Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 96.335 | EURUSD 1.2935 | EURJPY 124.617 | AUDUSD 1.04355 | NZDUSD 0.84234 | USDCAD 1.01277 | EURCHF 1.21564 | USDCHF 0.93981 | GBPUSD 1.52335 | EURGBP 0.8491 |

 

Harry Hindsight

·         EUR: After a dull start to the day in Asia opening just above the 1.2840 level and flat lining until late in the session and only when the BoJ announcements hit did we see a little bit of movement and JPY weakened forcing the Euro lower as exporters sold into the rally in USDJPY and EURJPY in particular, as we reached the opening in London the market was just holding above the 1.2780 level. We slowly started to rise in front of the ECB rate announcement, and while it was expected the market dropped to below the 1.2750 level to set a new low for the year, and appeared in line with the no change to the rate however, Draghi wasn’t finished and his post announcement commentary and in particular the denial that what happened to Cyprus was a template for other countries that may come to the table in the future seemed to appease the market somewhat and we quickly rose to above 1.2880, while Draghi commentary was reasonably dovish and you would have expected negative for the Euro, the simple fact that it rallied on his conviction that what happened to Cyprus led to a short squeeze as the market continued to rally against all reason, pushing through 1.2880 properly on the second attempt and quickly pushing to 1.2950 for a decent sized move for the day, having pushed up there it ran out of steam however, with the buyers sated and most of the near term stops done there was nothing left in the market and it slowly drifted into the close. 

·         GBP: Cable struggled during the Asian market it opened above the 1.5130 level and stayed out of trouble until a good way into the session where we found a good amount of GBPJPY selling entering the market as the JPY began to weaken forcing Cable lower and triggering some weak stops along the way, both in the straight Cable and EURGBP cross which moved to above 0.8520 from the 0.8490 level. The market began to stabilise around the 1.5040 lows and once we moved into London we started to see a steady rise higher as BoE’s expected no change entered the market from there it was a tight channel higher through into NYK before stalling above 1.5240 for a similar move to the Euro we slowed into late NYK and the market finished just off its highs holding the gains for the day.

·         JPY: With all eyes focused on the announcement, the market expected the no change and probably very little else, however, Kuroda had other plans and laid out a broad unparalleled easing policy far beyond what the market expected, having held the FinMin role what would you have expected however, one has to air on the side of caution here as while he filled the role in the MoF he was as successful as everyone else who have attempted to stimulate the economy since the Asian crisis, and while I’d be the first to agree I’m a cynic the fact remains that after years of trying will they be successful this time? From the opening levels around the 93.00 we briefly flirted slightly lower however, we struggled as the hours ticked by but, the wait was worth it as the raft of announcements were released and the market moved quickly higher trading to above 95.50 without taking a breath into the London opening, we struggled to move after that and limped into the NYK open sticking to the level, NYK again moved it a leg higher to peak above 96.40 in an extended rally before settling into the rest of the session holding around the 96.30 area into the close.

·         AUD: The Oz had its own day in the sunshine briefly as the numbers looked good especially the Retail sales figures which showed a 1% leap above expectations which in hindsight looked very cautious given the previous months, we moved from an opening level just below 1.0460 to trade quickly above 1.0490 before running out of steam and starting to slide slowly back, as with the rest of the currencies once the BoJ made its announcement sellers of the crosses entered the market as the JPY weakened and Oz dropped back at a steady pace to enter London around the 1.0410 area, the Oz found itself again on the receiving end when NYK opened and having pushed back above the 1.0430 area IMM sellers entered the market selling the Oz lower to test below 1.0390, some profit taking towards the end of the futures market led to a short squeeze into that markets close and macro names were seen as quick buyers at that point as Oz managed to move back to the opening levels before drifting into the NYK close.

Yesterday’s premiership results

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

AUD       Building Approvals M/M Feb A 3.10% | C 2.50% | P -2.40% | R -2.00%

AUD       Retail Sales M/M Feb A 1.30% | C 0.30% | P 0.90% | R 1.20%

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

EUR        Eurozone PMI Services Mar (F) A 46.4 | C 46.5 | P 46.5   

GBP       PMI Services Mar A 52.4 | C 51.5 | P 51.8              

EUR        Eurozone PPI M/M Feb A 0.20% | C 0.20% | P 0.60% | R 0.40%

EUR        Eurozone PPI Y/Y Feb A 1.30% | C 1.40% | P 1.90% | R 1.70%

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

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

USD       Challenger Job Cuts Y/Y Mar A 30.00% | P 7.00%               

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

USD       Initial Jobless Claims (MAR 30) A 385K | C 354K | P 357K

USD       Natural Gas Storage A -94B | C -89B | P -95B

 

For today

USDJPY 
Topside: 97.30-97.60 decent buy stops 97.65-97.80 medium offers
Downside: 95.80-96.10 light bids 95.30-95.60 light bids 95.00-95.30 decent bids 

EURUSD 
Topside: 1.2950-1.2980 medium buy stops  1.3000-1.3030 medium buy stops  1.3050-1.3080 light offers 
Downside: 1.2900-1.2910 light bids 1.2850-1.2880 light bids 1.2800-1.2830 light bids 

EURJPY 
Topside: nothing of significance
Downside: 124.00-124.30 light bids  AUDUSD 
Topside: 1.0450-1.0480 light buy stops  1.0490-1.0520 medium buy stops 
Downside: 1.0370-1.0400 light bids 1.0330-1.0360 light bids

 

JPY:

BOJ’s Kuroda: no immediate risk of bond, stock market bubbles

Japan Parliament Approves Full 5-Year Term For BOJ Gov Kuroda

BOJ easing to keep government funding costs ‘very low’ through 2014-Moody’s

Aso Says Not Easy to Achieve 2% Inflation in 2 Years

Japan May Host Extra Round of TPP Trade Talks in July: Nikkei

AUD:

Swan Plans Changes to Australia’s $1.6 Trillion Pension Savings

USD/JPY:

Fed’s Yellen Says Japan’s Easing Appropriate to End Deflation

USD:

Fed’s Yellen Expresses Regret Over Troubled Foreclosure-Review Process

 

·         EUR: The Euro was kept in a tight range as the JPY dominated the flows in Asia, we opened in the 1.2935 areas and most to the actions was contained in a 1.2920-38 range as JPY weakened the Euro moved to its lows and when it then strengthened and started to move lower Euro’s moved back to its mid-30’s area, we saw light exporter selling into the JPY weakness, while the volumes were respectable they still remained mute as the market seems to be hanging away from the pair and only limited cross plays generate any significant moves.

·         GBP: Cable was no different to the Euro dominated by JPY plays and being caught by exporter selling into any USDJPY strength, we moved from the opening areas to trade above 1.5244 and as low as 1.5216 for a wider range than the Euro, and some minor attempts to push the EURGBP cross through the 0.8500 level which failed, otherwise it would have been a quiet session for the pair with nothing significant to upset the market for the moment as we head towards London around the opening levels.

·         JPY: We opened around the 96.30 area and it looked fairly static in the lead up to the Tokyo opening, once Tokyo was open we saw large amounts of retail movement as they went for the carry trades pushing the relevant base currency lower as they were matched off by a receding exporter market, we quickly traded higher initially peaking just above the 97.00 level before seeing a second move to 97.20 the highest we’ve been since August 2009, with yields in JGB’s on their lows at the beginning of the session we saw panic selling in the market driving the price lower in the 10yr and driving the yield from the 0.33% area back to above 0.55% thus negating the reason for the rally and the drop back from the highs to trade 96.13 the low of the day, before bouncing back to close to the opening levels and slowly rising again in a now empty market, we currently hold around the 96.30 with what could be a choppy day ahead as we move towards London.

·         AUD: As we opened the market cast it’s eyes over the JGB market expectations and saw the yields on lows not seen since 2003, so as soon as the market opened we saw a succession of AUDJPY, and NZDJPY buying in search of yield however, it was the JPY leg that couldn’t contain the moves and while the Oz slowly dipped as the USDJPY rose quickly, we moved off the early highs just short of 1.0440 tumbling into the opening in Tokyo to trade just above the 1.0400 level in a limited market, as we moved on in the session we moved off the lows as the JPY reversed it price action and the Oz clawed back 30tics or so as we move towards the grey hours pre London.

 

Today’s data

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

JPY         Leading Index Feb (P) A 97.5 | C 97.2 | P 95         

07:00     CHF        Foreign Currency Reserves Mar C 427.0B | P 427.7B        

09:00     EUR        Eurozone Retail Sales M/M Feb C -0.50% | P 1.20%         

10:00     EUR        German Factory Orders M/M Feb C 1.10% | P -1.90%     

12:30     CAD       International Merchandise Trade (CAD) Feb C 0.20B | P -0.24B  

12:30     CAD       Unemployment Rate Mar C 7.00% | P 7.00%      

12:30     CAD       Net Change in Employment Mar  C 9.0K | P 50.7K             

12:30     USD       Trade Balance Feb C -$44.6B | P -$44.4B               

12:30     USD       Change in Non-farm Payrolls Mar C 190K | P 236K            

12:30     USD       Unemployment Rate Mar C 7.70% | P 7.70%      

14:00     CAD       Ivey PMI Mar C 52.2 | P 51.1

Interbank Ranges as of 6am London time

                                Highs    Lows

USD/JPY               97.20 | 96.13

EUR/USD             1.2938 | 1.2920

EUR/JPY               125.61 | 124.395

AUD/USD            1.0438 | 1.0400

NZD/USD             0.8425 | 0.8387

USD/CAD             1.0134 | 1.0123

EUR/CHF              1.2159 | 1.21495

USD/CHF             0.9408 | 0.9391

GBP/USD             1.5243 | 1.5215

EUR/GBP             0.8496 | 0.8485

Good luck

Andy