MARKET SUMMARY Daily Currency Update -

Transcription

Daily Currency Update - 21 October 2014
DAILY CURRENCY UPDATE
21 October 2014
MARKET SUMMARY
USD: A much calmer day on markets overnight although European equities fail to
hang onto Friday’s gains with the Euro Stoxx ending the session 1.2% lower and
the FTSE 100 down 0.7% while periphery yields widen further (most notably in
Portugal). Movements in oil and fixed income suggest concerns about global
growth persist while USD loses some ground across the board except versus the
Yen even as stocks rally modestly in the US (on anticipation of a strong earnings
report from Apple) and Japan (GPIF comments) that drives JPY crosses higher
JPY: Japanese shares rally and the Yen weakens strongly after the Japan
Government Pension Investment Fund indicates that it would lift its allocation to
domestic shares (from 12 to 25%) and offshore bonds and stocks from around 23%
to around 30%.
EUR:
The ECB begins to buy short-dated euro area covered bonds (French, Belgian and
Spanish short-dated covered bonds) as it starts its ABS and covered bond buying
program. Also in the euro zone, the August current account surplus amounts to
EUR18.9bn to leave the surplus for the 12 months to August at EUR242.9bn or
2.5% of euro area GDP. Portfolio outflows on the other hand amount to EUR28bn
in August but are partly offset by direct investment of EUR9bn.
AUD | NZD | CAD: In commodities, iron ore prices gain about 1% on the session
though nickel and copper are weaker as investor sentiment remains nervous on
both the supply and demand situation in China (last week copper inventories rise
17.5% on the Shanghai Futures Exchange while a Reuters poll shows expectations
for China’s third quarter economic growth to slow the most in five years). Crude oil
markets also end the session weaker.
Price Action
Spot
1M High
1M Low
EUR/USD
1.2794
1.2997
1.2500
USD/JPY
106.91
110.09
105.19
GBP/USD
1.6158
1.6526
1.5874
USD/CHF
0.9433
0.9689
0.9301
USD/CAD
1.1288
1.1386
1.0887
AUD/USD
0.8788
0.9218
0.8642
AUD/JPY
93.95
98.35
91.76
NZD/USD
0.7975
0.8268
0.7708
USD/SGD
1.2700
1.2826
1.2590
USD/TWD
30.37
30.53
29.94
1 Year Forward (Bid)
Onshore Offshore
Fwd
Onshore
Fwd
Fwd
30.07
30.08
USD/KRW
1057
1080
1031
1069
1066
USD/CNY
6.1230
6.1568
6.1171
6.2592
6.2747
USD/INR
61.13
62.45
60.56
65.92
65.06
USD/IDR
12035
12325
11767
12865
12715
USD/PHP
44.84
45.12
43.75
45.19
45.1
Source: Bloomberg
USD & JPY: Moderate bias to sell USD across the board as concerns about further market volatility persists
USD: Key Events Over The Past 24 hours: Fed President Rosengren (non voter and dovish) 

Says conditions are right for Fed to end QE after the October 29 meeting, but does not rule out extending QE if there are severe problems.
Also says the timing of liftoff from the zero lower bound could easily be shifted by a quarter or two, given the uncertainty around forecasts for employment and inflation,
according to MNI.
Fed's Fisher –



USD/JPY High Low Chart
Recent market volatility has not changed his outlook 'one iota'
Underlying economy is improving, I don't see any need to not curtail QE3 at the October meeting
No slide to downside on inflation, no pressure on the upside either
106.91
105.19
110.09
USD & JPY:

Global FX investors ease back into the trading week overnight with a moderate bias to sell USD across the board except versus JPY on strong turnover, still coming to
grips with the volatility seen in recent trading sessions. USDJPY gains following the GPIF headlines (refer Macro Wrap) though runs out of steam after hitting the
107.30s in the London session that sees it trade back to the 106.80s. CitiFX traders in NY point out that “Another top Monday confirms 107.40/50 as the level to watch
topside in USDJPY. We’ve tested this region multiple times and most notably, pre-retail sales. The short-term range is 105.00/107.50 going forward. Below 105.00 will
seriously jeopardize long term bullish sentiment while a break above 107.50 should get the market thinking about new highs for 2014.”
What’s happening in the next 24 hours
US
Indicator
Citi
Consensus
Prior
Existing Home Sales, mn
5.1
5.1
5.05
USDJPY still holds the breakout levels as supports




The rally into the October high was extremely similar to that
seen going into the January high in terms of both time and
magnitude.
From the Jan high we corrected down 469 pips and
marginally overshot the 50% retracement of the rally
This time we corrected down 489 pips and marginally
overshot the 50% retracement of the previous rally
We are now beginning to turn up just as we did in early
February after posting a weekly hammer pattern (also seen
in February). To us, the similarities in price action and the
levels that have held (remember we have basically retested
the previous high from January which was the breakout
level) strongly indicate a rally ahead.
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EUR, GBP, CHF: EUR gains on weaker USD sentiment, GBP continues to consolidate
EUR/USD High Low Chart
1.2793
EUR
1.25
1.2997

EURUSD rallies from 1.2740 in London towards 1.2815/20 as the spot move follows the broad weaker USD sentiment.
Following on from reports from Friday’s session, a spokesperson for the ECB confirms that it has begun purchasing
covered bonds with the first round of notes acquired including short-dated French notes. Meanwhile, Klaus Regling,
GBP/USD High Low Chart
1.6158
head of the European Stability Mechanism, says that the ECB’s asset quality review (AQR), due October 26, should
1.6526
1.5874
bring clarity on Greece’s funding needs. The CitiFX Strategist team suggests that contagion remains a non-negligible
risk given the recent sharp deterioration in Euro zone fundamentals while the CitiFX Flows team points out that while
accounts have been buying back EUR and CHF all of last week, they appear to be losing interest in EUR buybacks and
USD/CHF High Low Chart
CHF looks overbought. And while data has not yet captured an aggressive return to selling, weaker demand for EUR
0.9433
implies a loss of momentum.
0.9301
0.9689
GBP

GBPUSD mirrors the EUR’s footsteps overnight and opens in Asia this morning testing 1.6170/80. Sterling seems to be
consolidating its recent gains with the main action seen in the EURGBP cross where downward pressure continues. The recent highs of 0.8040/50 on EURGBP appears
to provide a solid cap while near term support lies at 0.7900/10 for now and 0.7875 below that.
What happened in the past 24 hours
Euro zone
Euro zone
Indicator
Actual
Citi
Consensus
Prior
Euro zone Current Account SA (Aug)
Euro zone Current Account NSA (Aug)
EUR18.9bn
EUR15.1bn
N/A
N/A
N/A
N/A
EUR21.6bn
EUR32.8bn
Switzerland
UK
Euro Area
Indicator
Citi
Consensus
Prior
Trade Balance, CHFbn
PSNB ex Banking Groups, GBPbn
Gen. Govt. Debt to GDP Ratio (2nd Notification)
-10.5
--
2.49
10.1
--
1.33
10.4
92.6
AUD/USD High Low Chart
AUD, NZD, CAD: AUD consolidates ahead of RBA minutes and Q3 CPI (later this week)
0.8787
0.8642
0.9218
AUD and NZD

AUD and NZD also seem to be consolidating for now with the 0.8650 - 0.8900 range defining the movement in
NZD/USD High Low Chart
AUDUSD ahead of today's RBA Minutes and Australia Q3 CPI later this week. Also released this week is NZ Q3 CPI
0.7975
which will be the key domestic driver for NZD. The AUDNZD cross remains at an interesting stage, caught between
0.7708
0.8268
stale positioning and lack of fresh interest with short term support seen around the current 1.1000 area while
resistance is at 1.1120. Positioning wise, both our Citi Positioning indicators and the CFTC note that there has been
an increase in short AUD positioning as well as a reduction in long NZD.
USD/CAD High Low Chart
1.1288
CAD
1.0887
1.1386

USDCAD opens in Asia slightly higher this morning than where it closes in NY on Friday around the 1.1285-95 area
and coming ahead of Wednesday's Canadian retail sales and the Bank of Canada rate meeting. Meanwhile, our
CitiFX positioning indicators show CAD positioning has moved aggressively towards the "short CAD" end of the spectrum and point to active currency managers having
increased their short positioning in CAD further this past week. The Positioning Indicator value is now at 3, indicating short CAD at 3x normal exposure. Active managers
have clearly benefited from the recent USDCAD gains as they have been mostly long this pair since June, but this latest positioning level has rarely been reached in its 3year historical series and could potentially be crowded. Short term resistance in USDCAD lies at the 1.1300 level with larger resistance seen towards the highs of last
week - 1.1375/85 while some small support is seen below at 1.1250 and more significantly at 1.1210/20. On crosses, CitiFX Technicals note that while trading through
94.00 (even down to 93.00), CADJPY has failed to close below that level and has bounced higher and the 95.35 level (which is the 100d MA) will serve as short term
resistance. Meanwhile, EURCAD remains in no-man's land trading between the 50 and 100d MA with the 1.4450 area providing decent near term resistance.
GOLD

Gold passes the USD1,240 mark overnight and is approaching its month-high level of the middle of last week. Despite mild price losses at the end of the week, it ends
the second consecutive week with overall gains, having risen 5% from its lows at the beginning of the month due to safe haven demand in response to the recent turmoil
in stocks. Meanwhile, Gold ETFs see a net influx last week of 5 tons, likely the first weekly rise for five weeks, and the biggest since mid-July. A little past the mid-month
mark, gold coin sales in the US also reach 42.5 thousand ounces. This figure is only a little short of that reached in all of October last year, and could prove to be the best
since January, traditionally a strong time. Moreover, money managers are also increasingly betting on the price of gold rising with net long positions in Comex in the week
to 14 October up a good 12k contracts to 42.2k, the highest level seen for five weeks. It remains to be seen however how strong physical demand will be in India
following the Diwali holidays this week.
Australia
Indicator
Citi
Consensus
Prior
RBA Minutes of October meeting
0
0
0
ASIA:
China
China
China
Indicator
Citi
Consensus
Prior
Retail sales, YTD, %YoY
IP, YTD, %YoY
GDP, YTD, %YoY
----
12.1
8.4
7.4
12.1
8.5
7.4
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MARKET SUMMARY Daily Currency Update -

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