03 August 2016 at 11:25 GMT
Today's session is playing out in the long shadow of Japan's stimulus and central bank measures, which failed to excite markets and wound up driving the yen higher and Japanese government bonds lower.
Beyond institutional measures, the yen strength comes as markets move into a risk-off move which is being aided by collapsing oil prices; WTI crude fell below $40/barrel for the first time since April overnight.
In stocks, Europe's embattled banking sector is trading in the green today following earnings beats from ING and Socgen.
- US ADP Employment Change (1215 GMT, expected 170,000/prior 172,000)
- US Services PMI (1345 GMT, expected at 51/prior 50.9
- US Crude EIA Inventory Report (1430 GMT)
EURUSD targeted the 100-day moving average which we have been looking at lately at 1.1234 and has found resistance there yesterday and today. A quiet market waiting for ADP later today and then the services PMI. Disappointments in releases could start seeing us higher than 1.1234. To the downside we have been seeing the 55-day moving average as the base, and this is expected to hold unless the releases today are exceptional (55-day moving average at 1.1156). In USDJPY we like the downside and target 100 in the light of disappointing fiscal stimulus from Japan. Note that looking at absolute lows from before Abenomics started (October 31, 2011) to the highs of 2015, then 100.57 is a 50% retracement and an important tech level. We believe it would be difficult to see JPY weaken in such an environment. AUDUSD closed slightly above 0.7600 yesterday, and is so far slightly lower on the day, but we remain favorable for higher AUD with the main tech support that needs to hold being 0.7488 (100-day moving average)
FX Options volatilities
USDJPY volatility opened very bid after trading one-month at 11.3 yesterday; it opened in Asia at 12.75 but have only seen sellers in the European time zone and it is now trading at 11.7. It seems as if the Asian and US sessions are seeing buying while the European time zone has more risk appetite and therefore sees more selling interest.
The main interest today is to sell front-end especially one-week to one-month. We also see curve spread interests, where the market is a seller of shorter date against a buyer of backend. These type of trades are dominating in all major currency pairs today.
Overall volatility is trading softer today.
European equity indices are softer again this morning following on from a weak Asian session as Japanese stimulus measures failed to excite. Markets remain in a risk-off mode with the FTSE MIB being the exception.
Better-than-expected Q2 results from European lenders ING and SocGen have banking shares trading higher today and peers such as UniCredit, Santander, and BNP Paribas were lifted as a result.
Staying with the financials, HSBC climbed 4% after announcing a $2.5 billion stock buyback plan despite posting lower profits.
Volkswagen is back in the news as shares fell 1.5% after warning of lower sales in China next year.
Swiss money manager GAM fell 15% after posting lower profits prompting investors to withdraw $5.8 billon.
Earnings to be released Stateside today include Clorox Crocs, Dominion Resources, ICE, Leucadia National, Office Depot, and Time Warner.
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.
The inclement Tokyo weather is being felt across world markets today. Photo: iStock
— Edited by Michael McKenna