Futuro del peso mexicano 2-5

There’s really no specific news behind this week’s EM washout.  Higher US rates are one major factor, perhaps ongoing trade tensions are another.  Yet this week’s price action is simply a continuation of the trend that’s been seen all quarter.  For Q2 so far, every EM currency is down except for PHP, with the worst performers being the high beta group RUB, ZAR, BRL, MXN, and TRY.  Many currencies have seen their Q1 gains wiped out in Q2, and then some.  This trend should continue, as we don’t really get the sense anyone wants to step in front of this freight train now.

50 HMA= 527.40
200 HMA= 528.50
Futuro del peso mexicano 2-5

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

Futuro del peso mexicano 25-4

Bstops 530  Sstops 518

525.40= 50 HMA

Dollar Regains Luster, but Consolidation Likely Ahead of Key Events and Data.

  • The sell-off in US shares yesterday dragged global equities lower
  • The US 10-year yield is through 3.0%, pushing global yields higher, though the US 2-10 yr curve is unchanged net-net since the end of last year
  • The dollar recovered from yesterday’s reversal but in the absence of fresh news, consolidation is likely ahead of tomorrow’sECB meeting
  • China boosted QDII quota for the first time in three years

Futuro del peso mexicano 25-4

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

Futuro del peso mexicano 24-4

  • USD/MXN opens NY 18.87 v 18.94 Mon cls, dips slightly; o/n 18.9605-18.8050
  • UST 10-yr yield backs away from 3% (2.976%) boosts EM broadly, for now
  • Political risk remains AMLO policies viewed skeptically; MX inflation 10AM
  • USD/MXN res 18.8906 10-HMA, 18.9605 Tues (7-wk) high, 18.98 Mar 2 high
  • Sup 18.8065 dly pvt, 18.7536 100-DMA (fmr res), 18.6125 hrly cloud top
529.40 50HMA – MPM
Futuro del peso mexicano 24-4