Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 97.841 | EURUSD 1.30827 | EURJPY 127.984 | AUDUSD 0.9256 | NZDUSD 0.77397 | USDCAD 1.05156 | EURCHF 1.22711 | USDCHF 0.93792 | GBPUSD 1.54225 | EURGBP 0.84831 |

Harry Hindsight

• EUR: Euro’s opened around the 1.3120 area and was bid early in the session as JPY weakened, this allowed the Euro to move higher as USDJPY offset any EURJPY bids we could see, rising steadily to above 1.3135 area before real selling kicked in with cross JPY selling doing the damage throughout the Asian session, we ran into the grey hours to the 1.3110 level in what was a reasonably quiet session with the range curtailed by offsetting orders in the Euro’s. During the hour preceding the official London open we saw East Europeans avid buyers of the Euro and a move to 1.3150 triggered some weak stops from the early sellers, as the London market opened this was countered by system sellers from the opening and we moved steadily back to the starting point and held around the 1.3120 level into NYK. Dovish comments from Draghi again left the Euro exposed to selling and the market dropped helped by this and the strong durable goods number which came in above expectations tumbling to below the 1.3100 and trading a couple of time through the 1.3070 level, the market recovered with some light profit taking driving the market to the 1.3100 level however, overall the range was significantly curtailed and one suspects that we are well and truly into the summer season. We currently hang around the 1.3080 areas.
• GBP: The Cable spent the first half of the day rising slowly from the opening areas around the 1.5430 level moving to 1.5455 in Asia before dropping back to the start line in the latter half of Asia, London was little better with a move to above the 1.5475 level in the build-up pre-NYK only for the market to aggressively buy the USD from the opening turning the market down after comments from Draghi that was then followed by the US numbers and we moved lower again to touch below 1.5400 however, unlike the Euro the Cable spent the rest of the session slowly moving back towards the starting area and finished only just short of the opening. EURGBP again saw sellers predominate with the market having held around the 0.8490-0.8500 during the early part of the day the market sold the pair as GBP refused to give ground in the face of Euro selling more than anything and we saw the cross dip below 0.8475 at one stage and finish the day just off the lows. We saw comments from BoE’s Bean and not the more famous one who suggested that there was no technical obstacles to negative rates however, I believe he’d need to consult with the pensioners who are already grumbling at the low returns on their life savings, he’s not be a popular boy down the pub.
• JPY: With all the commentary on QE tapering out of the US the media seems to be fixated on the USDJPY suffered during the Asian and early London markets as retail Japan sold aggressively, the market at the moment seems to forget that there was a market before QE started and the withdrawal of the support is not likely to alter the fact as could be seen later in the day when NYK opened. Having opened around the 97.70 area the market sold USDJPY into the Tokyo opening as the early guys took the bet that retail guys would be selling, only problem is they forgot about system guys who kicked off on the opening in Tokyo buying and reversing the move from the low just below 97.50 this caused a little bit of a short squeeze as the market moved back through the opening levels and triggered the weak stops left by the Macro guys. We topped above the 98.00 for the first time and hung there for an hour or so before the retail selling actually entered the market, we’d seen some early buying from importers but they only did smalls it would seem before the market turned and we saw USDJPY hit below 97.30 for the first time. AUDJPY and EURJPY featured large as the retail guys offloaded the crosses and we saw substantial amounts of AUDJPY stops being triggered which fed into the USDJPY and AUDUSD legs. The market stabilised in the run through the grey hours and we held a 97.40-60 range for the most part before further EURJPY selling appeared in the market as the Euro made its moves lower. This time the low was through the 97.00 level and we started to rise in waves as we moved closer to NYK we rose to test above the 98.00 level for the second time with the US data releases but as with the first attempt we met some stiff resistance above there and we drifted back to close just below the 97.90 level so holding on to the majority of the gains. With the AUDJPY pushing back to the 90.70 area, recovering most of its losses.
• AUD: The Oz had a fairly healthy range for the day trading some 80+ pips on the wide with early buyers being tested once AUDJPY selling kicked in, we opened around the 0.9250 area an pushed into the mid 0.9270’s in early trading before early selling in USDJPY started to impact on the levels in in the Oz with USDJPY dropping the AUD was unable to carry on moving higher as it started to run into AUDJPY offers and as the USDJPY continued the Oz started to weaken, moving down to the 0.9240 area from the highs before holding the level. It was short lived with the bounce only rising to the opening 0.9260 level before fresh AUDJPY selling started to enter the market this time we tumbled quickly through the low and started to trigger stops along the way pushing both USDJPY and the Oz lower, by the time we hit the grey hours the market was just below the 0.9200 for the second day in a row however, while the market seems to be devoid of meaningful resting orders one suspects that there are significant call levels or triggers out there signalling to enter the market as we held the level and started to recover strongly during the pre-London grey market, by the time the London market opened the recovery was well under way, reversing the losses on the day and looking for the next leg up. We peaked around the same time as Cable and Euro as the general mood was USD bearish just short of the 0.9300 and then traded into NYK with less surprises we saw some gamma selling around the NYK option cut taking the market back to 0.9220 however, once that was over with the market slowly moved upwards to finish the day slightly better than when it opened.

Yesterday’s premiership results

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

JPY         CSPI Y/Y May A 0.30% | C 0.00% | P -0.40%

GBP       BBA Mortgage Approvals May A 36.1K | C 33.1K | P 32.2K

USD       Durable Goods Orders May A 3.60% | C 3.00% | P 3.30%

USD       Durables Ex Transportation May  A 0.70% | C -0.20% | P 1.30%

USD       S&P/Case-Shiller Composite-20 Y/Y Apr A 12.10% | C 10.60% | P 10.90%

USD       House Price Index M/M Apr A 0.70% | C 1.10% | P 1.30%

USD       Consumer Confidence Jun A 81.4 | C 75.5 | P 76.2

USD       New Home Sales May A 476K | C 460K | P 454K

For today

USDJPY:
Topside: 98.20-98.40 light offers 98.40-98.80 light offers 99.30-99.50 medium stops
Downside: 97.30-97.60 light bids

EURUSD:
Topside: 1.3120-1.3140 light stops 1.3140-1.3170 light offers 1.3170-1.3200 light mix
Downside: 1.3030-1.3060 medium sell stops 1.3000-1.3030 light mix
EURJPY:
Topside: 128.60-128.70 light buy stops
Downside: 127.20-127.50 light sell stops

AUDUSD:
Topside: 0.9280-0.9310 light stops 0.9310-0.9340 light mix
Downside: 0.9210-0.9230 light mix 0.9200-0.9150 light stops

CNY:

China’s Big Four Banks Increased New Lending in June – Report

China Swap Drops for a Fourth Day as PBOC Eases Cash Squeeze

USD/CNY:

U.S. tops confidence survey on foreign investment, displaces China

AUD:

Australia opposition says top priority to dump mine, carbon taxes

Australia sees iron ore exports rising, even as demand growth wanes

GBP:

Bank of England’s Miles sees good reasons for low gilt yields

EUR:

Italy risks losing billions on debt restructured amid Eurozone crisis -FT

• EUR: Euro’s ended the day being sold aggressively and while we opened around the closing rates pondering the next move early sellers started to appear just before the Tokyo opening taking the market to the 1.3075 level from the mid 80’s. Tokyo opened and the selling continued for the first hour pushing it slightly lower in subdued volumes before seeing a minor squeeze higher to above the 1.3086 level into the Tokyo fix for EURJPY with some small stops around the market going through. From there JPY strengthened and we saw Euro’s moving lower for the next few hours nothing large was seen but it was a steady drift over the next 3 hours with little in it. An FT article on debt restructuring in Italy left the market lower again which will probably cost them a fair chunk, while the article and in fact the report is a little vague in details experts believe that in its restructuring for entry into the Eurozone it traded some structured derivatives that placed them at a distinct disadvantage as time passed, basically they paid for the time value through the nose thinking the gravy train would continue forever. Euro’s reacted to the story and one would suspect there will be further analysis on the subject throughout the day to which they can add very little without official confirmation of numbers and rates involved. As we head towards the London session the market is holding the 1.3060 level with volumes over the last move down above normal.
• GBP: For the most part Cable has been moving with the ebbs and flows of the Euro with very little volume going through in itself until the Italian news in the FT, we opened around the 1.5420 area just short of the highs and traded quickly down in pre-Tokyo to hold just above the 1.5400 area, we recovered with the Euro to push back above the opening only to tip over as the early FT hit the stands and again moved to the 1.5400 level at which point we saw some EURGBP selling move into the market allowing the Cable to move back to the opening with little problem and we currently hold around that area.
• JPY: The market saw a move higher in the pre-Tokyo part of the session moving from the 97.85 area to push to just above 98.20 into the first few minutes in Tokyo. While we saw some early stop chasing in the EURJPY the market found offers instead and struggled in the cross above the 128.40 level with the EURUSD leg taking the downward pressure. Once we moved into the session fully the market started to drift with no real direction for an hour or so before we started to see some month end supply coming to market and we moved down over the course of the next hour to below the 97.70 level before stabilizing and trading sideways around the 97.80 level where the market currently holds as we head to London.
• AUD: The Oz spent the day being pulled around by the JPY and then the Euro, we opened around the 0.9250 area pretty much the centre of yesterday’s range trading quietly into the Tokyo session as we saw early AUDJPY carry trade buyers willing to tempt the long side again after yesterday’s shakeout, we pushed to above the 0.9270 area for the first time only to see it sold off as more talk of the credit crunch in China hampered its move and it was forced back lower through the opening to hit the lows below 0.9240. Having hit the lows the market turned quickly as real money moved into the market with equity hedging  leading the way with Corporations joining in and we pushed to just below the 0.9275 level attempting the level a couple of times before the demand disappeared and we dropped again to the lows in what was becoming a choppy session if somewhat limited in range, the Italian news saw EURAUD selling enter the market with suspected bids now around the 1.3060 level the market in the Oz was forced back up towards the 0.9270 level and although there is 3 mins before my cut off I’ll stick my neck out and say we remain just short of the level as we move towards London.

 

Today’s data

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

06:00     CHF        UBS Consumption Indicator May P 1.46

06:00     EUR        German GfK Consumer Sentiment Jul C 6.5 | P 6.5

09:30     GBP       BoE Financial Stability Report

10:00     GBP       CBI Reported Sales Jun C 3 | P -11

12:30     USD       GDP (Annualized) Q1 (T) C 2.40% | P 2.40%

12:30     USD       GDP Price Index Q1 (T) C 1.10% | P 1.10%

14:30     USD       Crude Oil Inventories P 0.3M

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               98.24 | 97.645

EUR/USD             1.30875 | 1.3057

EUR/JPY               128.43 | 127.685

AUD/USD            0.9274 | 0.9236

NZD/USD             0.7748 | 0.7719

USD/CAD             1.0528 | 1.0499

EUR/CHF              1.2283 | 1.22595

USD/CHF             0.9394 | 0.93755

GBP/USD             1.5426 | 1.5404

EUR/GBP             0.84875 | 0.8471

Good luck

Andy