Article / 02 June 2016 at 11:41 GMT

Mid-session Europe: Markets in wait-and-see mode in countdown to ECB

Saxo Markets


Foreign exchange

FX Chart
All eyes are on the European Central Bank's policy meeting and an Opec meeting, with markets little changed ahead of those key events.


  • ECB interest rate decision (1145 GMT)
  • US ADP Employment change data (173K exp.) (1215)
  • US Initial jobless claims (270K) (1230)
  • US DOE Weekly crude oil inventories (1500)


  • ECB president Mario Draghi press conference (1230 GMT)
  • Opec press conference (1400)        

Forex developments

FX market quiet awaiting the ECB, but more importantly the US nonfarm payrolls tomorrow will be the focus.

EURUSD: Ahead of US nonfarm payrolls, expect interest to short EURUSD to be limited under current circumstances, unless the ECB surprises. Currently finding support above 100-day moving average at 1.1179 area today. As mentioned yesterday, the pair has broken the downward channel from early May. The 1.1225 area is a Fibo level to watch as it is acting as a barrier for upside. A few technical resistance levels on the topside, including the 1.1256 area (21-day moving average) and 1.13, which is a Fibo level as well as the 55-day moving average.

USDJPY: The news from Japan dominates the JPY, and talk that the range 107.80 to 111 would dominate under current circumstances for the time being as it is believed the Bank of Japan would not make a move before any government stimulus, which is expected in September. So US yields development would be important, also the US nonfarm payrolls tomorrow are key. But expect JPY not to weaken very much, especially if Brexit volatility is in place. 108.5 is 50% Fibo level from the rally starting in early May, and this would need to hold to avoid a sharper move down to 107.8 area.

GBP finding support at 55-day moving average at 1.4394 area today, which was also yesterday’s support area. Cable closed yesterday right at 1.4415 (which we mentioned as a Fibo 50% level yesterday). It needs to hold above to avoid opening into 1.4338 area. 1.45 starts looking more like the Brexit technical resistance with polls divided (actually a 38% Fibo level at 1.4491 area from rally starting mid-April).

FX Options volatilities
GBPUSD: 1-month ATM reached 21.5 vols overnight. RRs continue to trade at extreme skew towards downside.

USDJPY: Vols traded higher as spot broke 109.00. Front-end interests buying USD puts, but also interest to buy USD calls over the BoJ event.

XAUUSD: Renewed interests to buy low-delta XAU. 

Fixed income


A wait-and-see mood prevails ahead of the ECB announcement and press conference. Forecasts and possible new details on bond buying program (CSSP) or TLTRO 2 auctions will be looked for. If the ECB upgrades its economic forecasts, it will be a tough balancing act for Mario Draghi to maintain the supportive tone for lower yields. Bunds dipped below the 164 mark earlier but are now back slightly above, and corporate bonds are in general unchanged for the session so far. Weekly Bond Update: Buckle up for intense activity ahead .




Equity indices

European markets are trading little changed ahead of a meeting by Opec and a policy meeting by the ECB. Opec oil ministers have gathered in Vienna for the bi-annual meeting, trying to restore unity and to revive their output target.

The macro data picture was quiet, with only the UK PMI construction released and coming in weaker than expected, but still at an expansionary figure of 51.2%.

Germany’s Dax 30 gains 0.06% to 10,208.58 points, France’s CAC 40 rises 0.07% to 4,478.64. 
Spain’s IBEX raises 1.06% to 9,011.40 points, with Spanish financials gaining 2.57% due to a positive outlook for Banco Popular from Moody’s.

Among other movers, Fiat Chrysler rose 4% after reporting a small gain in US auto sales in May. Money supermarket fell 7% as Jefferies cut to hold.

US stock futures signal a lower open, waiting for the ADP employment change (2:15 pm CET, 1215 GMT) and Initial Jobless Claims (2:30 pm CET, 1230 GMT). 

Join our Weekly OptionsLab on Wednesday  to find out more on covered call strategy.


Read more

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.

US:        US Market Wrap:  US dollar churns in choppy FX session

Asia:      Morning Report APAC: Oil rallies on reported output cap talks

Europe: From the Floor: ECB and Opec waltz into Vienna

OIl  It's a busy day in the oil market with an Opec meeting and 
the EIA report. Pic: iStock

— Edited by John Acher

The Global sales Trading desk is a multi-asset team providing customised trading solutions

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