Market News 9-5

(JPM on macro) US sentiment is more muted for the SPX as a whole although for the nearterm there is still more anxiety w/the SPX up at 2400 than was the case when the index appeared headed towards 2300 (i.e. despite the lead pg. 1 WSJ article Tues morning, “investor anxiety drops to new low”, the near-term pain trade feels like it may be to the upside). The biggest controversy at the moment is reconciling the recent commodity price slump and signs of softening Chinese nominal growth w/the broader global economic  backdrop (i.e. are the implications of the commodity weakness pernicious or benign? Right now investors are leaning towards the latter conclusion).
(WSJ) Investors are shifting out of the US and into Europe.
(Politico) Republicans at “war” over taxes as some in the party want to push for “reform” while others are willing to settle for “cuts”.
(WSJ) Trump wants to decide on the Paris climate accord soon and will be hosting a series of meeting Tues to discuss the matter
(Bloomberg) “We are paying very close attention” to China’s policy tightening, said Ray Uy, head of macro research at Invesco Advisers Inc. in Atlanta. “Emerging markets would be the most vulnerable to any abrupt tightening in global financial conditions triggered by developments in China.” Even so, “the China story is far from over and is still one of the most compelling structural opportunities in the market.”
(Bloomberg) — DoubleLine Capital’s Jeffrey Gundlach recommends shorting the S&P 500 Index and going long on emerging market stocks despite conventional wisdom that rising U.S. rates will lead to a stronger dollar. Specifically, Gundlach recommended wagering long on the iShares MSCI Emerging Markets exchange-traded fund and betting against the SPDR S&P 500 ETF. He also said it’s a myth that the Federal Reserve raising rates necessarily leads to a stronger dollar.
(Bloomberg) – Pimco Sees 10-Year U.S. Yield Rising to 3% on Fed Hikes – The 10-year Treasury yield may climb to 2.75 percent to 3 percent over the “medium term’’ as the Federal Reserve will probably raise rates twice more this year, according to Pacific Investment Management Co. The likelihood of a reduction in the Fed’s balance sheet over the next couple of years will also bolster yields, said Mark Kiesel, Pimco’s chief investment officer for global credit
(Bloomberg) — Commodities investors needn’t fear the Federal Reserve. Raw materials perform best when the U.S. central bank is hiking rates, according to Goldman Sachs Group Inc., which used the findings of a study to buttress its overweight call on the asset class while acknowledging risks to its view. Raw materials do best during periods of rising interest rates, topping returns from equities and bonds, analysts including Jeffrey Currie said in a May 8 report.
Advertisements

Eurodollar Futures 9-5

Jun18 Eurodollar Slip Stems Corrective Rebound

Posted on 5/9/2017 6:45 AM by Dave Toth

While overnight’s slip below 24-Apr’s 98.28 low is barely noticeable, it nonetheless renders the prior couple weeks’ recovery attempt to 03-May’s 98.355 high in the Jun18 contract as a 3-wave and thus corrective affair that confirms at least the intermediate-term trend as down.  Per such, 98.36 is considered our new short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.  IF something broader to the bear side lies ahead, it would be incumbent on the market to now sustain losses below this level.Eurodollar Future Jun 2018

FX Market Update 9-5

Market Briefs

  • EUR/USD -0.2%, USD/JPY +0.4%, GBP/USD -0.1%, EUR/CHF +0.1%
  • DXY +0.3%, DAX +0.5%, FTSE +0.6%, Brent +0.2%, Copper +0.6%
  • USD/JPY hits 8 week high at 113.63 in early London trade
  • EUR/CHF rises to fresh 7-month high at 1.0923
  • London copper edges up after losses on worries over China demand – Rtrs
  • GB Apr BRC Retail sales +5.6% y/y vs prev -1.0%
  • CH Apr Jobless rate unadj 3.3% vs prev 3.4%. 3.3% f/c
  • DE Mar Industrial output -0.4% m/m vs prev 1.8% rvsd. -0.6% f/c
  • German trade surplus narrows in March to 19.6bln fm prev 21.2bln rvsd. 20.9 f/c
  • BoJ Gov Kuroda reiterated intention to keep easy policy till CPI target met – Rtrs
  • Moody’s says BoJ becoming main source of affordable funding for government – Rtrs
  • Bank of England to set out plans to open up interbank payments in coming months – Rtrs

Looking Ahead – Economic Data (GMT)

  • 13:30  CA Building Permits (Mar) mkt 5.5%, prev -2.5%
  • 13:55  Redbook Weekly Same-Store Sales Index
  • 15:00  Job Openings and Labor Turnover Survey (Mar)
  • 15:00  Wholesale Inventories (Mar) mkt -0.1% m/m, prev -0.1% m/m
  • 15:00  — Wholesale Sales (Mar) mkt +0.2% m/m, prev +0.6% m/m

Looking Ahead – Events, Other Releases (GMT)

  • 14:00  FRB Minneapolis’s Kashkari at MN High Tech Spring Conference
  • 16:45  FedTrade Operation 30-year Ginnie Mae (max $1.0 bn)
  • 18:00  FRB Boston’s Rosengren, luncheon speech; NYC
  • 21:15  FRB Dallas’s Kaplan moderated Q&A

Currency Summaries
EUR/USD

  • EUR/USD 1.0892-1.0931 in Europe as more longs exit
  • Reports of real money demand below 1.0900. Stops below May 4 low @ 1.0875
  • Rising U.S. yields proving influential across FX
  • Bunds have lagged but tracked UST’s lessening that influence for EUR/USD
  • Downside gap 1.0788-1.0821 is back on the radar

USD/JPY

  • Japanese exporter offers ebb away, unlocking upside
  • USD/JPY continues to edge higher from 113.15 Asia low to reach 113.83
  • Market has broken above 113.77 – 76.4% Fibo 115.51-108.13
  • 113.90 pivot point is next for a test. Stops said to be above 114.00
  • Decent support has built up in the lower 113s
  • 30/60-day correlation with UST/JGB spreads across curve significant

USD/CHF

  • USD/CHF up on broad dollar gains. 0.9988 to 1.0024 3-wk high in Europe
  • 0.9980 Asia low. Rise breaks above cloud. Close above would bolster bulls
  • Key 100-day MA and 76.4% Fibo resistance in sight at 1.0045 and 1.0047
  • Cross hits 7-mth high of 1.0923 fm 1.0910 Mon close. Next res 1.0929 Oct 12 high

GBP/USD

  • GBP/USD fell to a European am low of 1.2914 as EUR/USD sagged to 1.0893
  • 1.2914 approximates to 10DMA. 1.2932-1.2960 was early Ldn range
  • EUR/GBP elicited support near 0.8422 after its early Europe break below 0.8432
  • 0.8422 was May 2 low. More bids expected near 0.8400 (0.8405 = Apr 28 low)

USD/CAD

  • USD/CAD retreated to 1.3671 after rising to 1.3708 in early European trade
  • Parameters well within Monday’s 1.3644-1.3733 range (low before high)

AUD/USD

  • AUD/USD plumbed fresh 4mth low of 0.7329 after Australia levy on banks
  • Levy unveiled in Australian Treasurer Morrison’s budget at 5.30am ET
  • 0.7335 was early Europe low amid talk of new taxes in Australian budget
  • Asia high was 0.7398, before weak Australian retail sales data

NZD/USD

  • NZD/USD revisited 0.6881 in early European trade as AUD/USD sagged
  • 0.6881 was knee-jerk low after US jobs report Friday
  • Asia high was 0.6926. RBNZ OCR verdict & MPS Wednesday 5pm ET

FX OPTIONS

  • Implied vols in most G10 pairings are at, or near long term lows
  • 1mth EUR related vols underpinned by June ECB since yesterday
  • Paring of French risk and lack of n/term events adding weight
  • USD/JPY vols see minor bounce as spot pushes higher/USD gains
  • EUR/USD in a long gamma zone whilst 1.0850/1.1050 holds

COMMENT
Euro likely to show pluck ahead of June ECB

The euro may remain well supported ahead of the ECB’s June 8 meeting. Traders have sat long Bunds for ages knowing they have the ECB’s support but things are changing with higher U.S. rates fuelling the idea that where the Fed leads others will follow. The ECB is more optimistic about growth, and while lagging U.S. yields, the 10-year Bund yield is heading towards its 2017 high. Bond markets may be set up for a wash-out of positions similar to that seen in U.S Treasuries after Trump’s November election win. With UST positioning adjusted months ago, a flush of Bund positions could give EUR/USD a major boost, yet markets need inflationary data. That said, with a June Fed hike virtually priced in, hawkish speculation regarding the ECB is likely to intensify. With a static BOJ, rate divergence should add to a bullish technical EUR/JPY picture. A break below 2016’s low of 42.3bps by the 10-year Bund/JGB yield spread would warrant attention

FX Market Update 5-5

Market Briefs

  • EUR/USD -0.2%, USD/JPY -0.25%, GBP/USD +0.1%, EUR/JPY -0.4%
  • DXY +0.05%, DAX -0.4%, FTSE +0.05%, Brent +0.4%, Copper +0.4%
  • EUR/USD off 6-month high on profit taking. 1.0990 high in Asia
  • Swiss forex reserves up in Apr. CHF 695.943bln vs prev 683.386bln
  • Swedish Mar Industrial output rises 0.3% m/m, +3.8% y/y vs 0.9%/4.1% f/c
  • Macron stretches lead as French presidential campaign enters final day – Rtrs
  • Brexit minister Davis says EU trying to bully Britain – Rtrs
  • EU to cut Greece 2017 growth forecast to 2 pct – EU official – Rtrs
  • BoJ Kuroda: 2% target challenging, won’t be abandoned – Rtrs
  • Kuroda: Infl expectations still not anchored around 2% price target – Rtrs
  • Consensus emerging for OPEC, non-OPEC to extend output pact -Saudi governor – Rtrs
  • Czech C. bank vice-Gov Hampl says FX development “so far so good” after float – Rtrs

Looking Ahead – Economic Data (GMT)

  • 12:30  Nonfarm Payrolls (Apr) mkt +185k, prev +98k
  • 12:30  — Private Nonfarm Payrolls (Apr) mkt +180k, prev +89k
  • 12:30  — Manufacturing Payrolls (Apr) mkt +10k, prev +11k
  • 12:30  Unemployment Rate (Apr) mkt 4.6%, prev 4.5%
  • 12:30  Average Hourly Earnings (Apr) mkt +0.3% m/m, prev +0.2% m/m
  • 12:30  Workweek Hours (Apr) mkt 34.4, prev 34.3
  • 17:00  Baker-Hughes Rig Count (weekly) prev 697, +9 w/w)
  • 19:00  Consumer Credit (Mar) mkt +$14.85 bn, prev +$15.21 bn

Looking Ahead – Events, Other Releases (GMT)

  • 15:30  Fed Vice Chair Fischer speaks at Hoover’s Monetary Policy Conference; Stanford, CA
  • 15:45  FedTrade Operation 30-year Ginnie Mae (max $875 mn)
  • 16:45  FRB San Fran’s Williams gives keynote address for Shadow Open Market Committee; NY
  • 17:30  Fed Presidents Bullard, Evans & Rosengren participate in monetary policy panel; CA

Currency Summaries
EUR/USD

  • EUR/USD 1.0988 in NA then 1.0990 in Asia
  • Key 1.10 resistance untouched ahead NFP so profit-taking in Europe
  • EUR/USD 1.0956. Prior 1.09-40-50 resistance reverts to support
  • EUR/JPY which led rise seeing similar pre-NFP action, down 72 ticks
  • All eyes to NFPs & whether USD weakness again follows robust data
  • 1.1070-90 targets on 1.10 break. Recent lows ahead 1.0850. 200-DMA 1.0832

USD/JPY

  • USD/JPY relapsed from 112.65 to 112.09, ahead of the latest consolidation
  • Bids likely to be in decent size ahead of 112.00
  • Market has failed to register an hourly low below 112.18 pivot  point
  • Now stuck between two reasonably sized option strikes @112.00 & 112.50
  • NY Cut Expiries: 112.00 (689M), 112.50 (760M)

USD/CHF

  • USD/CHF lifts to 0.9888 from new 0.9859 trend low in Asia
  • 0.9853 Fibo is key support, bears seeking break/close below
  • EUR/CHF within 1.0827/1.0845 range in Europe
  • Swiss FX reserves rise points to active SNB
  • C. bank could be working new EUR/CHF 1.08 soft floor


GBP/USD

  • GBP/USD met headwind pre-1.2950 after catching bid from Ldn open
  • 1.2942 = two-day high. 1.2948 = Wednesday’s intra-week peak
  • More offers expected pre-1.30 option barrier level. 1.2965 = recent 7mth high
  • EUR/GBP was helped off 0.8508 to 0.8469 by profit-taking on EUR longs
  • 0.8508 = 9-day high in Asia amid expectations of easy Macron win Sunday

USD/CAD

  • USD/CAD elicited support near 1.3750 after retreating from highs near 1.38
  • Highs notched in late Asian/early European trade after oil tanked in Asia
  • 1.3800 = option barrier level.
  • USD/CAD helped off high by WTI rallying to $45.90 from $43.76 low in Asia

AUD/USD

  • AUD/USD met headwind circa 0.7400 after rallying off 0.7368 (late Asia 4mth low)
  • Drop to 0.7368 influenced by another steep Dalian iron ore fall, closed -7.5%
  • Stops below 0.7380 tripped en route to 0.7368. More stops tipped sub-0.7350

NZD/USD

  • NZD/USD met headwind at 0.69 after pushing recovery envelope from 0.6840
  • 0.6887 = Asia high after RBNZ inflation survey. 0.6840 was Thursday’s 11mth low

FX OPTIONS

  • Short dated vols propped by final short cover pre NFP/French vote
  • Risk premiums tame however – O/n vol break evens well below round 1
  • NFP event risk included also. Monday EUR/USD 15.0 vol or 120 pips, yen 12.0/96 pips
  • JPY vols little changed on week. AUD vols up on weaker spot but limited demand
  • Cable vols at ever new lows since late 2015. 1mth GBP put bias long term lows

COMMENT
Fed – Payrolls day but don’t forget Fed speakers

The FOMC statement this week highlighted that the Fed is still on track for a further rate hike at the June meeting. It would take a shockingly weak employment report today to reduce the chances of a June hike. The market is currently priced with a 75% probability of a further 25bps hike in the fed funds target range. In addition to the payrolls report we also have four Fed speakers on tap today in the form of Fischer, Williams, Evans, Bullard, Rosengren and Yellen [FED/DIARY]. These speakers will be as important as the data today and more of a focus will be any updates to the debate over balance sheet reduction. The idea being to prep markets for the release of minutes from this week’s FOMC meeting that are released in 3-week’s time.

Futuro del peso mexicano 5-5

  • USD/MXN opens NY 19.07, steady nearby; o/n range 19.1265-19.05
  • Matching flows  picked up in Europe, light into NY pre-NFP
  • US NFP at 8.30 NYT,  f/c 185k v 98k in Mar, Rtrs f/c range 1245-267k
  • USD/MXN res 19.1265 Fri high, 19.1585 daily cloud base, 19.2990 Apr 26 high
  • Support 19.0450 Fri low, 19.0015 daily pivot, 18.9875 daily Tenkan line

Futuro del peso mexicano 5-5.png

Futuro del peso mexicano 4-5

  • USD/MXN opens NY 18.9350, abv Wed 18.8630 cls, o/n range 18.98-18.84
  • Pair buoyed by rising US rate outlook, weaker oil & weaker Mex growth f/c
  • IRPR on Eikon: Mexico OIS f/c 61% chance for 25bp Banxico hike May 18
  • USD/MXN support 18.9652 upper 21-h Bolli (fmr res), 18.8987 10-HMA
  • Res 19.00 Thurs high, 19.0711 upper 21-d Bolli, 19.1585 dly cloud base
  • 1-wk/mos MXN vol up, remains below 200-DMA
  • Futuro del peso mexicano 4-5

FX Market Update 4-5

Market Briefs

  • EUR/USD +0.4%, USD/JPY -0.1%, GBP/USD +0.3%, EUR/JPY +0.5%
  • DXY -0.15%, DAX +0.75%, FTSE +0.35%, Brent +0.75%, Copper -0.75%
  • Copper slides further after biggest one-day loss in 20 months – Rtrs
  • DE Apr Markit Services PMI 55.4 vs prev 54.7. 54.7 f/c
  • DE Apr Markit Comp final PMI 56.7 vs prev 56.3. 56.3 f/c
  • EZ Apr Markit Sev final PMI 56.4 vs prev 56.2. 56.2 f/c
  • EZ Markit Comp final PMI 56.8 vs rev 56.7. 56.7 f/c
  • GB Apr Markit/CIPS Serv PMI 55.8 vs prev 55.0. 54.5 f/c
  • GB Mar Mortgage lending 3.105bln vs prev 3.386bln rvsd. 3.400bln f/c
  • GB Mar Mortgage approvals 66.837k vs prev 67.936k rvsd. 67.400k f/c
  • Uk Mar Consumer credit +1.624bln vs prev 146bln. 1.3bln f/c
  • UK Mar M4 money supply growth +0.3% m/m vs prev -0.2% rvsd
  • EZ Mar Retail sales 0.3% m/m, 2.3% y/y vs prev 0.5%/1.7% rvsd. 0.1%/2.1% f/c
  • Swiss consumer sentiment index slips in Q2. -8 vs prev -3
  • Macron, Le Pen clash on euro, terrorism, in French pre-election TV showdown – Rtrs
  • Swedish c.bank’s Jansson says risky to move policy ahead of ECB – Rtrs
  • Swedish c.bank’s Jansson says tool box still full if needed – Rtrs
  • Norway’s central bank keeps interest rates on hold as expected – Rtrs
  • UK’s Prince Philip to step down from royal duties – Rtrs
  • Turkey’s EU membership secondary as long as EU standards achieved, minister says – Rtrs

Looking Ahead – Economic Data (GMT)

  • 12:30  Challenger Layoffs (Apr) prev 43,310
  • 13:30  Initial Jobless Claims (Apr 29 week) prev 257k
  • 13:30  — Continued Claims (Apr 22 week) prev 1.988 mn
  • 13:30  International Trade (Mar) mkt -$44.5 bn, prev -$43.6 bn
  • 13:30  Productivity (Q1) mkt +0.2% q/q AR, prev +1.3% q/q AR
  • 13:30  Unit Labor Costs (Q1) mkt +2.5% q/q AR, prev +1.7% q/q AR
  • 15:00  Factory Orders (Mar) mkt +0.4% m/m, prev +1.0% m/m
  • 15:00  — Factory Orders Ex-Trans (Mar) prev +0.4% m/m
  • n/a    Chain Store Sales (Apr)
  • 20:00  Treasury STRIPS

Looking Ahead – Events, Other Releases (GMT)

  • 14:45  FedTrade Operation 30-year Fannie Mae/Freddie Mac (max $1.6 bn)
  • 15:45  FedTrade Operation 15-year Fannie Mae/Freddie Mac (max $575 mn)

Currency Summaries
EUR/USD

  • EUR/USD opens softer to 1.0875 then rallies to reach 1.0936 in Europe
  • Bonds price out any French election risk:
  • Peripheral EZ yield follow, Spain & Italy tighten 7/4 resp vs Germany
  • EUR/JPY challenges Dec 8 2016 peak at 123.50 as DAX hits record high
  • US/bund 10 yr spreads tightens despite 80% chance June Fed hike
  • Heavy supply still until 1.1000 EUR/USD. 200-DMA 1.0833 pivotal below

USD/JPY

  • Some decent demand from a prominent Japanese bank saw spot rise in Asia
  • Spot stuck between 112.51-113.05 pivots, range has been 112.60-112.93
  • More exporter offers, amongst others, likely between 112.90/113.00 region
  • 112.90 is just above cloud 112.87 top, TL comes in @113.00
  • Major Japanese exporter offers likely in size around 113.40
  • 113.40 – 50% retrace of 118.66 to 108.13 fall. Bids said to be circa 112.50 level
  • GBP/JPY has exceeded previous 2017 high @145.40 posted in January

USD/CHF

  • USD/CHF sharply lower. 0.9958-0.9908 in Europe
  • Reject came fm circa 200-day MA at 0.9955 again. Below is bearish
  • 0.9892 was Wednesday’s low and price looks to set challenge here
  • EUR/CHF holds above 1.08. 1.0820-1.0842, supported by 200-HMA
  • SNB possibly working new 1.08 soft floor. Brief dip below Wed

GBP/USD

  • GBP/USD tripped stops sub-1.2850 en route to 1.2831 in early European trade
  • 1.2831 = 8-day low. Cable then rallied to 1.2896 high pre-UK service PMI beat
  • 1.2905 = high since UK service PMI beat. 1.2965 = recent 7mth high
  • EUR/GBP has risen to 0.8487 amid greater certainty of a Macron win Sunday
  • Offers ahead of 0.85 have kept a lid on the cross over the past week

USD/CAD

  • USD/CAD elicited support pre-1.3700 after retreating from 1.3746
  • 1.3746 = early Europe high. More bids are tipped at 1.3680-85
  • 1.3680 was Wednesday’s low. Poloz due to speak in Mexico City at 4.10pm ET

AUD/USD

  • AUD/USD extended south to a fresh 4mth low of 0.7395 during the European am
  • Losses influenced by commodity weakness: copper -0.5% after 4.5% slump Wednesday
  • AUD/USD stops tipped below 0.7380 & 0.7350. Offers mooted 0.7425-40

NZD/USD

  • NZD/USD eased to 0.6861 in early European trade as AUD/USD probed below 0.74
  • 0.6861 = 3-day low. 0.6847 was 10mth low last week (Apr 27)

FX OPTIONS

  • Markets quiet, Japan out, FOMC non event, awaiting NFP, light event premium
  • Low delta EUR puts remain elevated in to French election as tail risk hedge
  • Rest of EUR/USD curve 2yr lows, Cable vols lows since late 2016
  • USD/JPY curve steady/heavy, more downside potential after France vote
  • AUD vols only gainers today as spot falls sub 0.7400, 1mth 8.25 vs7.7

COMMENT
Norges Bank gives little away, pledges transparency

On the face of it little in the way of fresh policy bias from the Norges Bank but some clues noted. In-line with Reuters poll Norges Bank leaves key rate at 0.50% and provides no rate path view. Rhetoric suggests the c.bank sees little fundamental change in risks or outlook since the March meeting. For the tighter policy camp a fall in unemployment, weaker NOK and a faster pace of household debt growth mentioned. Case for the status quo supported by a slowing in house price inflation and looser policy amongst trading partners. On balance key factors support an on hold stance and unchanged rate path. ECB and NOK likely future policy drivers. Worth noting that the NB will be offering more transparency at future board meetings. Minutes will be published and voting records given.