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EUR/USD nears the November low

  
Analysis, Forex
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Keep an eye out for stops

EUR/USD is at the lows of the day as the US dollar gets a broad bid. The pair is down 27 pips on the day to 1.0994.
The level to watch is 1.0989, which as the November 13 low. Watch for stops if it gives way. A break below would mark the lowest since October 9.
Keep an eye out for stops
There are $1.1 billion in options running off at 1.1000 at the top of the hour, among others.

Mood in Beijing on trade deal is pessimistic – report

  
Analysis, Forex
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USD/JPY down on the headlines

Risk trades are under pressure after this report from CNBC’s Beijing correspondent Eunice Yoon:

Mood in Beijing about #trade deal is pessimistic, government source tells me. China troubled after Trump said no tariff rollback. (China thought both had agreed in principle.) Strategy now to talk but wait due to impeachment, US election. Also prioritize China economic support.

Next week brings the FOMC and BOJ meetings – forecast range for USD/JPY

  
Analysis, Forex
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A note via MUFG on the yen for the week ahead, analysts looking for 107/111 for USD/JPY.

On the Federal Open Market Committee meeting:
  • USD/JPY has already priced in a rate cut by the FOMC to some degree, so would not react much to a cut. If the Fed does defer on cutting rates, then the initial reaction would likely be USD buying, but stock price weakness would likely cap a rise by USD/JPY
And, on the Bank of Japan:
  • BoJ will maintain current monetary policy
  • BoJ Governor Kuroda commented in an interview that he expects a rate cut, so if the BoJ stands firm on policy, JPY may strengthen slightly but probably not continue. But if the BoJ does make some sort of policy change, JPY would initially weaken but not continue to do so because of concerns about side effects and continuity, and at some point USDJPY would lose steam. 
And, of course on a big driver:
  • Ultimately Brexit continues to loom and there will likely be little sense of direction despite some volatility.
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FOMC on the 30th, Wednesday next week.
BOJ on the 31st, Thursday next week.

CFTC Commitments of Traders: Pound shorts haven’t been squeezed…yet

  
Analysis, Forex
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Forex futures positioning data from the CFTC for the week ending October 15, 2019:

Forex futures positioning data from the CFTC for the week ending October 15, 2019:
  • EUR short 75K vs 75K short last week. Unchanged
  • GBP short 73K vs 73K short last week. Unchanged
  • JPY short 7K vs 11K long last week. Longs switch to shorts in an 18K drop
  • CHF short 13k vs 11k short last week. Shorts trimmed by 1K
  • AUD short 48k vs 46k short last week. Shorts increased by 2K
  • NZD short 40K vs 38K short last week. Shorts increased by 2K
  • CAD long 13K vs 5K long last week.  Longs trimmed by 1K
  • Prior week

The big moves in sterling came last week and I’m surprised there wasn’t any covering through Tuesday. That’s good news if you’re long GBP because it leaves lots of juice to squeeze.

CFTC commitments of traders: The largest position remains GBP shorts

  
Analysis, Forex
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Forex futures positioning data for the week ending September 24, 2019 from the CFTC  should

  • EUR short 66K vs 61K short last week. Shorts increased by 5K
  • GBP short 77K vs 81K short last week. Shorts trimmed by 4K
  • JPY long 14K vs 13K long last week. Longs trimmed by 1kK
  • CHF short 12k vs 11k short last week. Shorts increased by 1K
  • AUD short 52k vs 47k short last week. Shorts increased by 5K
  • NZD short 42K vs 45K short last week. Shorts trimmed by 3K
  • CAD long 6K vs 5K long last week.  Longs increased by 1K
  • prior week

Modest changes in the major currencies for the current week. Although speculators trimmed short positions in the pound, it remains the largest specular position. The EUR shorts increased by 5K. It is the 2nd largest short position.

The specular position in the JPY remains on the long side. The CAD is also a long position for traders.

European shares are beaten down. German DAX falls -2.5%. France’s CAC -2.9%

  
Analysis, Global Indices
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Ouch.  European shares take a beating.

The European major indices are closed and the provisional closes are not looking good. The major indices are all beaten down by 2%-3%  declines.
The provisional closes are showing:
  • German DAX, -2.5%
  • France’s CAC, -2.9%
  • UK’s FTSE, -3.2%
  • Spain’s Ibex, -2.7%
  • Italy’s FTSE MIB, -2.8%
In the European debt market, the benchmark 10 year yields are ending the session higher, but off the highest levels of the day.  Below is a snapshot of the current yields, changes and high low yields.
Ouch.  European shares take a beating.
US stocks are also down sharply and trading near lows.
  • S&P index, -1.91%
  • NASDAQ index, -1.75%
  • Dow industrial average, -2.0%

In other markets:

  • spot gold is surging and back above the $1500 level. The price is up $22.34 or 1.51% at $1501.50.
  • WTI crude oil futures is trading down $1.35 on expectations of slower growth. That is down 2.5% at $52.28. The inventory data showed a higher build then expectations today
In the forex, the JPY remains the strongest currency on flight to the relative safety of the JPY. The CAD has taken over as the weakest.  The USDCAD is now trading back above its 200 day moving average at 1.3288.

CFTC Commitments of Traders: Canadian dollar buyers bail

  
Analysis, Forex
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Forex futures positioning data for the week ending September 24, 2019 from the CFTC:

Forex futures positioning data for the week ending September 24, 2019 from the CFTC:
  • EUR short 61K vs 69K short last week. Shorts trimmed by 8K
  • GBP short 81K vs 86K short last week. Shorts trimmed by 5K
  • JPY long 13K vs 24K long last week. Longs trimmed by 11K
  • CHF short 11k vs 5k short last week. Shorts increased by 6K
  • AUD short 47k vs 54k short last week. Shorts trimmed by 7K
  • NZD short 36K vs 30K short last week. Shorts increased by 6K
  • CAD long 5K vs 20K long last week.  Longs trimmed by 15K

There were some substantial moves across the board in this week’s data. There was no overarching theme in the US dollar. The loonie has stubbornly held onto longs but I suspect the jump in oil prices and lack of a corresponding climb in the loonie may have sent some specs to the sidelines — that data certainty hasn’t eroded.

Saudi-led coalition launches military operation in Yemen

  
Analysis, Politics
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If it was against Iran directly there might be some forex impact but Yemen, no.

If there are market jitters watch for flows out of risk and into havens. But nothing evident right now.
  • Saudi state TV with the report of a military operation Yemen against military targets

Global currency trading volumes surge to highest-ever level

  
Analysis, Forex
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Trading hits $6.6 billion per day

Trading hits $6.6 billion per day
Trading in the foreign exchange market has hit $6.6 trillion per day, according to the latest survey from the Bank of International Settlements.
The BIS today reported today that volume in the survey month of April rose 29% compared to 2016. The comprehensive survey is conducted every three years.
Aside from the jump, what stands out was the rise in swaps trading — which is now nearly half the market.
Other key details:
  • 88% of all trades include USD
  • London accounts for 43% of all activity
  • US trading is 17%
  • EM currencies are now 25% of turnover
  • Trading involving the euro hit 32%
  • Trading involving the yen at 17%
  • Yuan trading is 4%
  • Spot FX trading rose 20% to $2 trillion
The changes in volumes of the major currencies was muted compared to 2016 aside from a small drop in the yen but that may have been due to lower volatility in the survey month.

August forex seasonal scorecard

  
Analysis, Forex
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You can’t predict anything from Donald Trump but the August seasonal patterns did a great job of predicting how the month would go.
1. Weakest month of the year for NZD/USD
This one delivered in a big way. Month-to-date the kiwi is down 3.7%. It’s fallen every which way and is the worst performing major currency this month.
2. 2nd weakest month for CAD
The loonie has been bolstered by some upbeat economic data including today’s GDP report but even with all that, the Canadian dollar fell 0.7% on the month against the US dollar.
3. 2nd weakest month of the year for AUD
It was the second-weakest month and AUD was the 2nd weakest performing major. AUD/USD fell 1.6% in the month.
4. 2nd weakest month for cable
This one bucked the trend but only modestly. Cable is up 0.4% on the month with more than half the gain coming today. Maybe it’s a good sign that the pound has been able to buck seasonal weakness?
5. 2nd strongest month for gold
Few traders need a recap on this one. Gold was a rocket ship in August posting one of its best months in years as it gained nearly 7%.
6. Poorest month over the past decade for the S&P 500
Stock markets have shown some impressive resilience over the tail end of this week but all that has done is narrowed a loss that was as much as 6.2% at one point down to -2.7%.
Verdict:
That’s a solid 5 out of 6 wins with a few homeruns in there. Ready for the September seasonal playbook?
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