08 February 2017 at 12:36 GMT
Uncertainty over Trump's presidency has been coupled with the prospect that the whole European project might face disintegration as anti-EU French presidential candidate Marine Le Pen finds herself edging higher in the polls. The unpredictability has sent gold skyward to a three-month high.
The same forces that are propelling gold up and up have brought EURUSD its third consecutive day of losses, despite all European indices edging higher today.
Watchlist (all times GMT)
- US MBA mortgage applications (1220)
- US Weekly Department of Energy crude oil inventories (1530)
- Royal Bank of New Zealand interest rate decision (2000)
EUR is the main victim today. In EURUSD, the upward channel which started in January has been broken downwards and we are at a 38% Fibo level at the 1.0640 area, which then opens up to the 1.0585 area. This is the third day of losses for EURUSD.
For GBP, we like it higher in general but mostly against EUR, with 0.8500 being a possible level that, if taken out, opens for more moves lower. A number of things are giving GBP a bid, first some hawkish comments by a Bank of England member and EU election risks giving GBP some safe-haven status compared to Europe.
GBPUSD managed yesterday to close above 100-day moving average at 1.2448 and we need to remain above this level, as GBPUSD has failed to close below the 100-day moving average since January 23. GBPUSD 1.2485/1.2500 is a magnet for GBPUSD until more Brexit developments arise.
Since the Trump rally of November 9 from lows of 101.18 up to highs of 118.65 on December 15, USDJPY has corrected and is now around 38% Fibo level at the 111.98 area, which we see at the initial technical support area, and below it then opens up to the 100-day moving average at the 110.32 area. It has been one long retracement since December's highs, so it's important we start seeing it comfortably higher than the 111.98 area to avoid deeper moves. Technical resistance of note around 10-day moving average, today at 113.11, which USDJPY has had difficulty closing above since January 31.
FX Options volatilities
The month tenor is now covering the French election, so the 3-month tenor is much higher today.
The EURUSD curve is in general supported with most focus on downside strikes at the moment.
AUDUSD today is neutral or slightly better offered after we saw some buying interest yesterday for downside strikes.
NZDUSD is better bid, especially the front end due to the upcoming Royal Bank of New Zealand interest rate announcement this evening.
USDJPY is better offered today. Yesterday it traded 500 mio 3m atm ag 1y at 0.4. This is adding gamma to the market and may also be reason for the 30-month being relative cheap, even it is covering French election today.
European stocks stepped higher but post-earnings drops by Maersk, Tullow Oil and Carlsberg helped put a brake on the gains. The CAC 40 rose 0.5% and the Dax 30 picked up 0.1%. The FTSE 100 edged down 0.2% ahead of a vote on proposed amendments to the Brexit bill in the UK’s House of Commons.
The Athex index was down 1.4% as the International Monetary Fund’s annual review of the Greek economy, published yesterday, revealed a rare split among its board members – showing they are in disagreement over the austerity measures imposed on Athens and over the country’s huge debt burden.
Company wise, on the downside, A.P. Moller-Maersk halved its dividend Wednesday and posted a massive quarterly net loss. The Danish shipping giant’s stock fell 5.2%.
Tullow Oil lost 4.8% after the U.K. oil explorer reported a narrower loss and said cost cutting will remain a key focus in 2017.
Carlsberg dropped 3.2% after the Danish brewer swung to a second-half net profit, but also posted lower-than-expected revenue for the final three months of the year.
On the upside, Sanofi rose 2.1% after the French drug maker adjusted income-topped forecasts, while Vestas Wind Systems jumped 2% as the Danish maker of wind turbines hiked its dividend after a jump in full-year net profit.
Storebrand soared 5.3% for the Stoxx 600’s biggest gain. The Norwegian financial-services provider‘s quarterly results and dividend announcement both topped expectations.
The replay of our Morning Call can be found here
Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.
A strong inventory build in this afternoon's EIA inventories report
could put yet more pressure on oil prices. Photo: Shutterstock