FX Recommendations
Short EURAUD at 1.4260, targeting 1.3805. stop loss 1.4490.
Short EURUSD at 1.2520, targeting 1.1800. stop loss 1.2800.
Long EURCHF at 1.2305, targeting 1.2500, stop loss 1.1970.—- BNP
BofAML’s MiJ, Joe Kraft thinks that the looming possibility of snap elections and a delay in the consumption tax in Japan are HUGE and that it indicates that PM Abe is about to go “ALL-IN” on the reflation game by setting a clear timeframe to achieve clear and sustainable growth. To meet this deadline, the Administration, the MOF and the BOJ would need to throw everything they’ve got to achieve it, which could potentially make the most recent round of easing pale in comparison. In Joe’s opinion, the snap election is directly linked to a delay in the consumption tax and Abe needs the confirmation of public support and the guarantee of a specific timeframe to re-enact the tax in order to ensure the cooperative relationship between the administration the MOF and the BOJ remains intact. In order to achieve this however, Abe must win any re-election campaign with at least an absolute 269 seat majority to ensure that the MOF/BOJ believe his promise that he can eventually reinstall the tax. A massively positive NKY and USDJPY event would occur on any upside for LDP seats above 269.
“It could make the Oct 31 BOJ easing look like a nursery rhyme…”
Trading in the Asian session was against a backdrop of US equities being near their all-time highs and general dollar strength. USDJPY we went up as high as 116.29 during Asia hours and then up further to 116.38 that was largely related to the timing of the Japan’s consumption tax hike. Continue to be positive on USD vs majors going into the next week.
Support in USDJPY comes in at 116.00. Low delta 130.00 strikes were paid in the market. Large expiry in AUDUSD 0.87 strike option comes in today. EURUSD is range bound 1.24/1.25 and do not expect much interest in the pair today. In Equities black spot is energy stocks which, because of the oil slump, will basically continue to be under pressure into year end.
Commodities: oil saw its worst week of losses since 2012, and WTI is in the midst of its worst run of weekly losses for nearly 30 years, leading market-watchers to speculate about the upcoming OPEC meeting in November. Iron ore is at a five-year low and Australia’s Glencore mining company has halted its coal production in response to high supplies. Silver has hit a 5.5 year high relative to gold, with gold investors remaining happy to sell into any rallies.
MS Heatmap picking offers in USD/JPY at 116.42-44 area – these offers were briefly evident as spot spiked to 116.38 on the London open but are much clearer now.
would think this ‘confirms’ barrier interest at Y116.50