FX Flows

From the FXWW Chatroom: Strong demand for NzdUsd into and after Tokyo fix kept the pair supported. Earlier in the day, RBNZ published the Economic Assessment and as expected, was dovish in several aspects. The publication out at NY close sent Kiwi from 0.7025 to 0.6977. Speculators took advantage of the bounce to add on to shorts limiting the move to 0.6990-95.

NzdUsd printed 0.6952 and Tokyo banks emerged. We thought it was just for fix but demand continued and brought Kiwi back to high seventies. 0.6990-95 remains an obstacle. There are small option strikes expiring today 0.6975 and 0.7000.

There was an article from Kyodo News that the Japanese government could be planning a Jpy20trln stimulus program to support the economy had UsdJpy breaking the 107.02 trendline. The report said ruling party and New Komeito is putting up a stimulus package to help the domestic economy emerge from deflation and fend off possible adverse effects of Brexit.

UsdJpy jumped at the NY close, and I am still pondering what caused the move. Some suggested stops through the 107.05, which is the trendline from Jan 29 2016. Speculative names were picking up Usd on the move back near that trendline. There was demand into the fix – registered 107.49 and moved back to the 107-teens. Suspect exporters are at 107.50. Intraday support should be 107.00 but better at 106.85. Nothing big in option expiry – only a $1bn strike at 107.00 NY cut.

We saw platform names hitting offers in GbpUsd in the 1.3260’s. We think the move was partially linked to stops and CTA names jumping in. The other reason is Asia market picking up this Telegraph article by MPC member Kristin Forbes saying that BOE should keep calm on rates until the Brexit fog clears. Cable exhausted after 1.3275 and drifted to 1.3230.

Emerging Market

USDCNY fixed at 6.6872, in line with traders’ guess. USDCNH took out some weak stops below 6.6775 from Asia accounts but bounced higher after the fix. Some said the buying was linked to higher opening in the onshore USDCNY.

Into the late morning, onshore USDCNY broke 6.6800 and move accelerated from 6.6770 to 6.6720 very quickly. Some offshore traders suspect the move was engineered ahead of G20 this weekend in Chengdu. Another linked the move to comments by SAFE that market’s expectations of Yuan depreciation is weakening.

UsdSgd is trying hard to break above two moving averages 50-Day at 1.3582 and 100-Day at 1.3586. Also, do note there is a long term trendline coming in at 1.3597. Our trader likes to buy UsdSgd on dips but rather shallow as EM traders are buying UsdSgd as proxy hedge to UsdMyr.

(CIBC)
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