FX Flows

From the FXWW Chatroom: Is the RBNZ action prelude to something to come today, Mr Draghi? Our strategist Bipan Rai has put out a piece – he sees ECB cutting deposit rate by 20bp vs consensus of 10bp. ECB lowers the remuneration rate on excess reserves by 10bp; ECB expands size and scope of QE by $20bln per month; and there is a chance that they’ll introduced some modified LTRO program. Why? The ECB over promised and under-delivered last Fall and its unlikely to repeat the same action this time around lest its credibility takes a huge hit.

EurUsd offers are again reported 1.1040-45 (200-Day MA at 1.1044). Bids are down to 1.0900-10. We started the day near 1.1000, drifted lower to 1.0980 where we found a mid-size Swiss on the bid.

Following rate cut, NzdUsd fell to 0.6618. During RBNZ Governor Wheeler’s testimony to parliamentary committee, he said it could be we don’t need any more cuts. NzdUsd jumped to 0.6655 but short lived as market returned to buy AudNzd. We hear stops under 0.6600 in NzdUsd.

Aud rallied hard against the Nzd – yield spreads of the 2-year bonds telling us there is still potential for this cross to gain up to high 1.13’s. We saw some buying of the cross, initially capped at 1.1260 but macro demand drove the cross to 1.1277. Meanwhile, AudUsd stayed firm, there should be some fresh resistance near 0.7500-area again.

UsdJpy traded to 113.15 – early supply came from North Asia names. Demand for Goto-bi Day got UsdJpy higher into and after Tokyo fix, chewed away good offers near the 200-Hour MA of 113.38. I hear thicker offers atop 113.70.

UsdCad advanced from where Toronto ended 1.3240. Flows has been light, we suspect some short covering from intraday traders occurred that got us higher.

Strong equity and bond inflows into Thailand has pressured the UsdThb lower. Besides real money, speculators like momentum and CTA accounts sold UsdThb as well, pushed the funding more towards the left. We saw local banks soaking up supply 35.27-28. On the day, we should see better support near 35.23; intraday resistance at 35.40.

USDCNY fixed today at 6.5127, in line with interbank traders’ estimate. USDCNH firmly in the high side of 6.51’s. Cheap funding in the front end has attracted buying of USDCNH from macro names.

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