16 September 2016 at 11:50 GMT
Italian car-maker Fiat traded 2% lower after recalling nearly 2 million cars worldwide due to an airbag defect.
- US August CPI (0.1% m/m; 1.0% y/y exp.) (1230)
- US August CPI Ex. Food/Energy (0.2% m/m; 2.2% y/y exp.) (1230)
- US August CPI Core Index (1230)
- US September Prelim. Univ. of Michigan Confidence (1400)
still sees 102.60 as the main technical resistance, which is the 55-day moving average. This was briefly breached yesterday only to return back below post US releases. This moving average has been capping topside since September 7, and USDJPY failed yet again yesterday to close above this average. On the downside, technical support is seen at the 21-day moving average at 101.91, which has been the floor since the same date, and USDJPY has failed to close below on several occasions. With European indices under pressure and the market apparently concluding that chances of the Bank of Japan reaching a strong consensus on policy fading, this level looks threatened, and below that the way is open to 100.
1.3155 (55-day moving average) has been decent support since September 1, and we are watching for any close below to open up to the 1.30 area. This level is now threatened, with GBP negatively affected by the current risk sentiment and a Bank of England that is nominally dovish and leaning towards a rate cut at its November meeting. Since September 7, GBPUSD has been in a very notable downtrend channel, with the highs of today (1.3246 area) being the current top of this daily downward channel. The lows of the channel correspond to around the 55-day moving average. GBPJPY
seeing a stronger JPY and weaker GBP move the pair down, and notable technical support is at 133.99, which is the 50% Fibo from the rally of August 16 to September 2. Below that level we see the 132.83 area, which is the 61% Fibo level from the same move.
-- as we approach the weekend, it is important to note the 100-week moving average above which EURUSD has failed to close comfortably despite several attempts lately. This level is now at the 1.1249 area. Little can be concluded before the Federal Open Market Committee meets next week. Downside decent technical support is at the 100-day moving average in the 1.1203 area, which then sees 1.1144 (200-day moving average) as the next area to watch.
FX Options volatilities
Tight ranges keep adding selling pressure in the options market. The market is long ahead of Bank of Japan and Fed meeting next week, and time decay is expensive so the market needs to sell something to finance.
The USDJPY vol curve is the biggest loser over last few days. We have seen good selling interest, in particular the backend (6m-1y).
One-month is down almost 2% over last two days. There's also good interest in EURAUD for the upside (buying interest). Overall we think the market is close to a buying area for medium tenors.
The STOXX Europe 600 index is trading down 0.70% on good volume, with almost all sectors in negative territory. Banks and energy stocks are underperforming, while healthcare names remain positive.
Fiat trades 2% lower after recalling nearly 2 million cars worldwide following an airbag defect.
Apple continued its strong week, gaining a further 3% last night (up 12% for the week so far) after confirming strong demand for its latest models.
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Deutsche Bank's US penalty woes dented other bank stocks as well.
Photo: Deutsche Bank
— Edited by John Acher and Clare MacCarthy