Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 93.641 | EURUSD 1.33974 | EURJPY 125.447 | AUDUSD 1.02833 | NZDUSD 0.83148 | USDCAD 0.99776 | EURCHF 1.23041 | USDCHF 0.91837 | GBPUSD 1.57123 | EURGBP 0.85266 |

 

Harry Hindsight

·         EUR: Having opened around the 1.3520 area Asia remained range bound in a 20 tic range with very little movement, only as we moved towards London did we see any movement occurring as early Europeans began buying with a plethora of data for the day to come, we moved up 20 tics doubling the range before London opened officially, once we moved into London we saw some strong buying moving the market just shy of 1.3580 at which point we stalled and sat for a few hours awaiting the rate announcement and press conference, as expected there were no changes on interest rates and the market barely reacted, however, Draghi then started his speech and talking about currency wars which is an interesting point seen as they are using the same tools as the rest to stimulate the European markets although changing the name so to the unlearned it doesn’t look like QE or that the interest rate is being used as tool however, it precisely the same as the Japanese have been doing since the Asian crisis in the 90’s and the US is doing, so the point is a mute one, apart from Germany which believes the currency is fine showing any contemplation of the facts, he spoke on inflationary pressure receding which putting the two together means the likelihood of interest rate rises recedes, so the Euro dipped moving quickly over the next couple of hours from the highs to a low just shy of 1.3370 in a large move triggering EURGBP, EURJPY stops, obviously the timing couldn’t be better as the market seemed poised to move higher which was not what most of the European countries wanted and in light of some comments seems to smack of dual standards. We held just below the 1.3400 and struggled to move any higher over the course of the NYK session settling just below there. 

·         GBP: GBP had a good day today in particular it rose against both the Euro and USD, as safe haven flows were seen in the market, stops being triggered as the Euro fell, we opened around the 1.5660 levels and remained in a tight range throughout Asia, lifting a little higher once the London market opened, a good set of IP number saw the market rise quickly to trade just below the 1.5770 level forcing out long EURGBP players and exaggerating the move somewhat, once the flurry was over the market moved back to the 1.5700 level holding the levels for the rest of the session while Euro’s dropped.

·         JPY: Asia traded quietly lower with more focus on what would happen in Europe than in Asia, we drifted from the opening levels of 93.80 to touch 93.30 in somewhat sluggish trading, it recovered in later trading pre-lunch moving back above 93.50 but was always on the back foot as we saw squaring of positions before rate announcements in Europe, London had no such reluctance and we saw plenty of USDJPY and GBPJPY trading going through taking the pair above the 93.90 level just before the announcements, once the ECB press conference kicked off we saw Euro drop taking out stops in EURJPY and dragging the USDJPY leg with it falling in two waves to below 93.10 before NYK took over completely and start to reverse the losses, by the time we reached the close the USDJPY had risen to just above the opening levels.

·         AUD: The Oz traded sideways for the most part, a poor business confidence print sent it dropping from the opening levels around 1.0325 to below 1.0300 however, a good employment number reversed the losses and we traded just shy of 1.0340 in what was a reasonably quiet session for it, only as we moved into NYK did we see any meaningful movement and we again broke to the downside as option plays in the futures market kicked in taking the pair firmly through 1.0300 triggering weak stops from long day traders who’d been playing the buy around 1.0300 for the past 24hrs, we touched below 1.0275 and struggled to move back above the 1.0290 and remained caught in a 20 tic range from that point till the close.

Yesterday’s premiership results

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

NZD       Employment Change Q/Q Q4 A -1.00% | C 0.40% | P -0.40%        

NZD       Unemployment Rate Q4 A 6.90% | C 7.10% | P 7.30%     

JPY         Machine Orders M/M Dec A 2.80% | C -0.90% | P 3.90%               

AUD       NAB Business Confidence Q4 A -5 | P -2               

AUD       Employment Change Jan A 10.4k | C 6.0K | P -5.5K          

AUD       Unemployment Rate Jan A 5.40% | C 5.50% | P 5.40%    

JPY         Leading Index Dec (P) A 93.4 | C 93.6 | P 92.1     

EUR        German Industrial Production M/M Dec A 0.30% | C 0.20% | P 0.20%      

GBP       Industrial Production M/M Dec A 1.10% | C 0.70% | P 0.30%       

GBP       Industrial Production Y/Y Dec A -1.70% | C -2.20% | P -2.40%      

GBP       Manufacturing Production M/M Dec A 1.60% | C 0.60% | P -0.30%           

GBP       Manufacturing Production Y/Y Dec A -1.50% | C -2.60% | P -2.10% | R -2.00%

GBP       Visible Trade Balance (GBP) Dec A -8.9B | C -8.9B | P -9.2B        

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

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

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

CAD       Building Permits M/M Dec A -11.20% | C 4.30% | P -17.90% | R -14.50%

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

USD       Non-Farm Productivity Q4 (P) A -2.00% | C -1.00% | P 2.90%       

USD       Initial Jobless Claims (FEB 3) A 366K | C 360K | P 371K     

GBP       NIESR GDP Estimate Jan A 0.00% | P -0.30%        

For today

USDJPY 
Topside: 93.75-94.00 light offers  94.00-94.30 light buy stops  94.30-94.60 light offers 
Downside: 93.00-93.40 light bids 92.70-93.00 light sell stops 

EURUSD 
Topside: 1.3420-1.3430 light offers  1.3450-1.3480 medium offers 
Downside: 1.3350-1.3380 light sell stops 1.3300-1.3330 light bids 

EURJPY 
Topside: 125.50-125.80 light offers  126.00-126.30 light offers 
Downside: Nothing of note  AUDUSD 
Topside: 1.0300-1.0330 light offers  1.3340-1.3370 light buy stops 
Downside: 1.0240-1.0270 light sell stops 1.0200-1.0230 light sell stops

 

CNY:

China Jan export growth beats forecasts

Former PBOC Adviser: China Still Following Old Growth Pattern; Carries Risks

JPY:

Japan Dec current account in deficit, energy imports weigh

Amari: Concerned No Prior Publication Rule for Public Positions Affecting BOJ Successor Process

Aso Says DPJ Move on FTC Head Nominee May Affect BOJ Nominations

Japan Govt Suga: China Response to Radar Incident Unacceptable

Japan Jan Corporate Bankruptcy Cases Down 10.2% on Year

Japan service sector sentiment improves in January

AUD:

Australia CB sees scope to ease, watching business investment

Australia says new mining tax raised $131 Mln in first six months

SGD:

S.Korea’s Daewoo Shipbuilding says wins $1.6 bln order in Europe

 

 

·         EUR: A very quiet day for the Euro opening below 1.3400 and slowly pushing above the level, once above its done very little and remains just above the 1.3410 level.

·         GBP: Fairly quiet having opened around the 1.5710 level it struggled to make any headway until towards the end of the session when we saw some light GBPJPY buying taking the market in Cable up towards the 1.5740 levels; otherwise we had been pinned between 1.5710-20.

·         JPY: USDJPY opened around the 83.65 levels trading sideways for the first few hours until the Current account numbers appeared, showing the worst trade deficit since 1985 at Y264.1B vs Y144.2B consensus, however, everyone read the headline number and USDJPY dropped down to 93.45 and then traded lower from there over the course of the session to hold around 93.40 moving towards London.

·         AUD: The Oz opened around the 1.0280 level trading quietly until the Tokyo fix where we saw some selling appear in the market taking us eventually down to the 1.0256 area before bouncing as the first of the CNY numbers hit with a larger than expected trade balance helping the Oz back to where it started falling, we held at the top of the range pushing through the 1.0295 level on a couple of occasions but failing to take out the 1.0300 for the moment, although we are not backing away from the level.

Today’s data

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

CNY        Trade Balance (USD) Jan A $29.15B | C $24.20B | P $31.62B          

JPY         Current Account (JPY) Dec A 0.10T | C 0.24T | P 0.23T     

JPY         Eco Watchers Survey: Current Jan A 49.5 | C 48 | P 45.8 

CNY        CPI Y/Y Jan A 2.00% | C 2.10% | P 2.50%

CNY        PPI Y/Y Jan A -2.20% | C -1.60% | P -1.90%           

06:45     CHF        Unemployment Rate Jan C 3.10% | P 3.00%        

07:00     EUR        German Trade Balance (EUR) Dec C 13.7B | P 14.6B         

08:15     CHF        Retail Sales (Real) Y/Y Dec C 3.20% | P 2.90%      

13:15     CAD       Housing Starts Jan C 195.0K | P 198.0K   

13:30     USD       Trade Balance Dec C -$46.0B | P -$48.7B               

13:30     CAD       Trade Balance (CAD) Dec C -1.50B | P -1.96B       

13:30     CAD       Net Change in Employment Jan C 4.0K | P 39.8K               

13:30     CAD       Unemployment Rate Jan C 7.20% | P 7.10%        

15:00     USD       Wholesale Inventories Dec C 0.40% | P 0.60%    

Ranges as of 6am London time

                                Highs    Lows

USD/JPY               93.75 | 93.34

EUR/USD             1.3417 | 1.33825

EUR/JPY               125.60 | 125.135

AUD/USD            1.0298 | 1.0256

NZD/USD             0.8364 | 0.8326

USD/CAD             0.9992 | 0.9972

EUR/CHF              1.2311 | 1.2294

USD/CHF             0.9198 | 0.9171

GBP/USD             1.5738 | 1.5706

EUR/GBP             0.85335 | 0.8516

 

Good luck

Andy