Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 108.706 | EURUSD 1.22079 | AUDUSD 0.76045 | NZDUSD 0.71492 | USDCAD 1.28492 | USDCHF 0.9782 | GBPUSD 1.39396 |

LMAX Highs and Lows 5am GMT

                                High | Low

EURUSD               1.22196 | 1.21846

USDJPY                 108.873 | 108.671

GBPUSD               1.39499 | 1.39181

USDCHF               0.97899 | 0.97787

AUDUSD              0.76138 | 0.75788

USDCAD               1.28616 | 1.28326

NZDUSD               0.71581 | 0.71131

EURCHF                1.19494 | 1.19291

EURGBP               0.87629 | 0.87548

EURJPY                 132.941 | 132.612

For today

• EUR: A quiet opening few hours saw the market holding around the closing levels before dropping quickly triggering some weak stops on a dip through the 1.2200 level and testing to the 1.2185 level before recovering its composure and reversing the loses to hold deep into the session around those opening levels again, as the market pushed towards the grey hours the market pushed to the 1.2220 level in a half-hearted move before holding quietly, downside bids continue to dominate through to the 1.2160 level with weak stops possibly joined with breakout players with the 1.2120-00 levels likely to be only slightly stronger and vulnerable to a test and the ranges from early in the year under threat, a push through the figure will quickly see the market pushing into the mid 1.20 handle and whether the limited congestion can hold remains to be seen with the market likely to be limited until stronger bids closer to the lower 1.20 area appears. Topside offers light through the 1.2240-60 areas and the market only likely to see stronger offers once the market tests back to the congested 1.2300 areas with the likelihood of stronger offers then reappearing above the 1.2340 level.
• GBP: The same pattern for the Cable with some weakness early in the Tokyo session setting the lows around the 1.3920 area before moving slowly off the level and pushing through to test 1.3950 and then holding around the 1.3945 area to the grey hour, downside is likely to continue to see strong congestion through to the 1.3900 level with that congestion possibly weakening on a move through the level but still there until stronger bids into the 1.3850-35 level before any weakness appears, a test through towards the 1.3800 will likely see the potential for a deeper move, topside offers likely to be lightly congested through the 1.4050 areas and then opening to a weaker 1.4100 level, and the market open for the most part once through the 1.4115 with any impetus, the closer the market gets to the 1.4180-1.4200 the stronger the offers are likely to become.
• JPY: USDJPY was particularly quiet given Kuroda’s comments during the session with the market basing around the 108.70 opening levels for the most part with a brief push through the 108.85 level before again settling into a quiet range around the 108.80 level for the run to the grey hour, while Kuroda denies any involvement in the weakening Yen the market continues to push ahead, with the market finding some offers into the 108.80-109.00 levels likely to slow the market a little with stronger congestive and trend line resistance into the 109.35 and 109.60 areas likely to limit the top for the time being a push through that top level though is likely to see lighter congestion to a test of the 109.80-110.00 level where offers are likely to be sentimental and strong. Downside bids light through the 108.00 levels and weak stops on a push through the 107.80 areas will leave the downside potential somewhat limited as it moves back into the ranges from last month and congestion, with stops likely to be absorbed by that congestion however, whether those stops have the ability to push through the congestion remains to be seen or whether the buying continues by whomever depends on how deep any downside potential is, but without that buying the downside could see stronger selling.
• AUD: Possibly the markets driver for the day with the Kent comments driving the Oz from a slow decline to the 0.7600 level and dipping through to test the 0.7580 with a quick stab before stabilizing and eventually reversing the losses only to range weakly around the 0.7610 area however, the market continued to slip and the run to the grey hour barely see’s it holding above the figure, downside very congestive into the 0.7550 areas and the market likely to see buyers willing to move into the market above the 75 cent level with this area seeing a lot of action over the past couple of years, a push through the level will see stronger bids through to the 75 cent areas however, there could be some decent stops appearing along the way to make it a two way affair and the 75 cent levels being particularly strong, stronger stops through the level and the downside still remains congestive. Topside offers weak through to the 0.7650 area with some limited offers through that level on a move back towards 77 cent and some stronger bids likely to reappear.

Overnight News

CAD:

BoC Poloz: Inflation above target this year will be temporary

Poloz: Inflation is on target, economy close to potential

Poloz: Higher inflation will be due to temporary factors

Poloz: Reiterates that higher rates warranted over time

Poloz: Reiterates that BoC will remain cautious on rates

Poloz: Economy is about 50% more sensitive to interest rates

Poloz: We believe investment in oil sector will remain flat

Poloz: Drop in housing from pull forward effect to reverse

Poloz: Fundamentals of Canada housing market to remain solid

Poloz: BC housing rules have had a temporary effect

Poloz: Uncertainty around NAFTA is hampering investment

Poloz: Increase in job vacancies symptom of strong jobs market

Poloz: Job vacancies also symptoms of skills mismatch

Poloz: Forecast is for inflation to go back to 2%

Poloz: Higher wages will promote labour participation

Poloz: Exports investment not performing as models suggest

Poloz: Economic healing promoted by monetary and fiscal policy

Poloz: Vast majority of vacancies are lack of skilled workers

Wilkins: We believe real estate markets are rebounding

Wilkins: Signs that speculation is declining in housing market

Wilkins: BoC needs about one year to assess B-20 rule changes

Wilkins: Many industries at or above historical capacity levels

Wilkins: Still indication of slack in economy in some areas

JPY:

Kuroda: Japan isn’t intentionally depreciating the currency

Kuroda: Japan continues to advocate multilateral solutions, TPP

Kuroda: Trade tensions are biggest risk to world economy

Kuroda: We don’t see imminent turning point in world recovery

Kuroda: Risks to world economy include trade tensions geopolitics

Kuroda: World economy to continue growing at relatively high pace

AUD:

RBA assistant Gov. Kent plays down impact of A$360B of risky mortgages

Kent: Most borrowers have managed transition from Interest only loans to expire by 2021

Kent: Kent says share of borrowers who cannot afford step up in payments is small

Kent: Some borrowers will be able and willing to refinance their loans

Kent: Overall impact of transition on household cash flow consumption likely to be small

Kent: some borrowers may experience genuine difficulties when their interest only periods expire

OIL:

Geopolitical storms threaten $100 oil as US shale struggles to plug the gap

USD:

Trump’s message to Congress: New NAFTA or No NAFTA

CNY:

China has room to cut RRR

China is likely to ease liquidity tension in week

Today’s data

Actual = A | Consensus = C | Previous = P | Revised = R All timings GMT

JPY         Corporate Service Price Y/Y Mar A 0.50% | C 0.50% | P 0.60% | R 0.70%

AUD       CPI Q/Q Q1 A 0.40% | C 0.50% | P 0.60%

AUD       CPI Y/Y Q1 A 1.90% | C 2.00% | P 1.90%

AUD       CPI RBA Trimmed Mean Q/Q Q1 A 0.50% | C 0.50% | P 0.40%

AUD       CPI RBA Trimmed Mean Y/Y Q1 A 1.90% | C 1.80% | P 1.80%

AUD       CPI RBA Weighted Median Q/Q Q1 A 0.50% | C 0.50% | P 0.40% | R 0.50%

AUD       CPI RBA Weighted Median Y/Y Q1 A 2.00% | C 1.90% | P 2.00%

06:00     CHF        Trade Balance (CHF) Mar C 3.23B | P 3.14B

08:00     EUR        German IFO Business Climate Apr C 102.8 | P 103.2

08:00     EUR        German IFO Expectations Apr C 99.5 | P 100.1

08:00     EUR        German IFO Current Assessment Apr C 106 | P 106.5

08:30     GBP       Public Sector Net Borrowing (GBP) Mar C 1.1B | P -0.3B

10:00     GBP       CBI Trends Total Orders Apr C 4 | P 4

13:00     USD       House Price Index M/M Feb C 0.60% | P 0.80%

13:00     USD       S&P/Case-Shiller Composite-20 Y/Y Feb C 6.30% | P 6.40%

14:00     USD       New Home Sales Mar C 625K | P 618K

14:00     USD       Consumer Confidence Index Apr C 126 | P 127.7

 

Harry Hindsight

• EUR: Quiet through the Asian session with the market opening a little below Fridays close and holding around the 1.2285 levels through to the Tokyo session before slowly drifting to test the 1.2265 area and basing on that level, the market held in a tight range for the most part unable to push back through the 1.2280 levels until the market lifted in the London session with better PMI numbers for Germany helping the market to test the 1.2290 level, French and Eurozone didn’t fare so well and the market dipped after the initial run and continued through the 1.2250 levels triggering some light early stops and the market dropped to hold through to the NYK session around the 1.2225 area, NYK saw a slow move back towards the 1.2245 levels but with better PMI numbers for the US the market again pushed lower for the Euro and testing the 1.2200 levels before holding around the 1.2205 area to the close.
• GBP: A rise into the Tokyo session saw the Cable testing to the 1.4025 areas from the opening just above the 1.4000 areas, the market held for the most part around the 1.4015 area for a long period and into the London session again rising a little to touch through the 1.4030 area before dropping back quickly through to the 1.3985 level before briefly stabilizing and then dipping again in a stronger move through to the supportive 1.3950 level, the market moved through into the NYK session holding around the level before slowly edging lower through the session to test the 1.3925 level and clearing a lot of the congestion before pushing a little to hold the 1.3940 area.
• JPY: Strong USD day with the market opening higher from Friday and although early trading attempted to close the gap on the charts it held in a 107.75-90 range through into the London session before pushing through the 108.00 level and triggering only minor stops on a move through to the 108.25 areas, the better PMI figures in the US was enough to push the market on another run higher with the market testing to the 108.50 level struggling for a short period and then pushing through gradually to the 108.75 level and holding that level through to the close.
• AUD: With the rise in the USD and the offers in AUDJPY the cross ranged in a choppy manner and the Oz was forced lower through the day, holding through the Asian session and slowly pushing the 0.7680 level the market started to slip as soon as the London session opened and the opening level and then the low of 0.7660 quickly fell and the market soon based for an hour or so along the 0.7650 level, the market eventually came under pressure again and the market struggled into the NYK session holding the 0.7635 level, US numbers saw the USD rising and the Oz slipped slowly lower through the evening and pushed through to the 0.7610 level into the London close and eventually tested to the 76 cent level on the appearance of early Sydney and a quiet run to the close just holding off those lows.

Yesterday’s premiership results

JPY         PMI Manufacturing Apr (P) A 53.3 | C 53.4 | P 53.1

EUR        France Manufacturing PMI Apr (P) A 53.4 | C 53.5 | P 53.7

EUR        France Services PMI Apr (P) A 57.4 | C 56.5 | P 56.9

EUR        Germany Manufacturing PMI Apr (P) A 58.1 | C 57.5 | P 58.2

EUR        Germany Services PMI Apr (P) A 54.1 | C 53.7 | P 53.9

EUR        Eurozone Manufacturing PMI Apr (P) A 56 | C 56.1 | P 56.6

EUR        Eurozone Services PMI Apr (P) A 55 | C 54.6 | P 54.9

CAD       Wholesale Trade Sales M/M Feb A -0.80% | C 0.80% | P 0.10%

USD       US Manufacturing PMI Apr (P) A 56.5 | C 55.2 | P 55.6

USD       US Services PMI Apr (P) A 54.4 | C 54.1 | P 54

USD       Existing Home Sales Mar A 5.60M | C 5.55M | P 5.54M

 

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