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"Key options expiring today"(2012-06-01)

Key options expiring today


Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2350, $1.2450, $1.2480, $1.2485, $1.2500;
USD/JPY: 78.50 and 79.00;
GBP/USD: $1.5525;
EUR/GBP: 0.8000, 0.8050, 0.8100;
USD/CHF: 0.9725;
EUR/CHF: 1.2050;
AUD/USD: $0.9700, $0.9800..

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"NFP is unlikely to bring joy "(2012-06-01)

NFP is unlikely to bring joy





Today is one of the most exiting regular releases of the month – US Non-farm payrolls.

Previous (April): +115K.

Forecast (May): +151K.

Analysts at Standard Chartered think that the actual reading will come between previous and forecast level, at 130K. In their view, the lack of progress at US labor market reflects more the cautious attitude of business to future than indicates fears about a return to recession.

Analysts at BNP Paribas also think that NFP will show increase of only 110-140K that is below 150-200K level regarded by the Fed as acceptable. The specialists note that such figures will surely increase the odds of monetary easing in the US. However, BNP Paribas notes that this may happen only later in summer: it’s likely that the Fed’s Jackson Hole gathering in August will once again prove a defining moment in the US monetary policy.

Initial jobless claims have recovered after their seasonally adjusted spike higher in April, but they have failed to move below the levels seen in February-March. In addition, ADP employment report released yesterday was lower than expected showing that the number of employed people excluding the farming industry and government rose by 133K in May after increasing by 113K in April (below the forecast of +145K).

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"BOJ: judging the intervention risk "(2012-06-04)

BOJ: judging the intervention risk



Bloomberg data shows that Japanese currency lost 10.4% versus its main counterparts in the first 3 months of the year, but then added 12.5% since March. Last week yen, a popular safe haven, has made the biggest weekly advance versus the greenback in 2012. During the resent months USD/JPY has been steadily trading below 1995 minimums in the 80 yen area.

However, analysts at Morgan Stanley note that yen still isn’t overvalued compared with 1995: on a trade-weighted basis yen is “roughly” in line with its average over the past 2 decades and would need to appreciate to about 55 yen per dollar to equal its strength in the mid 1990s.

Japanese authorities keep saying that they are ready to act in order to weaken the national currency. The nation’s Ministry of Finance sold 14.3 trillion yen ($183 billion) in 2011. The last time it sold the currency was on November 4 – the sales were unannounced and came to the market’s attention after the data appeared in February. There’s talk about the BOJ’s stealth intervention on June 1.

Investors don’t believe that Bank of Japan’s intervention will be able to prevent further yen’s appreciation taking into account the current situation in Europe and its negative impact on the markets all over the world. According to PIMCO, the probability of Japan intervening at yen’s current level and pace of change is low as last year yen’s sales were unsuccessful. RBC expects yen to keep strengthening 73 per dollar and 93 per euro by year-end. In their view, “the goal of Japanese officials is to manage the pace of appreciation in the yen and not try to engineer its outright weakness.”

Chart. Daily USD/JPY





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"UBS: short- & longer-term comments "(2012-06-04)

UBS: short- & longer-term comments



EUR/USD: neutral in the short-term. Recovery is likely. Resistance lies at $1.2650 (38% retracement of the May decline). Support is at $1.2288.

GBP/USD: neutral in the short-term. Upward correction may continue in the summing days. Resistance is at $1.5410. Support lies at $1.5235.

Analysts at UBS claim that the recent weaker than expected data in the US could make the market expect the Federal Reserve to launch the third round of quantitative easing. At the same time, the specialists still favor the safe-haven dollar amongst the major currencies as the Fed’s actions are surrounded with uncertainty, while the rest of the main central banks could resume their stimulus as the crisis in the euro area remains unsolved.

Chart. Daily EUR/USD





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"Expectations ahead of the ECB meeting "(2012-06-04)

Expectations ahead of the ECB meeting



This week is packed with the major central bank meetings. We’ve already pointed out that the expectations for the RBS rate cut have significantly strengthened in the recent days, what about the ECB?

Policymakers of the European Central Bank are meeting on Wednesday, June 6. In May the central bank left kept the interest rates unchanged at the record minimum of 1% for the fourth month in a row.

Analysts at IHS Global Insight think that the ECB will take a wait-and-see approach. In their view, European monetary authorities would like to wait for the results of Greek elections on June 17 as well as some economic growth figures. The specialists think that the ECB will slash the borrowing costs in Q3, probably in July.

Deutsche Bank points out that the ECB may decide to accelerate a possible policy response before the next Bank Lending Survey in July due to the weaker European economic data, especially the last flash PMIs indicating a significant slowdown in Q2 output after Q1’s flat print. At the same time, the ECB reiterated that the final responsibility for crisis resolution rests on Europe’s politicians. Economists see a cut in the refinancing rate or, less likely, another 3-year LTRO as possible outcomes.

Strategists at BNY Mellon expect no change in the ECB’s rates or stance. However, the specialists think that the central bank may signal that it’s ready to do more. In their view, Draghi is a tricky character to judge so it impossible to know whether he is susceptible to political pressure to cut rates. The bank says the market hasn’t positioned itself towards any solid expectations for the decision, “otherwise the euro would be trading higher.” But there are bets at the margins so the bank expects the euro to strengthen on any remedial action by ECB such as a liquidity injection.

Photo from Crackerjack Finance | Crackerjack Finance – Investing A Step Ahead





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June 5: economy, policy and currencies
Tuesday, June 5, 2012 - 07:19

Today is quite eventful.

Finance ministers and central bankers from the G7 nations will hold an emergency conference call today to discuss the euro zone’s debt crisis.

Traders covered euro shorts in case the policymakers arrive to some new measures. However, investors will keep selling the single currency on its advance. For now EUR/USD dipped below today’s opening price sliding to $1.2490 after testing resistance at $1.2540 earlier today.

Demand for higher-yielding assets improved, Asian equities went up making US dollar and Japanese yen lose versus the majority of their peers. The MSCI Asia Pacific Index of shares added 1% after declining for 4 days in a row.

As it was expected, the Reserve Bank of Australia cut its benchmark interest rate by 25 bps to 3.50%, the lowest level since 2009. Australian Q1 current account deficit came in line with expectations (AUD$14.9 billion). AUD/USD gained after the RBA’s announcement as the markets were ready for bigger cut.

Data to watch today:

9:00 a.m. GMT – euro zone’s retail sales, forecast: -0.1% m/m in April after +0.3% in March.

1:00 p.m. GMT – Bank of Canada’s rate decision: the borrowing costs are seen unchanged at 1%.

2:00 p.m. GMT – ISM Non-Manufacturing PMI: May readings are seen almost unchanged from April level (53.5).

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"USD/JPY remains under pressure "(2012-06-05)

USD/JPY remains under pressure



There's a talk that Japan conducted stealth intervention on June 1 to weaken the national currency and support the pair USD/JPY which spiked below 78 yen hitting fresh 4-month low at 77.64 yen. Analysts at Totan Research, however, don’t think that the nation has sold yen last week citing their analysis of the Bank of Japan’s current-account balances.

Analysts at Bank of America claim that US dollar may slide to 75.56 yen (October 31 minimum) as risk aversion will likely keep prevailing at the markets.

USD/JPY lost about 150 pips last week. The greenback managed to close last week above the lower border of the weekly Ichimoku Cloud. However, Tenkan-sen has crossed Kijun-sen upside-down - bearish signal. In addition, the prices have fallen below the 50-week MA, which is now playing the role of resistance. The daily Ichimoku chart oints at the downtrend.

At the same time, specialists at Westpac claim that “dips in the pair towards the low 78.00 region are likely to be well supported. Moreover, we are not too far away from previous intervention levels and if risk appetite does improve/stabilize we suspect the recent run of JPY strength can come to an end.” FBS thinks that the pair will have chance for recovery only above 78.72 (June 1 maximum) and 79.00.

Chart. Weekly USD/JPY




Chart. Daily USD/JPY





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"SocGen: forex majors in the short-term "(2012-06-05)

SocGen: forex majors in the short-term



-EUR/USD: there are offers at 1.2540/50. Focus on G7 meeting and ISM non-manufacturing PMI ahead of the ECB meeting on Wednesday. Sell EUR/USD on rallies.

-GBP/USD: UK markets still closed for the Queen’s Diamond Jubilee holidays, so sterling will remain driven by external forces today ahead of Thursday's Bank of England’s meeting.

-USD/JPY and EUR/JPY may get lower after G7 meeting.

-AUD/USD: although Aussie didn’t suffer from the Reserve bank of Australia’s rate cut as some investors feared that the central bank may reduce the borrowing costs more, the dovish RBA statement may make the pair revisit its recent minimums in the 0.9600 area after the G7 meeting.

-USD/CAD: the Bank of Canada will likely leave the benchmark rate unchanged at 1.0%. This may provide support for loonie for some time.

Image from andlestickcourse.blogspot.com[/url]





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"Key options expiring today"(2012-06-06)

Key options expiring today


Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2350, $1.2400, $1.2425, $1.2450 (large), $1.2500, $1.2650, $1.2670;

AUD/USD: $0.9600, $0.9750, $0.9800;

USD/JPY: 78.25, 78.50, 80.00, 80.80;

EUR/JPY: 98.00;

EUR/GBP: 0.8060, 0.8110.

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June 6: risk sentiment has improved
Wednesday, June 6, 2012 - 08:07

Yesterday’s emergency conference of G7 finance ministers and central bankers passed without big headlines: the officials agreed “to monitor developments closely ahead of the G20 summit in Los Cabos.” The market took an optimistic view thinking that the policymakers are preparing some major developments for 18-19 June 2012.

Risk sentiment improved, Asian stocks gained (MSCI Asia Pacific Index +1.2%), US dollar and Japanese yen weakened versus the most of their counterparts. The greenback was also affected as Chicago FRB President Charles Evans said that “extremely strong accommodation” is needed taking into account the poor economic data released in the US so far.

Australian GDP added 1.3% in the first 3 months of the year vs. 0.5% advance expected. AUD/USD rose by more than 100 pips. USD/JPY went up for the third day in a row as Japan’s finance minister Jun Azumi Japan’s indicated that G7 nations remain supportive of intervention to address extreme currency moves.

Important events today:

- Euro area: the ECB meeting results. The majority of experts think that the central bank will leave its benchmark rate unchanged at 1%. If the ECB does cut rates, euro will get a blow.
- US: beige book will give us more hints on the current economic conditions in the United States ahead of the FOMC meeting on June 19-20.

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