Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 94.825 | EURUSD 1.31071 | EURJPY 124.284 | AUDUSD 1.02684 | NZDUSD 0.82849 | USDCAD 1.0293 | EURCHF 1.23554 | USDCHF 0.94263 | GBPUSD 1.50139 | EURGBP 0.87302 |

 

Harry Hindsight

·         EUR: A gradual rise in Asia from the opening levels around the 1.2970 level was tempered only by the impending implications of a rate announcement and commentary from Draghi, it rose to the 1.2995 areas but wasn’t able to push through the 1.3000 level during the period, London walked in and bought on the opening pushing the pair through some weak stops in a quick move to the 1.3020 level before we stalled, we slowly moved to above 1.3030 in early trading however, was forced lower as German factory orders proved less than sparkling with a large difference to what was expected however, today was not about real numbers it was about perceptions of direction. BoE was first and Euro’s tagged along in the Cables quick rise as EURGBP dropped quickly from 0.8685 area to below 0.8640, Euro slowly rose to above 1.3040 before dropping back again to below 1.3010 as it failed to keep pace and EURGBP pressure built however, once we had the rate decision in Europe the tables turned and we saw a quick reversal of the EURGBP as Draghi was speaking putting the cross to above the 0.8690 level, with comments from Draghi about upside inflationary risk from taxes and oil, he pointed out that the weakness we are seeing today is an overhang of the Q4 downturn and that we should be seeing improvements moving into the market, that remains to be seen having talked the market down over the past few weeks he single handedly turned the market on its head and pointed it in the other direction, with varying opinions on what he said the market took the line that good times are ahead and this was reflected in the movement of the Euro which surged higher, triggering minor stops and the flurry of news traders, some of which sold to the 1.2990 level, while the market quickly corrected and left them caught short, pushing to above 1.3100, once we’d reached above there the market was finished for the day with some decent volumes seen with the market petering into a narrow range into the close around 1.3105. Whether we are likely to be further comments over the coming days to explain either Misconception, translations or umpteen other tools used to fend off everyone whose vested interests have been upset by comments contrary to previous leanings over the past few weeks.

·         GBP: Cable opened in Asia with a follow through of the fall in Euro’s into the close of NYK falling from the opening 1.5020 areas to below 1.4970 at one stage, from there it was a quiet day with the market rising back to above 1.5010 as we moved closer to London, grey market traders seemingly decided that the risk was to the downside and sold reasonably aggressively in the hour leading up to London to again test the 1.4970 level, with London opening it seemed the market was reluctant to make much of a decision on what was to come, we rose slowly back to the 1.5000 level, and when the announcement came that there was no change but more importantly no increase in QE the market rallied quickly triggering stops in EURGBP to the downside and a short squeeze in the Cable, as we jumped top above 1.5070, only later once we started to listen to the Draghi announcements did the lustre disappear from Cable, and it started to wilt as EURGBP again rose taking back its losses and a little more and the US analysts started to question the wisdom of no further QE and we started to see Cable dropping back and given the poor figures out of the US one has to wonder what could have happened without the balance, we finished the day not much changed from the previous holding around the 1.5010 level into the close.

·         JPY: USDJPY opened quietly in front of the BoJ’s decision around the 94.10 level before dropping back to below the 94.00 level into the opening of Tokyo, while the decision was nothing less than expected we moved steadily lower as positions were cut in the crosses ahead of Europe and UK’s impending decisions the market moved to just below 93.80 before finding a base and from there steadily rose, London was early buyers however, only smalls were seen going through and we pushed back higher to above 94.20, each release then saw JPY weaken moving on the BoE’s announcement to 94.40 and then on Europe’s to push above 94.60, even with the US figures the USDJPY was now in new territory and taking out stops in both crosses and straight finally topping out above 95.10 for a new 30 month high we then settled back to just below the 95.00 level and traded in a 20 tic range for several hours into the close just above 94.80.

·         AUD: The Oz initially had mixed movements trading from the opening 1.0234 to the 1.0220 level on the back of the trade balance number however, we saw plenty of what could only be called safe haven movement to the Oz through the crosses ahead of the day’s events with the Oz lifting from the lows to move above 1.0255 at one point in Asia, once we moved into the London market there seemed to be a follow through and again we lifted another leg higher to above 1.0275 the GBPAUD sellers during the session suddenly found themselves at a disadvantage and as Cable rose quickly we saw those shorts squeezed out only to be rescued by a quickly rising Euro and GBP sell off, the Oz tagged along with the Euro but as with last week’s rallies failed to move through the 1.0300 level and dropped back from the 1.0290 levels, we settled into a quiet session from then on holding around the 1.0270 level into the close in NYK.

Yesterday’s premiership results

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

AUD       Trade Balance (AUD) Jan A -1.06B | C -0.51B | P -0.43B | R -0.69B

JPY         BoJ Decision A 0.10% | C 0.10% | P 0.10%             

JPY         Leading Index Jan (P) A 96.3 C 96.2 | P 93.4 | R 93.2

CHF        Unemployment Rate Feb A 3.10% | C 3.10% | P 3.10%   

CHF        Foreign Currency Reserves Feb A 427.7B | C 427.0B | P 429.5B

EUR        German Factory Orders M/M Jan A -1.90% | C 0.60% | P 0.80% 

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

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

USD       Challenger Job Cuts Y/Y Feb A 7.00% | P -24.40%              

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

USD       Trade Balance Jan A -44.4B | C -42.8B | P -$38.5B              

USD       Non-Farm Productivity Q4 (F) A -1.90% | C -1.50% | P -2.00%      

USD       Unit Labour Costs Q4 (F) A 4.60% | C 4.20% | P 4.50%     

USD       Initial Jobless Claims (MAR 3) A 340K | C 356K | P 347K   

CAD       Trade Balance (CAD) Jan A -0.2B | C -0.6B | P -0.90B        

CAD       Building Permits M/M Jan A 1.70% | C 5.40% | P -11.20%              

USD       Natural Gas Storage A -146B | C -135B | P -171B

For today

USDJPY:
Topside: 95.50-95.70 decent buy stops 95.70-96.00 decent offers
Downside: 94.20-94.50 light sell stops 93.90-94.20 light mixed bag

EURUSD:
Topside: 1.3120-1.3160 light buy stops 1.3170-1.3200 light offers 1.3200-1.3230 light mix
Downside: 1.3060-1.3090 light bids 1.3030-1.3060 light bids

EURJPY:
Topside: Nothing of note

Downside: 123.80-124.10 light sell stops AUDUSD:
Topside: 1.0310-1.0340 light mixed bag
Downside: 1.0220-1.0240 light bids

 

CNY:

China exports much stronger than expected, imports weak

Commerce Minister Chen Adds Voice to China Concerns on Yen Drop

PBOC’s Yi Says 1% Yuan Daily Trading Band ‘Suitable:’ Securities

PBOC’s Zhou Says Stimulus Exit Could Have Been Earlier: News

JPY:

Hamada: Kuroda, Iwata Nominations Positive for BOJ Policy

Japan’s Abe will not take too much time before decision on TPP

Japan Jan Current Acct Deficit Y364.8B; Expected Deficit Y626B

Japan Q4 revised GDP flat versus previous quarter

Econ Min Amari: Believe Change in Sentiment Starting to Appear in Real Economy

Japan’s Aso: No comment on yen’s decline to 95 per dollar

Japan service sector sentiment improves in February

USD/JPY:

Jack Lew, Japan’s Aso to Hold Teleconference Today, Nikkei Says

·         EUR: Market opened quietly around the closing levels of 1.3105 and traded in tight quiet range into the Tokyo opening were we saw some aggressive EURJPY buying for the fix, once it was over and light stops had been triggered the Euro started to slip back from the highs around 1.3115, and the slide continued through the session although the market was fairly muted after the moves yesterday, sliding only as far as the upper 1.3088 we moved off the lows just and have held the 1.3090-95 level since.

·         GBP: Cable has made a continual decline through the session opening around the 1.5015 level and peaking above 1.5020 on the opening of Tokyo only to slide from there to the mid 1.4980 area where we currently hold in light trading.

·         JPY: USDJPY opened just below 94.90 with earlier buyers taking it to above the 95.00 level just before the official opening, while GDP was better than expected it still shows signs of weakness and the fact that the currency has weakened may be the only reason for the difference, as the change in leadership of the BoJ starts the market voted with a good rise in the equities market and USDJPY moved up to above the 95.50 area for a new high, where we currently hold as we approach the London session.

·         AUD: The Oz opened around the 1.0270 area and initially moved higher with AUDJPY buying seen entering the market before the Tokyo opening however, with the release of the CNY trade balance which looks healthy enough and better than expected one would have imagined the market in the Oz to go higher but it would seem they expected a far better number than they go and we started to dip as concerns about China meeting its target of 7.5% growth in GDP seemed to be slipping from its grasp already. We continued to trade lower through the session touching below 1.0240 before finding some bids to hold the market in place for the time being.

 

Today’s data

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

JPY         GDP Q/Q Q4 (F) A 0.0% | C -0.10% | P -0.10%     

JPY         GDP Deflator Y/Y Q4 (F) A -0.70% | C -0.60% | P -0.60% 

JPY         Current Account (JPY) Jan A 0.36T | C 0.11T | P 0.10T      

CNY        Trade balance Feb A $15.25B | -6.9B | P $29.15B

JPY         Eco Watchers Survey: Current Feb A 53.2 | C 51.2 | P 49.5            

08:15     CHF        CPI M/M Feb C -0.30$ | P -0.30%             

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

11:00     EUR        German Industrial Production M/M Jan C 0.60% | P 0.30%           

13:15     CAD       Housing Starts Feb C 173K | P 160.6K      

13:30     USD       Change in Non-farm Payrolls Feb C 158K | P 157K             

13:30     USD       Unemployment Rate Feb C 7.90% | P 7.90%       

13:30     CAD       Net Change in Employment Feb C 7.8K | P -21.9K             

13:30     CAD       Unemployment Rate Feb C 7.00% | P 7.00%       

15:00     USD       Wholesale Inventories Jan C 0.40% | P -0.10%

           

 

Interbank Ranges as of 6am London time

                                Highs    Lows

USD/JPY               95.45 | 94.79

EUR/USD             1.3115 | 1.3087

EUR/JPY               124.98 | 124.21

AUD/USD            1.0276 | 1.0236

NZD/USD             0.8292 | 0.8247

USD/CAD             1.0313 | 1.0291

EUR/CHF              1.2374 | 1.2347

USD/CHF             0.9451 | 0.9422

GBP/USD             1.5026 | 1.4982

EUR/GBP             0.8738 | 0.872

 

Good luck

Andy