CIBC: FX Flows: FXWW

From the FXWW Chatroom: Usd weakened after the Asia opening bell, e-minis down, 10-year UST yields down 1bp. Some traders said the price action is Asia’s reaction to the Trump Fed nomination that came out in late NY news. GOP news on tax reform bill made to the headlines too but no one paid any attention.
UsdJpy peaked at the Tokyo open and slipped towards 113.99. Just a reminder, there are 114.00 option strikes due today and tomorrow, totalling $3.4bn. Usd sales surfaced from macro names, this snowballed when we broke 113.95 and got quickly to 113.73.

AudUsd popped from 0.7680 to 0.7701 following the strong Aussie data published today. Sept trade surplus exceeded expectations, rose to Aud1.75bn. Bloomberg reported this is caused by higher prices for key commodities like iron ore, driven by renewed Chinese demand and a stronger global backdrop. Sept building approvals were also stronger. AudUsd ran into resistance, I heard macro names added supply. It took a while for buyers to chew away the offers and eventually rallied to 0.7721. Do note, we have not been able to closed above this SMA past 3 trading days. Today’s rate comes in at 0.7697. There is a Aud1.5bn option expiry today NY cut strike 0.7700.

GbpUsd, EurUsd and NzdUsd advanced. EurUsd touched technical resistance at 1.1670, sellers are said to be surrounding 1.1695-1.1700. Watch for these strikes maturing today NY cut – 1.1700 for Eur1bn; 1.1670 for Eur800mio, 1.1650 for Eur1.5bn and 1.1600 for Eur1.4bn. 
In the past week, Gbp has reacted positively to data as well as expectations of BOE rate hike today. However, latest development is causing long positions to lose confidence. UK Defence Secretary Michael Fallon has resigned, two other Tory ministers have been named on allegations of sexual harassment. This does not look good for Theresa May’s cabinet. Now what happens if BOE stays unchanged today? An argument made in FT, UK inflation looks dangerously high but this reflects a one-off pass-through of sharp Gbp depreciation. MPC is pessimistic about the economy’s long-term growth potential, plus Brexit talks. Gbp resistance now at 1.3350 while downside risk is 1.3190.

UsdCad weaker – not a surprise. We cleared several bids in the 1.2840’s and saw US names on supply. Our macro strategist Bipan said the pair remains overbought as indicated by RSI. He said a push below 1.28-handle would confirm a move lower is underway. On charts, support should come in at 1.2785.
Interesting remark by FT’s John Authers on Jay Powell as Fed chair. He said Powell is not quite the non-event. Powell’s views on monetary policy are not as clear to the market as those of his predecessors so that adds to the uncertainty and volatility should the market put him to the test.
Asians
USDCNY fixed at 6.6196, in line with estimates. We suspect stops in USDCNH were taken out when the pair broke through 6.6010 and traded quickly to 6.5978. Onshore USDCNY opened at 6.5940 and proceeded to 6.5840 dragged USDCNH towards 6.5887.
UsdKrw, on the other hand was bid. The onshore pair started at 1112.5 then slipped to 1111.8 in line with other Usd/Asia. However a report by CNN that North Korea is already working on advanced version of missile that could potentially reach US.
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