30 May 2016 at 11:30 GMT
It's been a quiet session thus far with the UK and US both out and European bourses are trading flat
Fed chief Janet Yellen’s hawkish comments late on Friday saw the emergence of some USD strength and a weakening in precious metals early in the day, however, much of this has been reversed
Inflation data from Spain and Germany showed some improvement
- Japan (Apr) Jobless Rate (23.30) 3.2% exp
- Japan (Apr) Industrial Production M/M & Y/Y (23.30) -1.5% & -5.0% exp respectively
EURUSD: Saxo's head of FX strategy, John J Hardy, remains short in the EURUSD targeting the 1.1000 area. With the US closed for a public holiday today the pair looks to remain in the 1.11 area (200-day moving average) and 1.1170 (100-day moving average). The downside channel we have been observing starting early May is still intact, with the top of this channel also around the 100-day moving average. USDJPY: as noted in our previous writings, the G7 meeting in Japan needed to be out of way for a trigger to push USDJPY higher. This happened in the wake of talk of Japanese sales tax delay. Now the 55-day moving average is the base of USDJPY at 110 today roughly. Upside the first decent resistance is the 111.90 area, where USDJPY struggled in late April. We would need possibly solid US data this week to punch through this.
FX Options volatilities
It's a quiet session with both the UK, and later the US, out. Vega has been relative firm, with USDJPY being paid up in Asia as spot broke 1,11 and EURUSD also holding firm, as it seems like spot will eventually try to go below 1.11. Metals have been offered, as USD went bid, watch for XAUUSD at the 1200-figure, most be some stops there.
Positive sentiment underlining early trading this week, despite slow activity due to UK and US holidays.
- Bunds are on the slide after a fresh rejection above 164, which has taken the 10-year yield up to 0.17%.
- Corporate bonds barely changed, hovering a few bps above the much looked at 300 basis points level for ITRAXX XOVER.
European stocks are flat today as market is unclear about the direction in the light of Yellen’s comments on Friday, and absence of the US and the UK due to holidays today. Germany’s Dax 30 was up 0.24% at 10,311, and France’s CAC 40 was unchanged at 4,515. Overall all volumes are close to one third of usual trading activity.
The Spanish lender Banco Popular Espanol SA shares jumped on capital increase oversubscription news as institutional investors are interested in the planned capital increase. Auto sector seems to be doing well today in Europe with Fiat Chrysler up after two sessions spent in red. After some speculation about the merger between Belgian postal company Bpost SA and Dutch PostNL NV, the earlier declined on the news that the deal failed. PostNL NV keeps part of its gains.
Dong Energy IPO analysis available on TradingFloor
. The stock is valued at around 30% discount to European utilities, but it comes with high execution risk related to Dong Energy’s big plans in offshore wind farms.
Energy is balancing on a knife’s edge here after recent rejection of $50/barrel in Brent. We maintain our negative view as long as this level is not broken.
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 Fed is prepared to hike. Pic: iStock
— Edited by Clare MacCarthy