Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 93.64 | EURUSD 1.35824 | EURJPY 127.198 | AUDUSD 1.0390 | NZDUSD 0.84525 | USDCAD 0.99555 | EURCHF 1.23366 | USDCHF 0.90824 | GBPUSD 1.5659 | EURGBP 0.86738 |

 

Harry Hindsight

·         EUR: From the Asia opening it was all one way traffic with the Euro steadily losing ground against most currencies opening just above the 1.3510 level we slowly declined to hold above the 1.3480 level before dropping quickly to the 1.3460 level in the grey market before London opened. When London opened they took the opportunity to buy from the lows in front of the PMI figures for 3 of the larger economies, Italy, France and Germany, while the results were mixed Germanys and Eurozone numbers were better than expecte and lead the way for the Euro’s recovery over the course of the day rising in the first four hours of London trading to 1.3570 before meeting some resistance, in the meantime France’s Hollande called for a more stable Euro, obviously the obverse effect occurred in that the market sold the Euro back off to the 1.3500 level having read the statement as France wants a weaker Euro (every country wants a weaker currency), we moved into the NYK session with probably smiles on the faces of some American politicians (what’s it like hey) and we started to see the Euro rallying again as the ISM number hit better than expected but worse than the previous months and while the USD out performed most currencies the Euro wasn’t one of them as we moved to just below the 1.3600 level for the day’s high before settling into a quiet ending for the day around the 1,3580 level.

·         GBP: Cable traded in a very tight range during Asia and while the damage done against the Euro over the past 48hrs was undone to a lesser extent it continued into the Asian session with the EURGBP dropping to 0.8555 before the end of the session in the Far East, as the market moved into the grey period before the London open we saw Cable struggling to maintain its levels as the Euro dropped through the 1.3480 level triggering some minor stops, Cable made its lows of just above the 1.5730 level, and once the London market opened the Cable managed to rally back above the opening 1.5760 to a high above 1.5780 on the back of strong PMI services number for Jan however, it was short lived and with anything that’s British at the moment the selling started as the Euro started to break higher, Cable started a steady decline from this point taking in the European figures and then the US figures we dropped to below 1.5640 on the day as stops in crosses started to dominate a weakening GBP, EURGBP rose quickly into the NYK session after the ISM number hitting above the 0.8680 level for what is a massive move given its usual 20-30 tic range and leaving the Europeans more exposed than they were before Hollande spoke out c’est la vie. We eventually found the bottom and moved back to the 1.5660 wiping out the past 24hrs that the GBP had spent recovering.

·         JPY: The USDJPY was reasonably quiet during the Asian session with an opening above the 92.20 dropping to just below 92.00 as pre RBA announcements had some retail players unwinding there carry trades, we then moved up steadily to above 92.50 as the market re-established  its positions post announcement before moving back to the opening areas as we quietly moved through the rest of the Asian session, London entered the fray and with Euro pushing higher we saw plenty of interest in buying the EURJPY cross from the start triggering minor stops all along the way from 124.80 to 125.80, driving the USDJPY leg ever higher until we moved through the 93.00 area just before the NYK opening, we slipped back slightly as the market adjusted to the new highs and new range before starting to rise slowly to touch above the 93.60 to levels not seen since May10, we currently hold just off the highs as we move to the close.

·         AUD: The Oz struggles from a month ago when some banks were calling for an Oz moving to 1.08/1.10, we’ve seemingly decided that maybe not, how fickle some analysts can be, having decoupled from the Euro and now only reacting on Chinese numbers Australia’s second largest partner only after Japan one has to wonder if we’ve found a turning point in what the retail market believes and what it knows, one  suspects that the all-important carry trade to its largest trading partner is performing better this year than last but only because the JPY is weakening at the moment, given this are we seeing passive intervention again something we saw at the end of last year, given some of the swings in other currencies the steady movement of the Oz looks rather suspicious, not that I blame them, it’s either that or cut interest rates to drive away the carry trades and face an inflation problem (the best medicine always taste foul) a tool which is being used by most other countries to try to beat its neighbour. The Oz opened around the 1.0440 level and traded higher on the better than expected trade numbers to touch just below 1.0460, we then traded sideways into the RBA announcement and while everyone expected no change that’s not how the market reacted, with first buyers as would be expected taking it back to the highs from below 1.0440 and then the savage drop counter to what one would expect, driving the market below 1.0400 not as larger move as we’ve seen previously but the same type of dithering over which direction it would take, it struggled to move back above the 1.0420 for the balance of the session however, once we moved into London the Oz was again driven lower basing of 1.0380 from London before breaking in late London session as USD rallied, slipping to just above the 1.0370 levels before moving slowly upwards on profit taken driven by the NYK and CHG markets to settle around the 1.0400 level again.

Yesterday’s premiership results

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

GBP       BRC Sales Like-For-Like YoY Jan A 1.90% | P 0.30%            

AUD       Trade Balance (AUD) Dec A -0.43B | C -0.81B | P -2.64B | R -2.79B

AUD       House Price Index Q/Q Q4 A 1.60% | C 0.30% | P 0.30% | R -0.10%

AUD       RBA Rate Decision A 3.00% | C 3.00% | P 3.00% 

CHF        Trade Balance (CHF) Dec A 1.00B | C 2.74B | P 2.95B | R 2.90B

EUR        Italian PMI Services Jan (F) A 43.9 | C 45.8 | P 45.6

EUR        French PMI Services Jan (F) A 43.6 | C 43.6 | P 43.6

EUR        Germany PMI Services Jan (F) A 55.7 | C 55.3 | P 55.3

EUR        Eurozone PMI Services Jan (F) A 48.6 | C 48.3 | P 48.3

EUR        Eurozone PMI Composite Jan (F) A 48.6 | C 48.2 | P 48.3

GBP       PMI Services Jan A 51.5 | C 49.8 | P 48.9               

EUR        Eurozone Retail Sales M/M Dec A -0.80% | C -0.50% | P 0.10% | R -0.10%

USD       ISM Non-Manufacturing Composite Jan A 55.2 | C 55 | P 56.1

For today

USDJPY:
Topside: 94.10-94.35 mixed 94.40-94.70 light offers
Downside: 92.80-93.20 light sell stops EURUSD:
Topside: 1.3600-1.3640 medium mix 1.3670-1.3700 medium offers
Downside: 1.3510-1.3540 light bids 1.3480-1.3510 light sell stops

EURJPY:
Topside: 127.75-127.90 light offers
Downside: Nothing significant

AUDUSD:
Topside: 1.0430-40 light stops1.0450-1.0480 light mix
Downside: 1.0320-1.0340 light sell stops 1.0300-1.0320 light bids

JPY/KRW:

S.Korea closely watching yen-won exchange rate -fin min official

JPY:

BOJ’s Sato: want to seek ways to indirectly affect FX rates

Fin Min Aso: Overall CPI More Directly Tied To Everyday Life, Thus Used As Policy Guide

CNY:

China’s yuan currency starts trading in Taiwan

AUD:

Australia Retail Sales Drop 0.2%, Weaker Than Consensus

 

·         EUR: We opened in Asia just below the 1.3590 level and held around the level for most of the session but failed to move above the 1.3600 area, we seem to have a few offers there and also USD was trading better against everything else pretty much so no real momentum, having failed the bigh we’ve moved to the downside a couple of times but again we seemed reluctant to move to far away from the 1.3600 level and mid 1.3570’s seems to be it as we move towards London.

·         GBP: Someone get the defribullator out as Cable is close to flat lining, the range has been 1.5650-1.5666 heady stuff as Asia struggles to come to grips with what to do with the thing so leaves it alone, with very little volume in anything GBP tagged.

·         JPY: USDJPY opened around the 93.60 level we moved up pre Tokyo opening trading just below the 93.80 level of course 80 being one of their (Japanese) favourite numbers to play with, we expected some exporter orders to kick in and they didn’t disappoint and by the time we moved to the fix all the supply expected had already been hedged and we’d moved to below 93.50, with that out of the way we saw light buying in EURJPY but it was all USDJPY today and we moved to above the 93.80 in the first couple of hours though struggled above the 93.80 level with suspected option barriers in play protecting the 94.00 area and although we dipped slightly as we moved into the mid-session it failed to break back below the 93.70 level and started to rise as we got closer to Tokyo lunch, we broke through the 94.00 as I was doing this pushing to 94.05 but with mixed reactions with plenty of two way action occurring between the figure and 94.05 before dipping back below the level, one assumes for the option people job done.

·         AUD: The Oz opened around the 1.0390 level and moved steadily higher into Tokyo with some light AUDJPY carry buying going through, however when the release of Retail sales for Dec hit the market was particularly unimpressed and we dropped very quickly to below the 1.0350 level taking out a mix of orders before bouncing like a brick to above the 1.0355 levels, we traded around this level for a few hours however, as we entered Tokyo lunch the retail mob halted the AUDJPY carry buying we’d been seeing over the session and the Oz again started to drift pushing down into the low 1.0340’s with some light stops just below, but holding for the moment as the JPY strengthens again having breached 94.00.

Today’s data

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

00:30     AUD       Retail Sales M/M Dec A -0.20% | C 0.30% | P -0.10%        

11:00     EUR        German Factory Orders M/M Dec C 0.70% | P -1.80%     

15:00     CAD       Ivey PMI Jan C 53.8 | P 52.8        

15:30     USD       Crude Oil Inventories P 5.9M

Ranges as of 6am London time

                                Highs    Lows

USD/JPY               94.075 | 93.45

EUR/USD             1.3597 | 1.3569

EUR/JPY               127.71 | 126.85

AUD/USD            1.0400 | 1.0342

NZD/USD             0.8461 | 0.8438

USD/CAD             0.9969 | 0.9949

EUR/CHF              1.2340 | 1.23075

USD/CHF             0.9087 | 0.9056

GBP/USD             1.5666 | 1.5650

EUR/GBP             0.86795 | 0.86675

 

Good luck

Andy