (post-election) drifts higher still

Futuro del peso mexicano 10-10