FX Flows

From the FXWW Chatroom: Oh Ploooozzzz… BOC Governor Stephen Poloz, after Toronto closed, corrected his earlier statement that “our best plan right now, we think, is to wait for the next 18 months or so”. He said the “18-month” comment was reference to output gap. This took UsdCad from 1.3285 to 1.3355. After print of 1.3364, the 50-60 area seems challenging for UsdCad – this is probably due to oil futures and the price action of AudUsd. Hearsay buyers lurking below 1.3260 while offers are mostly above 1.3400. Commodities firmer, nudged UsdCad towards 1.3330’s.

It is Gotobi-Day and UsdJpy was bought by Tokyo names only to ran into offers ahead of 104.50. There was small selling post-Fix but overall, firmer UST yields plus Nikkei Index gave the Usd firm sentiment. Since the Tokyo Fix, UsdJpy traded within 104.40-50 (yawn). Offers seen in platforms at 104.50.

EurUsd locked within this 1.08-1.09 for now; bids are reminded below 1.0850 while offers near 1.0900, likely to be linked to the option strike expiring today worth about Eur2.5bn. There are some stops on topside near 1.0915 but think there are traps, don’t be duped into buying for stops.

AudUsd firmed up onto 0.76-handle as price of iron ore futures advanced to 7-week high. However, the currency pair ran into option gamma play. I’m told option gamma has trapped AudUsd in tight range. Option players have been buying the pair on dips and then taking profit when this goes above 0.7600. The gamma play linked to option strikes rolling off on Thurs. First a 0.7575 for Aud1.2bn and then 0.7540 for about Aud1.5bn. Topside 0.7620 for Aud900mio. Calm until tomorrow’s Aussie Q3 inflation numbers.

Emerging Market
USDCNH continued to advance, printed high 6.7886. There was a chatter of Chinese banks hitting bids when we approached the CNY fix. Onshore weakened after opening on CFETS and this puts pressure on USDCNH towards the day’s low. The big level to watch is 6.8000, a large option structure up there.

There was a story in Joongang Daily about Chinese authorities are ordering travel agents to curb cheap travel packages to South Korea from November to April 2017. This report caused fall in some tourist-related stocks. Kospi Index fell and onshore UsdKrw rose to 1139.6. Offers from Korea shipbuilders rumoured at 1140 for their month-end hedging.

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