21 June 2016 at 11:31 GMT
Today's session represents the slightest of retreats from yesterday's 'Remain'-fuelled sentiment surge, but we are still far from last week's broad, Brexit-based declines.
European share indices opened slightly lower but have largely since clawed their respective ways back into the green while the pound remains 0.22% up against the USD (although its current range around 1.472 is a sizeable retreat from its early-session highs near 1.48).
German bund yields are up from their sub-zero panic point as well, but gold and the rest of the precious metals are trading in range, so this may be one signal that Brexit fears are waiting in the wings (although, as Saxo bank head of commodity strategy Ole Hansen notes, the UK referendum is far from the only factor supporting XAU).
- US Weekly API Oil Inventories (2030)
- Federal Reserve chair Janet Yellen testifies on Monetary Policy to Senate (1400 GMT)
- European Central Bank head Mario Draghi to speak in Brussels (1300 GMT)
- Fed’s Powell to speak (1830 GMT)
Risk-on is losing its momentum from yesterday, although this has not turned to risk-off mode. USD in general weaker across the main currencies, except JPY.
EURUSD has found the 55-day moving average as a support point so far. EURUSD has not really reacted to the ZEW data out this morning, which were generally stronger than expected. EURUSD actually rallied on the opening of the European exchanges, as the Dax index opened with a gap higher that quickly faded in the early opening hours. Still watching 1.1410/15 as the tech resistance of note. If this is taken out, then trade opens way higher in EURUSD. We have had three solid days of gains in EURUSD, with higher highs so far, so we need to see the momentum drop. USDJPY Rallies still not convincing us that we're out of the woods as the pair has had two days with resistance at the 104.82/84 area that were strongly pushed down. 105.50 is a tech level (105.60 is the 10-day moving average; this moving average has been respected since June 1) that would be the next resistance. Main tech support at 103.50, revisiting this could open the way lower, which is the main risk in USDJPY. GBP is comfortably above its 200-day moving average at 1.4683, yesterday closed a whisker below this average level and this now constitutes the tech support to watch. Will remain sensitive to polls and probably need new developments if needs to go higher. 1.4805 first tech resistance from here then expect around 1.4900.
FX Options volatilities
Most majors are unchanged today or slightly lower compared to yesterday. The interbank market seems to be in wait-and-see mode, so not much interest to quote or trade today. Best guess is slightly lower levels in the afternoon as we don’t have much new information out today.
In EURUSD the three-month tenor is slowly getting closer to the lows of the trading range for the last year, so market seem very comfortable with present risk/outlook. Would guess we start to see some support here around 9.0 % as it becomes relative cheap to put on a Brexit hedge again.
Bunds are reaching for new week-lows as markets remain confident ahead of Thursday’s Brexit decision and sentiment is firm.
At the current level of 0.07% the 10-year yield in Germany is now 11 basis points higher than the panic-low last week. In similar fashion, corporate bonds are performing well with liquidity quickly drying out on offer sides.
XOVER improves another 10 bps and is now just 10-20 bps away from the pre-Brexit panic levels leaving very limited upside should the 'Remain' vote prevail.
European markets opened lower after a very positive previous trading session, but most have now turned positive. The FTSE has been helped by further support for the Remain campaign.
Oil trades lower with the sector underperforming while the banks outperform. The EuroStoxx 600 is up nearly 0.50% on light volume. Corporate news remains quiet ahead of Thursday’s vote.
Whitbread is up 2.3% after reporting solid Q1 earnings with Costa Coffee and Premier Inns exceeding expectations.
Senior Plc, the aircraft parts manufacturer, is trading down 14.5% after warning on its Flexonics unit which sees margins lower than expected.
Kion, the German forklift truck maker, fell 5.5% after confirming it has agreed to buy Dematic for $3.25 billion.
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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.
Seems fine for now. Photo: iStock
— Edited by Michael McKenna