25 May 2016 at 11:28 GMT
Today's session is relatively hale and hearty as the announcement of yet another Greek debt deal offers some relief from the prospect of another crisis-ridden summer. Oil prices are another bullish factor ahead of today's inventories report from the US, where data point to a decline in crude stockpiles.
On the data front, the Canadian interest rate decision has forex traders keeping one eye on the loonie while the shifting sands of the Brexit debate pull the pound this way and that. In EURUSD, the declines continue with the next US nonfarm payrolls report a key release for the greenback.
- US May Preliminary Markit Services PMI (1345 GMT)
- Bank of Canada Interest rate Decision (1400 GMT)
- Fed’s Harker to speak (1300 GMT)
- Fed’s Kashkari to speak (1540 GMT)
- Fed’s Kaplan to speak (1800 GMT)
EURUSD: continues moving in the downward channel from May 3. The bottom of the channel for today also coincides with the 200-day moving average at 1.1100. Since late October 2015, whenever EURUSD crossed and closed day beyond its 200-day moving average, the trend continued (200-day moving average was crossed four times in this period). Tech resistance at 1.1163 area. USDJPY: is reaching interesting levels. We have been following a close above the 55-day moving average for a while now, and we are dancing around this level (today's 55-day moving average sits at 110.17). Preferably a close above 110.19 (close of May 18) is needed. The next resistance above this level is 110.58 (highs of May 20). Short-term tech support lies around 109.54 (10-day moving average). G7 leader meeting approaching, so is this a preparation for a breakout after that? GBP: Brexit polls continue to move with the "Remain" campaigns fortunes shifting. Online polls have shown "Leave" was ahead, but this is now equalising. EURGBP looks to be heading south under the current circumstances. USDCAD: All eyes on the Bank of Canada today. Saxo Bank head of FX strategy John Hardy closed his long position on USDCAD yesterday, with the risk-on sentiment being a possible support for commodity currencies. USDCAD remains elevated so far and contained in the range of the last three days. Tech support remains around 1.3015/20 (highs of May 9 and the 10-day moving average, respectively) which needs to be broken for a test lower. A break of 1.3215 could be needed for an attack on the 200-day moving average at 1.3360
FX Options volatilities
Vols are trading a touch lower today, both frontend and backend.
On EURUSD, nonfarm payrolls day is surprisingly offered. It still trades at a premium to other days, but significantly less compared to yesterday. In USDJPY, vols in general are offered and RR are trading close to par.
Very positive sentiment across fixed income markets. Corporate bonds are rallying and ITRAXX XOVER dips to 308 basis points – a 30 bps contraction for the week. Government yields are also back on the decline from an early morning selloff.
This comes despite the sentiment (and rate hike speculation in the US) that has the 10-year German yield trading back down to 0.16%.
European stocks bounced higher Wednesday. Germany’s DAX 30 was up 0.8% to 10,141.76, while France’s CAC 40 moved up 0.4% to 4,450.72. The U.K’s FTSE 100 added 0.6% to 6,258.66.
Investors are more confident in equity markets as Greece’s creditors have reached a deal to unlock more bailout funds for the debt-burdened country. Greece will receive €10.3 billion in new loans if a deal struck in the early hours of Wednesday morning is signed by the 19 member countries in the Eurozone.
The funding will help Athens from defaulting on large debt redemptions to the IMF and European Central Bank in July. The ministers also agreed on a road map on debt relief for Greece.
Energy shares were well supported this morning as oil prices crept toward $50/barrel, with the move coming after industry data pointed to decreases in US crude inventories. Official stockpile data will be released by the Energy Information Administration later today.
Repsol SA rose 2.4%, and Italy’s Eni SpA gained 1.6%. Oilfield services firm SBM Offshore NV picked up 0.8%.
Also on the move, Marks & Spencer Group PLC shares dropped 7% as the apparel and food retailer said profits fell 19% and warned on margins.
Meanwhile, Dixons Carphone PLC shares were up 0.6% as the electronics retailer forecast full-year pretax profits coming in at the top half of its previous guidance.
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.
Greece's problems are far from over, but today's announcement of a debt deal has left investors with at least some hope for the Eurozone's stability. Photo: iStock
— Edited by Michael McKenna