1-888-998-3948


Tuesday, September 17, 2019

Repo goes berserko

Repo goes berserko
SOURCE: Powered by Exchange Bank of Canada – www.ebcfx.com/news

 

Take control of your international payments with CXI FX Now.

• Zero transfer fees & great rates
• Fast international payments
• Safety and security
• Unparalleled customer service
• Consultative approach

Learn more about CXI's international payment services for businesses or call our trading desk directly at 1-833-572-8933.

Get real-time market coverage on twitter at @EBCTradeDesk or sign up here.

SUMMARY

US overnight treasury repo rates skyrocket to 7-10%, sparking bank liquidity fears.
No spillover effect into bond markets so far with US treasury and bund yields steady.
AUDUSD falls below 0.6855 channel support after dovish sounding RBA Minutes.
Canadian Manufacturing Sales miss expectations while US Industrial Production beats.
BOJ thinks they could cut rates further.  JGB yields behaving now though.
Oil markets eagerly awaiting Prince Abdulaziz’s 1:15pmET press conference.
 

ANALYSIS

USDCAD

Dollar/CAD is trading with a range-bound tone this morning as oil markets eagerly await a 1:15pmET press conference today from Saudi energy minister Prince Abdulaziz.  President Trump chose not to add fuel to fire yesterday by saying he was in no rush to respond to the attacks that knocked out 50% of Saudi Arabian oil production over the weekend.  October WTI crude oil prices couldn’t take out the Sunday opening high late in NY trade yesterday, but they seem to be finding support around 61.50 level since then.  USDCAD is now probing the upper end of the  1.3240-1.3260s range we talked about yesterday because Canada has just released a weaker than expected Manufacturing Sales report for the month of July (-1.3% MoM vs -0.2%) and the US just released a better than expected US Industrial Production figure for August (+0.6% MoM vs +0.2%).  We think the market could run higher to fully fill its Sunday opening gap (1.3270-1.3285) here but then we think the market returns its focus on Prince Abdulaziz’s comments this afternoon.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

OCT CRUDE OIL DAILY

OCT CRUDE OIL DAILY

EURUSD

Euro/dollar is bouncing a tad off chart support in the 1.0990-1.1000 this morning as traders appear glued on some hefty option expiries going off today at 1.1025-30 (1blnEUR) and 1.1040-50 (1blnEUR).  The forward looking Economic Sentiment portion of Germany’s ZEW survey for September came in above expectations this morning (-22.5 vs -37.0) and so some are cheering this as a mild positive considering the steep decline this sentiment index has gone through since the beginning of 2018.  Everybody’s talking about US treasury repo markets this morning and how funding costs have shot through the roof since early yesterday (see chart below).  Nobody really knows what’s going on here because these are shadowy interbank markets, but liquidity fears are rising and it begs the question…who is in desperate need of USD funding?  We’re frankly surprised how US treasuries aren’t exploding higher in price here (because treasuries are the highest quality funding collateral in repo).  We think Jerome Powell might have a real problem on his hands tomorrow.  The ECB’s move last week has seen the Fed funds market now even doubt the chances of a 25bp cut on Wednesday (odds reduced to just 70%), but the USD wholesale money markets are now screaming for help.

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

US OVERNIGHT REPO RATE MONTHLY

US OVERNIGHT REPO RATE MONTHLY

 


 

GBPUSD

Sterling is not doing much this morning, but the market continues to hold yesterday’s NY lows just below the 1.2400 figure.  Yesterday’s visit by Boris Johnson to Luxembourg was deemed a disappointment by the UK press and by the GBPUSD market.  The UK PM had to cancel the post meeting press conference because of booing from protesters that gathered outside the meeting venue.  More here from the NY Post.  The UK reports its August CPI data tomorrow morning at 4:30amET.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

 


 

AUDUSD

The Australian dollar has broken down from the 0.6855-0.6875 price channel we’ve been talking about for the last couple days, and it appears last night’s dovish sounding RBA Minutes did the trick.  More here from Reuters.  The AUDUSD market is now pressuring the next support level at the 0.6830s, and below that we see support in the 0.6810s.

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY

 


 

USDJPY

Dollar/yen is hovering around atop chart resistance at the 108.10 level this morning after the market successfully filled its Sunday opening gap (and then some) to close NY trade yesterday.  US 10yr yields are dribbling below chart support in the 1.8260% level this morning, but we’re not seeing any sort of panicky price action in light of what’s going on in repo.  BOJ officials think lowering negative interest rates further, if they chose to do so in the coming months, wouldn’t backfire in financial markets because investors are aware of the possibility.  More here from Bloomberg.  With JGB yields now “behaving” (back within the BOJ’s target 0% +/- 20bp range), we think the BOJ does absolutely nothing but breathe a sign of relief at its next policy meeting on Wednesday night.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

JAPAN 10YR BOND YIELD DAILY

JAPAN 10YR BOND YIELD DAILY

Charts: Reuters Eikon


About the Author

Erik Bregar

Erik Bregar - Director, Head of FX Strategy

linkedin twitter

Erik works with corporations and institutions to help them better navigate the currency markets. His desk provides fast, transparent, and low cost trade execution; up to the minute fundamental and technical market analysis; custom strategy development; and post-trade services -- all in an effort to add value to your firm’s bottom line. Erik has been trading currencies professionally and independently for more than 12 years. Prior to leading the trading desk at EBC, Erik was in charge of managing the foreign exchange risk for one of Canada’s largest independent broker-dealers.

Interested in creating a custom foreign exchange trading plan? Contact us or call CXI's trading desk directly at 1-833-572-8933.

 

About Currency Exchange International
Currency Exchange International, CXI, is the leading provider of comprehensive foreign exchange services, risk management solutions and integrated international payments processing technology in North America. CXI’s relationship-driven approach ensures clients receive tailored solutions and world-class customer service. Through innovative and trusted FX software platforms, CXI delivers versatile foreign exchange services to our clients, so that they can efficiently manage and streamline their foreign currency and global payment needs. CXI is a trusted partner among financial institutions, corporations and retail markets around the world. To learn more, visit: www.ceifx.com

Disclaimer: All product names, logos, and brands are property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, logos, and brands does not imply endorsement.

This publication has been prepared by Currency Exchange International for informational and marketing purposes only. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Currency Exchange International, its affiliates or any of their employees incur any responsibility. Neither Currency Exchange International nor its affiliates accept any liability whatsoever for any loss arising from any use of this information. This publication is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any of the currencies referred to herein, nor shall this publication be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The general transaction, financial, educational and market information contained herein is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a "call to action" or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. You should note that the manner in which you implement any of the strategies set out in this publication may expose you to significant risk and you should carefully consider your ability to bear such risks through consultation with your own independent financial, legal, accounting, tax and other professional advisors. All Currency Exchange International products and services are subject to the terms of applicable agreements and local regulations. This publication and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced in whole or in part, or referred to in any manner whatsoever nor may the information, opinions and conclusions contained in it be referred to without the prior express written consent of Currency Exchange International.
POSTED_BY Mandee Myers at 08:15 AM
comments powered by Disqus

Platinum Passport

Travelers: Never miss a thing and be the first to know about CXI branch promotions, travel tips and hot trends.

Currency Insider

Corporations & Financial Institutions: Want to get ahead of the curve for the upcoming week? Get CXI's currency market trend analysis sent directly to your inbox weekly.