Article / 27 May 2016 at 11:43 GMT

Mid-session Europe: USD in limbo ahead of GDP, Yellen

Saxo Markets


Foreign exchange

Today's session is both sparse and quiet with many traders having apparently copped an early weekend ahead of the UK and US holidays on Monday. One effect of this low volume, however, may be sharper spikes on even fairly marginal events. That certainly appears to be a risk as we head into Federal Reserve chair Janet Yellen's speech later this evening. 

Yellen's speech is merely a ceremonial affair, but direction, starved traders will be poring over her words in their quest to flush any lingering hawks of doves out of the bushes. If the consensus on this speech moves in the same direction as the US GDP print, the dollar could see some swings.

Crude oil's latest rally north of the $50/barrel mark saw some energy-sector gains, but the move was largely pallid and lacked conviction. In Saxo Bank head of commodity strategy Ole Hansen's view, a retracement remains likely.


  • US revised Q1 GDP Annualised (1230 GMT) 
  • US revised Personal Consumption 1Q (1230 GMT)
  • US revised Core PCE 1Q (1230 GMT) 
  • US University of Michigan Confidence (1400 GMT)


  • US Fed’s Yellen to Speak (1715 GMT)

Forex developments

EURUSD: This pair was weaker following a French Consumer Confidence print that was actually higher than expected and in the upper range of readings since 2007. The 10-day moving average, which has been a cap since May 12, is dropping down to the 1.1214 area today. EURUSD is captured between that and the 100-day moving average at 1.1168 today. The next trigger could be US GDP and Personal Consumption at 1230 GMT. Above the 1.1214 area, there is the next interesting level at 1.1250, which could be a target should the 10-day break. On the downside we are still looking at 1.1100 as important tech support around the 200-day moving average.

USDJPY: The daily range is getting smaller and is still contained now at the 55-day moving average cap (now at the 110.03 area). Again, releases from the US could, if better than expected, start a new attack higher. Still, the impression is that the G7 meeting needs to be out of way for a trigger higher. So far, this is the first month since November where USDJPY looks supported without the bigger downside swings. 109.40 is Fibo level from the rally starting May 3, then 108.65 is the next Fibo level, coinciding with the 21-day moving average.

GBP: Sterling is taking a breather and weakening against USD and EUR. As John Hardy writes this morning, "recent enthusiasm for sterling was overwrought". First support area in GBPUSD looks like 1.4600 and EURGBP resistance lies at 0.7650.

USDCAD: The support we mentioned yesterday at 1.2910 was tested and held yesterday (Fibo level and a potential line in sand to break rally starting in May). USDCAD is taking a breather higher and crossing the 10-day moving average at the 1.3033 area and highs of May 18 at the 1.3036 area.

FX Options volatilities
Today is another selling day, particularly on the front-end; only one-month is still in demand, while other tenors are sold.  

This is driven by extremely low levels of historical volatility combined with a market holiday Monday for the US and UK. A lot of participants have chosen to take today off, it would seem.

This general circumstance looks to set to continue until late next week: USDJPY and EURUSD vol down 0.15, AUDUSD and NZDUSD down 0.2, GBP vol down 0.1-0.2.

Fixed income

Bunds finally seem to have broken the 164 handle, taking the yield on the 10-year German government bond down to 0.13%. Improved sentiment seems to be the most reasonable explanation along with positioning ahead of the commencement of the European Central Bank’s extended bond buying starting in June.

This has corporate bonds celebrating as well, with the iTraxx XOVER getting close to attempting another break of the 300 bps index level. Liquidity and activity could be fading into the afternoon session into a long weekend with most focus on the GDP number, while the (Fed chair Janet) Yellen event later isn’t expected to produce any news on monetary policy (but is still worth keeping an eye on).





European stocks are mixed on Friday. Germany’s Dax 30 lost 0.1% at 10,258.75, and France’s CAC 40 was up 0.1% to 4,515.00. The UK’s FTSE 100 was off 0.1% at 6,260.75.  

Indices are facing trouble to find a direction as investors are waiting for a speech by Janet Yellen that could indicate whether an interest rate rise is imminent. Traders will watch for any hints she may offer about a possible rate increase at the Fed’s meetings in June or July. Her appearance is scheduled for 0115 EST, or 1915 CET.

Energy shares pushed higher this week as oil prices recaptured $50/barrel, although prices dipped below that key threshold Friday. For the movers, Philips Lighting shares jumped 8% in their trading debut. The IPO on the Euronext Amsterdam follows the sale of Royal Philips NV’s 25% stake in its 125-year-old lighting division.

Banco Popular SA was at the bottom of the Stoxx 600 for a second straight day. The Spanish lender’s shares plunged 26% Thursday as the company said it’s launching a €2.5 billion share sale. Adidas AG shares were off 0.6% after the German sportswear maker sold Mitchell & Ness, a US sportswear company.

Please note that trading volumes may be affected by the late May bank holiday in the UK and the Memorial Day holiday in the US on Monday.

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: Mixed US data makes FX markets feisty

Asia:      Morning Report APAC: S&P/ASX 200 smashes past resistance at 5,400

Policy hawks Fed chair Yellen's speech is not a policy event, but markets will still be looking for any signs of hawkishness, however slight. Photo: iStock

— Edited by Michael McKenna and Clare MacCarthy

The Global Sales Trading desk is a multi-asset team providing customised trading solutions
Relevant articles for you


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail