24 August 2016 at 11:29 GMT
A state of collective paralysis has enveloped markets ahead of the Jackson Hole get-together of central bankers and the key speech from Federal Reserve chair Janet Yellen Friday. GBPUSD has meanwhile landed in the lower foothills of the 1.32+ zone and USDJPY continues to flirt in and around the 100.0 handle.
- US MBA Mortgage Applications (1100 GMT)
- US June FHFA House Price Index (1300 GMT)
- US Jul. Existing Home Sales (5.51 exp.) (1400 GMT)
- Weekly DOE Crude Oil Inventories (1430 GMT)
EURUSD is still in the range we mentioned yesterday at the 1.1270-1.1365 area, and is now testing the support with mostly what looks like an overstretched short USD being covered. With all eyes on Friday's Jackson Hole event, how much more can the market take EURUSD lower? The 10-day moving average, which has been well supported since August 12 comes in today at 1.1262 and then the more decent 100-day moving average is at the 1.1223 area. US Existing home Sales is the main news event of the day.
closed above 1.3177 yesterday which we were looking for as confirmation for the upside push to continue, even though we were briefly below this level in the morning. GBP rallied on consumer credit rising fastest in a decade, even though BBA loans fell continuing the trend from last year. There are still no signs of stress from the Brexit result on the mortgage side. The next tech resistance is the 1.3250 area - both a slight Fibo level as well as a level above which GBPUSD failed to close since July 5 bar July 14 and 15. The pressure remains for upside in GBPUSD, unless we start closing below 1.3177 again.
is having another go at the 0.7350 area, which we see as a key point if broken for a test of 0.7500. NZDUSD has almost daily tested these levels around 0.7320 since August 11 and also in the early part of July but failed to close above. Closing the day above 0.7320 gives a better case for further upside, but we might need to wave goodbye to Jackson Hole for confirmation.
FX Options volatilities
The frontend of the curve is given in major currency pairs while medium term is unchanged.
USDJPY is still seeing buying interest of low delta upside strikes but the curve is not moving higher, which indicates some selling interest especially for at-the-money or downside strikes.
Three-year USDJPY 115 and 135 strikes have been traded in 250 mio each. There was also some interest in AUDJPY and GBPJPY for upside strikes today. NZDUSD 0,7325 strikes traded in 300 mio today.
This should be the last day with hardly no news out so next few days could be more interesting
Government yields are unmoved by the turnaround in risk sentiment so far today, with Bunds in a very narrow trading range. Corporate bonds are seeing more of a tailwind but XOVER still has a hard time breaking the 300 basis-points barrier and currently sits slightly higher but 5 bps tighter for the day.
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Brent crude is once again eyeing up the $50/b zone. Photo: iStock
— Edited by Martin O'Rourke