Citizens Foreign Exchange: Your Foreign FiX for Monday, January 29
 
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Your Foreign FiX
Monday, January 29, 2018
 
US interest rates are trading much higher this morning, with the 10 year note yield trading above 2.70%, for the first time since 2014.  Perhaps surprisingly, considering the move lower in the dollar, the US 10 year note has increased the most this year, compared to German, Canada, Japan and the UK (see chart).  Higher US yields are helping the dollar today, with the Bloomberg dollar index bouncing off the 12 month lows set on Friday.  Ahead of some key economic data, equity futures are pointing to a lower open, after closing at all-time records on Friday.  The week is full of key events including, Fed Chair Yellen’s last FOMC meeting, SOTU, key earnings reports and the job report of Friday.  US markets continue to gain momentum feeding off the optimism from tax reform.
China: A remarkably quiet day in USD/CNY after last week’s large moves. More action onshore however as the PBoC drained funds from the financial system, putting a floor under overnight repo rates, which fell every day last week. The CNY fixed at 6.3267, another new strong level against the USD. China equities were lower by 1+% ahead of PMI data due out tomorrow night US time.
Britain: The pound is lower overnight, but it has finally moved up to the area where it was trading ahead of the Brexit vote in June of 2016. The currency’s rise has brought a Bank of England rate hike expectations along with it. Traders are warned to pay close attention to what policy makers are actually saying rather than leaping to conclusions. Sterling interest rate futures have moved from pricing between one and two 25 bps hikes over the next 18 months, to expecting at least three. Forecasters expect another hike as soon as May and some calling for a move as soon as March. The view is that the bank would like to deliver a rate increase as soon as possible so it would have room to move in case Brexit proves calamitous.
Japan: Despite a significant push higher in the US 10 year to 2.71%, USD/JPY continues a sideways grind and is in line with Friday’s 108.80 close. Friday’s initial move lower was prompted by BOJ Governor Kuroda’s optimistic comments in Davos where he indicated Japanese wages are rising and the BOJ was close to achieving its 2% inflation target.  Volatility this week will be elevated following comments by Japan’s International Affairs Vice-Minister Asakawa that excessive and disorderly moves in currency markets have negative effects. This followed comments by US officials that a weaker dollar is good for trade. Adding to that volatility are very ripe economic calendars both in Japan and the US which include Janet Yellin’s final FOMC meeting this Wednesday (no change is expected). Support sits at 108.28 (overnight low) followed by 108.09 (2017 low).
Thinking of trading?
Key intraday levels
S1
S2
Pivot
R1
R2
USDCNH
-0.20%
6.2962
6.3112
6.3267
6.3417
6.3572
GBPUSD
-0.71%
1.4011
1.4086
1.4185
1.4260
1.4359
USDJPY
-0.27%
107.39
107.98
108.88
109.47
110.37
 
 
Annualized Cost of Forward Points
 
1M
3M
6M
9M
12M
2Y
USDCNH
2.23%
2.21%
2.17%
2.05%
1.97%
1.75%
GBPUSD
1.21%
1.38%
1.43%
1.46%
1.51%
1.54%
USDJPY
-1.75%
-2.04%
-2.26%
-2.36%
-2.51%
-2.77%
 
HEAT
MAPS
Cheap
Moderate
Fair Value
Moderate
Rich
 
Tenor
3M / 1Y
Forward Point Valuation HEAT MAP
1M Pts
3M Pts 6M Pts 9M Pts 12M Pts 2Y Pts
USDCNH
                       
GBPUSD
                       
USDJPY
                       
 
Tenor
3M / 1Y
Implied Volatility Valuation HEAT MAP
1M Vol
3M Vol
6M Vol
9M Vol
12M Vol
2Y Vol
USDCNH
                       
GBPUSD
                       
USDJPY
                       
 
 
Seasonality Trends - Average Change in the CURRENCY
5Y Avg
Feb Mar Apr May Jun Jul
USDCNH
-0.26%
0.23%
-0.14%
0.22%
-0.19%
0.33%
GBPUSD
-0.78%
0.06%
2.40%
-0.92%
-0.42%
-0.21%
USDJPY
1.01%
-0.44%
0.78%
-1.91%
1.79%
0.36%
Yields move higher
US 10 year yields move the highest this year
CNH Stronger Dispite Ongoing PBOC Cash Injections
Robust GDP Growth Means Room to Lean
Pound Back Off After the Significant Move Last Week
Cable Continues to Trade Above the Former Trading Range
Read our technical documentation to learn more about this data.
Questions, or thinking of trading? Contact the Foreign Exchange Trading Desk direct at 888.821.3600.
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