Sterling has been blasted lower after BoE governor Carney cast doubt on a previously pretty-much-expected UK May rate hike. The EU's rejection of Britain's latest Brexit-Irish border plan only served to deepen the rot.
Article / 15 August 2016 at 11:22 GMT

Mid-session Europe: How high, JPY?

Saxo Markets


Foreign exchange

A quiet late-summer day in the markets as investors weigh how far the JPY can climb before it begins to harm risk sentiment, and how low sterling can go before the heavily short market is squeezed.

In stocks, Volkswagen shares are on the mend to the tune of 1.3% after German regulators approved a solution for the carmaker's diesel engines while Sweden's H&M gained 2.6% on a strong, 10% July sales boost.

Crude oil prices hit a three-week high earlier as the verbal intervention/short-covering rally continues.


  • US Aug. Empire Manufacturing (1230 GMT)
  • US Aug. NAHB Housing Market Index (1400 GMT)
  • New Zealand RBNZ Governor Wheeler to Speak (2030 GMT)
  • Australia RBA Meeting Minutes (0130 GMT)
Forex developments

USD giving back its gains on the day so far...

EURUSD has been mostly trading above its main tech support area of 1.1150 which has been the magnet lately (around the 55-day moving average) following US Retail Sales that were weaker than expected. A reversal of Friday’s attempted rally looks to us as a bearish setup, but lacks a trigger so far. We remain watching tech resistance of note at 1.1230, which should preferably hold to avoid higher moves in the pair.

In USDJPY Japan's Q2 reading was below expectations but USDJPY continues to find decent support down at the 100.65/70 area. The markets remain complacent, so you would think USDJPY would at least rally a bit, but still looks heavy on the day and risks going to 100 if the 100.65 area is taken out. With this complacency, the question is how much lower than 100 it would go without upsetting risk sentiment. 

In GBP we like sterling weaker, but the risk reward looks less and less rewarding as the market is very short and we take note of the possible risk of sharp short covering, especially following UK releases tomorrow and Wednesday’s unemployment releases.

Commodity currencies: AUDUSD remains interesting in terms of yield differential and risk-on mode, has held so far above the 38% Fibo level at 0.7627 (from rally starting 27th July), has really struggled to close day above 0.77 lately, which is first decent tech resistance then.

FX Options volatilities

Little activity in the interbank market this morning.

EURUSD: overnight one week is offered while the two-week area is slightly bid.

USDJPY: no real activity but overall some demand for month-end strikes; the 24 Jan 110 strike traded 250m in the market which also keeps market small bid in the medium term.

GBP: market is bidding one-month as it covers the September Bank of England meeting but it is very difficult to get decent bids in one-week and less.

The overall market is starting to show bids for two-month and out as they do not want to go into September short vega.

Fixed income





European stocks advanced Monday. France’s CAC 40 rose 0.5% to 4,523.59 and the FTSE 100 tacked on 0.3% to 6,936.18. The DAX 30 picked up 0.7% to 10,791.57 with shares of carmaker Volkswagen AG and apparel retailer H&M AB helping to buoy the regional benchmark toward its highest level in more than two months. 

In Frankfurt, market heavyweight Volkswagen rose 1.3% after the automaker said KBA, Germany’s federal motor transport authority, approved technical remedies for 460,000 vehicles with diesel engines. 

In Stockholm, H&M shares pushed up 2.6% after the Swedish apparel retailer said sales in July rose 10%, compared with a year ago.

Amongst movers elsewhere in Europe, UCB SA surged 8% after the Belgian biotech firm said a Delaware court confirmed the validity of the company’s US patent for Vimpat. The drug is used to treat partial-onset seizures in patients with epilepsy. 

William Hill PLC fell 2.6% after the bookmaker rejected a higher takeover bid from Rank Group PLC and 888 Holdings PLC. Bovis Group PLC posted a 15% rise in first-half pretax profit, raised its dividend payment, and said underlying market fundamentals for UK housing market remain positive. But shares were down 2.3%.

Overall, oil and gas, healthcare and financial shares traded higher. But telecom, technology and industrial stocks slipped.

The replay of our Morning Call can be found here.

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.

All quiet on the retail front
 Slow train coming: A weak US retail print is helping to send USDJPY lower, but how far can the pair tumble without changing the market's risk profile? Photo: iStock

— Edited by Michael McKenna

The Global Sales Trading desk is a multi-asset team providing customised trading solutions
Martin O'Rourke Martin O'Rourke
GBPUSD is down to the 1.2870 area at 1237 GMT having breached the 1.29 handle in the last 30 minutes.
AG11406 AG11406
How low do you think it will go before reacting?


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