Daily FX Market Commentary

Andy Harrison

 

Good morning,

LMAX Close

USDJPY 88.784 | EURUSD 1.32722 | EURJPY 117.825 | AUDUSD 1.05976 | NZDUSD 0.84457 | USDCAD 0.98326 | EURCHF 1.21319 | USDCHF 0.91419 | GBPUSD 1.61662 | EURGBP 0.82089 |

 

Harry Hindsight

·         EUR: After a reasonably quiet session in Asia were we saw the Euro move from the 1.3070 area to a low of 1.3040 the market bottomed out and held the level from mid-session in Asia until the opening grey market in London, at this point we saw some risk taking appearing in the market as longs started to position themselves for the inevitable no change to the number, moving us slowly higher breaking through the 1.3100 level a couple of hours before the event occurred, when the release happened we had a sudden surge to the 1.3180 level triggering stops across the board in EURJPY, EURGBP, EURAUD etc. the follow up comments by Draghi and the unanimous vote pushed the Euro higher again touching 1.3260 before running out of steam, while its run its course for the day the Euro has not backed off from the levels for the moment however, we remain below the 1.3300 area that so far this year has proved to be a sticking point.

·         GBP: In a mirror image of the Euro Cable looks similar while less dramatic only taking a rally of some 160 tics on the day, as with the Euro we had a quiet session in Asia with the Cable just sitting above the 1.6000 level and barely breaking above the 1.6020 level during the session only for early London to start the buying moving Cable up steadily into the BoE decision which we know was never going to change, one suspects the niggling doubters were relieved with the European no change and Cable tagged along for the ride however, EURGBP rose quickly and we broke through 0.8200 for the first time this year having spent the previous two weeks holding 0.8100 and then 0.8150, Cable eventually topped out above the 1.6160 level and has held on to most of the gains for the moment looking to go out just short of the highs.

·         JPY: USDJPY stayed pretty much range bound for the session while the European currencies rallied strongly against the USD the JPY stayed in line with the USD moving from the opening area in Asia of 87.90 to above the 88.00 area we then based from this level for the day rising to just above the 88.30 level and down again over the course of the other two session until we came to close to the NYK close were a sudden rally materialised moving the USDJPY from 88.30 to above 88.70 as 88.50 USDJPY barriers were taken out triggering stops in both USDJPY and EURJPY. 

·         AUD: Having made its moves in the Asian session breaking from the lows below 1.0500 we moved up above the 1.0550 area taking out good offers along the way on the Chinese numbers before settling down. We slowly moved higher over the remaining sessions as the European numbers dragged the Oz along pushing to just below the 1.0600 area where we look to be holding into the close.

 

Yesterday’s premiership results

Actual = A | Consensus = C | Previous = P | Revised = R 

NZD       Trade Balance (NZD) Nov A -700M | C -670M | P -718M | R -666M

AUD       Building Approvals M/M Nov A 2.90% | C 3.10% | P -7.60% | R -5.10%

GBP       BoE Rate Decision A 0.50% | C 0.50% | P 0.50%  

GBP       BoE Asset Purchase Target Jan A 375B | C 375B | P 375B

EUR        ECB Rate Decision A 0.75% | C 0.75% | P 0.75%  

CAD       New Housing Price Index M/M Nov A 0.10% | C 0.20% | P 0.20%              

CAD       Building Permits M/M Nov A -17.90% | C 2.40% | P 15.00%          

USD       Initial Jobless Claims (JAN 5) A 371K | C 365K | P 372K     

USD       Wholesale Inventories Nov A 0.60% | C 0.30% | P 0.60%               

USD       Natural Gas Storage A -201B | C -185B | P -135B

           

For today

USDJPY:
Topside: 88.80-89.10 medium buy stops 89.10-89.45 light offers 89.50-89.80 medium offers
Downside: 88.30-88.60 light bids 87.80-88.10 medium sell stops

EURUSD:
Topside: 1.3280-1.3310 light offers 1.3320-1.3350 light buy stops 1.3350-1.3380 light offers
Downside: 1.3230-1.3260 light bids 1.3200-1.3230 light bids

EURJPY:
Topside: 118.00-118.35 light buy stops 118.40-118.70 light offers
Downside: 116.80-117.10 light bids AUDUSD:
Topside: 1.0600-1.0630 light offers 1.0640-1.0670 light buy stops 1.0670-1.0700 light buy stops
Downside: 1.0490-1.0520 light sell stops

 

JPY:

Japan Government Urges Public Pension Fund to Buy More Foreign Assets, Local Stocks

Japan approves $117 bln stimulus as PM Abe aims to boost economy

PM Abe: New Stimulus Package A Powerful Measure To Prop Up Economy

Japan logs first current account deficit in 10 months in Nov

Japan PM: BOJ should consider employment as policy goal-Nikkei

Fin Min Aso: Too Early to Predict if Japan Curr Acct Deficit Will Continue

Japan Econ Min Amari: Will Firmly Stick to Goal of Achieving Primary Balance

CNY:

China December inflation accelerates on food prices

 

·         EUR: The Euro opened around the 1.3260 level and rose over the first hour of trading as EURJPY continued higher after a late run in NYK and continual rise in USDJPY as the market target further barriers, Euro hit the 1.3280 mark before finding any resistance and then came back to the starting point just as quickly moving down to the 1.3250 level from there the market has been very quiet with little going through before the weekend however, as we move to the London market buyers are starting to creep into the market and we have moved back above the 1.3260 level.

·         GBP: Rally in USDJPY effected the GBP as minor stops in the cross moved the Cable leg to the 1.6180 level in the first hour of trading before settling back to the starting area of 1.6155 and a slow drift lower to touch 1.6145 unlike the Euro cable remains just above its lows and drifting as we move towards the London open.

·         JPY: A late push through option barriers on expectations of the above news saw the market push on once NYK was closed pushing from the 88.70 area to around the 89.35 level triggering more stops on the break of 89.00 once we’d cleared the topside the market started to settle back moving over the next few hours back to 88.80 area before again moving slowly back above the 89.00 level with the 2% inflation target being mentioned repeatedly as the goal for the stimulus package, as we head to London the market holds around the 89.10 level.

·         AUD: Inflationary pressures in China seemed to dominate the movement in the AUD today, as we continue to ignore domestic numbers in favour of Chinese, we opened just short of the 1.0600 level and given how close to the level we were in late NYK in came as a surprise that we didn’t at least attempt a move through that level, we’ve drifted slowly to just below the 1.0570 before finding support and holding and moving back to the mid 1.0580’s as we move towards London. So same picture as the rest of the week just the big figure has changed. Talk of carry trades outperforming the rest of the market from some major banks, but we already knew that one.

·         USDCHF: Why USDCHF you say well in the words of Max Bygraves “let me tell you a story” there was once a bank from cuckoo land that prided itself on being the biggest and best however, when it came to algo’s they just couldn’t get it right, in other words there algo blew a fuse and the market was sold off from 0.9145 to 0.90985 in about a second, unfortunately there is now some discussion over what the low is 0.90985 or as the offender says 0.9128 because that is what we showed. Whether this large bank is right or correct, having been on the receiving end of their market making abilities once they made a move some of the other major banks took off the brakes and went with the flow so the discussion over the low continues.

 

 

Today’s data

Actual = A | Consensus = C | Previous = P | Revised = R 

JPY         Current Account (JPY) Nov A 0.23T | C 0.31T | P 0.41T    

CNY        CPI Y/Y Dec A 2.50% | C 2.30% | P 2.00%               

CNY        PPI Y/Y Dec A -1.90% | C -1.80% | P -2.20%          

JPY         Eco Watchers Survey: Current Dec A 45.8 | C 41.1 | P 40

08:15     CHF        CPI M/M Dec C -0.10% | P -0.30%            

08:15     CHF        CPI Y/Y Dec C -0.30% | P -0.40%

09:30     GBP       Industrial Production M/M Nov C 0.80% | P -0.80%         

09:30     GBP       Industrial Production Y/Y Nov C -2.00% | P -3.00%            

09:30     GBP       Manufacturing Production M/M Nov C 0.50% | P -1.30%              

09:30     GBP       Manufacturing Production Y/Y Nov C -1.30% | P -2.10% 

13:30     CAD       International Merchandise Trade (CAD) Nov C 0.3B | P -0.17B    

13:30     USD       Import Price Index M/M Dec C 0.10% | P -0.90%               

13:30     USD       Trade Balance Nov C -41.1B | P -42.2B   

15:00     GBP       NIESR GDP Estimate Dec P 0.10%             

19:00     USD       Monthly Budget Statement Dec C -22.1B | P -172.1B

Ranges as of 6am London time

                                Highs   Lows

USD/JPY               89.35 | 88.73

EUR/USD             1.3280 | 1.325

EUR/JPY               118.58 | 117.00

AUD/USD            1.0598 | 1.0569

NZD/USD             0.8462 | 0.8421

USD/CAD             0.9840 | 0.9828

EUR/CHF              1.2145 | 1.2115

USD/CHF             0.91595 | 0.90985

GBP/USD             1.6182 | 1.6144

EUR/GBP             0.8215 | 0.82045

 

Good luck

Andy

LMAX Exchange Market Commentary   AUDUSD   Andy Harrison  

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