Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 96.98 | EURUSD 1.32461 | EURJPY 128.444 | AUDUSD 0.95989 | NZDUSD 0.80312 | USDCAD 1.0263 | EURCHF 1.23094 | USDCHF 0.92937 | GBPUSD 1.56017 | EURGBP 0.84908 |

Harry Hindsight

• EUR: The Euro traded quietly in Asia with the 1.3100 area being particularly sticky, having opened around the 1.3090-95 area we struggled throughout the session giving ground towards the middle of the session on minor cross dealing and continued weakness in the AUD, the market dipped to sub 1.3080 but the pull of the 1.3100 remained and we moved back to the level pushing through into the run to London but only by a few ticks. London continued the pressure higher and if I had to make a guess I would have said a large option barrier was in play given the amounts we were seeing changing hands in the market. Having breached 1.3100 it moved to 1.3120 and traded around the area for several hours into the NYK session. While the market remained mired the ECB decision was passed without any incident and as only once it became apparent that Draghi was only going to reiterate what the market now seem to believe are idle threats on negative deposit rates and no mention of a distinguishable increase in easing the Euro pushed higher and hard, and once the dam broke there was no holding it back any further pushing quickly to above 1.3160 and then climbing quickly over the next couple of hours to above the 1.3300 mark before dipping back to around the 1.3240 area with whatever was holding us up well and truly out of the way. The market in late NYK stabilised holding just above the 1.3240 level for the remainder of the 4hrs into the close.
• GBP: Fundamentally the market has not changed from yesterday, and although we’ve seen a good sized range over the course of the day it has been more Euro driven than anything else with the EURGBP levels staying pretty much in line with the previous day’s range however, the Cable roared to life with the Euro. We opened in Asia quietly just above the 1.5400 level and struggled for a time to maintain the level as retail players attempted to pick the top; it moved as with the Euro some 25 pips lower before spending the remainder of the session slowly moving back to the starting line. London moved in and we saw some concerted early buying taking out all those weak shorts and running the market to the 1.5445 area before it paused as with the Euro. Once the Euro started to move so did the Cable in a pattern that could be overlaid on that of the Euro hitting above the 1.5680 area before settling back to the 1.5600 level into the last 4 hours or so of the NYK market, there was a lot of Macro and fund buying into the rally but given the size of the move the volumes were not overly impressive.
• JPY: After a week of poor numbers out of both Europe and the US Yen’s strengthening should not come as a surprise, but even so yesterday’s US figures had less to do with the move’s which became a USD selloff than one would expect and the move was more a breakout/clear out in the Euro than anything else. USDJPY started the day around the 99.10 level and we saw the usual early session buying to take the market up to close on 99.50 before drifting off and retrying into the grey hours for the most part of Asia and early London the market was contained by the 99.50 top and 98.80 on the downside with thin volumes with bottom pickers half expecting some comments from the BoJ or MoF what they got was thin at the best of times and once we moved into the NYK session and the Euro led rally against the USD the market dropped quickly squeezing out the fresh longs from Macro types pausing around the 98.50 area before renewing the move lower as a little panic selling hit the market and we tumbled another 2.5 big figures to touch below the 96.00 level before bouncing on an overdone move. From the bounce the market settled into a slow sideways market as the market took its breath on the biggest move we’ve seen in USDJPY this year and it settled around the 97.00 area.
• AUD: The market opened around the 0.9540 area and early selling in front of the trade figures immediately looked to be the correct call, the market fell off from the opening and never really recovered in the Asian session pushing to below 0.9440 at one point even during the dangerous grey hours there was little movement away from the lows. Once London opened we started to see our first real buyers coming into the market and although we were trading from this year’s lows  they seemed confident enough and by the time we’d moved into the NYK session we had already pushed above the 0.9520 area. While the Oz then became fairly well bid on the back of the Euro rally taking the Oz to above the 0.9660 on a spike it was in a lower league to the major mover and dipped back to settle around the 0.9580 area for less of a gain on the day. One would suspect that with the Yen strengthening people were beginning to eye the AUDJPY for those carry trade holders still long.

Yesterday’s premiership results

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

AUD       Trade Balance (AUD) Apr A 0.03B | C 0.21B | P 0.31B | R 0.56B

CHF        CPI M/M May A 0.10% | C 0.10% | P 0.00%

CHF        CPI Y/Y May A -0.50% | C -0.60% | P -0.60%

EUR        German Factory Orders M/M Apr A -2.30% | C -1.00% | P 2.20%

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 May A -41.20% | P -6.00%

EUR        ECB Rate Decision A 0.50% | C 0.50% | P 0.50%

USD       Initial Jobless Claims (JUN 1) A 346K | C 345K | P 354K

CAD       Ivey PMI May A 63.1 | C 55 | P 52.2

For today

USDJPY:
Topside: 97.70-98.00 medium offers 98.00-98.30 medium offers 98.30-98.60 light offers
Downside: Nothing of note
EURUSD:
Topside: 1.3260-1.3300 light offers 1.3300-1.3330 light buy stops 1.3330-1.3360 light buy stops
Downside: 1.3190-1.3220 light bids

AUD: Seems devoid of anything meaningful

Topside 0.9530 sees fresh light offers

JPY:

Briefing planned at 0600 GMT on Japan public fund’s midterm plan-ministry

Japan FinMin Aso: Won’t Intervene in Forex Market Immediately

Japan MOF: closely monitoring dlr/yen, overnight moves ‘quite rapid’

Abe Adviser Hamada: Markets Were “Overconfident” in Abenomics

Japan PM Abe: will not comment on market moves

Japan Govt spokesman: closely watching market moves

EconMin Amari: Want to Cap Volatility in Markets by Implementing Growth Strategy

Japan EconMin: Recent Forex, stock moves driven by external factors

Japan May foreign reserves fall to $1.250 trln

USD/CNY:

Schumer Urges U.S. to Press China on Accounting Issues

Ex-U.S. Treasury Paulson: China Needs Interest Rate Liberaliz

• EUR: Asia seemed to be stunned by the moves so much so that nothing happened or so it would seem for the first four hours we moved gingerly from 1.3236 to 1.3247, there was I thinking a clear out would open up the ranges to be played (fool), we spiked a little higher on the CNY fix but returned to the same 1.3240 area only for Aso to make comments on the fact that Japan was not likely to intervene, one has to say their ability for the understatement is amusing as the market was quietly minding its own business and he throws that one out. Euro started to go bid as the Yen strengthened moving over the next few hours to move above the 1.3262 level in its most determined move of the session and we currently hang around those highs.
• GBP: Cable seemed to be in a world of its own with very choppy moves with talk of the LME sale at 2.2yrds bringing the best of the retail market out and you could almost predict the moves up and down with the repeats on the newswires, chances are the GBP has already been bought or not even required at this stage however, we saw the market dropping from above 1.5600 opening to 1.5585 with pre Tokyo top pickers only to jump on the Tokyo opening for Johnny come lately entering the market to above 1.5615 and so it repeated dropping down as Euro slouched then popping on the LME news, then back down as real money sold the move, for the moment it looks tired and empty almost as much as the AUD with the Cable holding around the 1.5600.
• JPY: They thought it was all over, it is now was the commentators cry as England scored the final goal in 66, USDJPY opened around the 97.00 and from the start there was plenty wishing to buy and we saw the market rally above the 97.50 level quickly and hold till the Tokyo opening and even then there was moderate buying until the politicians start to speak, one suspects they try to take these things philosophically and answer questions put to them in a simple matter however, what they neglect to think about is it’s not the professionals in the banks they are broadcasting too but the millions of retail traders that jump on any word from on high, I’m not saying that’s wrong however, take Aso’s comment on the BoJ won’t intervene the banks all know there is likely to be a line in the sand somewhere however, its nowhere near these levels we’ve only just come up here from the depths below 80.00 so common sense would tell you the obvious, however to state it on the news wires just causes either panic selling which triggers margin calls which increases carry trade selling, you get the picture, a simple no comment would probably have left the market alone. The market reacted to the comments selling USDJPY down through several layers of decent bids, whether profit taking or long term views at this point no one knows the move from 97.40 was in two steep declines touching 96.80 strong bids and then drifting lower to 96.40 and Aso’s comments next stop 95.60. For the moment the supply has exhausted itself as many a carry trade holder now looks at his 2.75% yearly interest and the 12% hole he’s in, of course many of these are probably in much lower however, the AUD drops we’ve had over the past few weeks and couple with Yen strength leaves an awful feeling if your carrying. For the moment we’ve managed to move to the 96.30 area as we move towards London.
• AUD: The has spent most of the session reversing yesterday’s gains with the AUDJPY cross being particularly active from the opening in Tokyo, we opened just shy of the 0.9600 level and saw selling of the AUDUSD from the off with one assumes clever money second guessing what was to occur in the carry trade. Once Tokyo opened it wasn’t immediately apparent with the Oz holding around the 0.9560 level however, two hours into the Tokyo session the retail market started to come alive and we dropped quickly to below 0.9480 before the USDJPY leg of the cross started to take all the downside pressure with the Oz slowly trying to rally above 0.9520 only to run into some offers that have appeared half way through the session, for the moment it is holding just above the 0.9500 level area but both the Oz and Yen are suffering from illiquidity after a session of quick and savage moves.

Today’s data

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

JPY         Leading Index Apr (P) A 99.3 | C 98.6 | P 97.9

06:00     EUR        German Trade Balance (EUR) Apr C 16.5B | P 17.6B

07:00     CHF        Foreign Currency Reserves May P 433.6B

08:30     GBP       Visible Trade Balance (GBP) Apr C -8.8B | P -9.1B

10:00     EUR        German Industrial Production M/M Apr C 0.30% | P 1.20%

12:30     USD       Change in Non-farm Payrolls May C 168K | P 165K

12:30     USD       Unemployment Rate May C 7.50% | P 7.50%

12:30     CAD       Net Change in Employment May C 18.0K | P 12.5K

12:30     CAD       Unemployment Rate May C 7.10% | P 7.20%

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               97.52 | 95.55

EUR/USD             1.3268 | 1.3236

EUR/JPY               129.05 | 126.775

AUD/USD            0.9572 | 0.9465

NZD/USD             0.8007 | 0.7950

USD/CAD             1.0288 | 1.0264

EUR/CHF              1.2320 | 1.2278

USD/CHF             0.9306 | 0.9253

GBP/USD             1.5618 | 1.5588

EUR/GBP             0.85015 | 0.8483

Good luck

Andy

Last one for a week as I’m off to clean off the oil baths my fishing reels have been languishing in for the last 3 months or so Tight Lines