Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 98.353 | EURUSD 1.30391 | EURJPY 128.234 | AUDUSD 0.92748 | NZDUSD 0.77895 | USDCAD 1.04771 | EURCHF 1.23235 | USDCHF 0.94516 | GBPUSD 1.52585 | EURGBP 0.85452 |

Harry Hindsight

• EUR: Euro’s made steady gains throughout the Asian session moving from the opening levels just below 1.3020 to trade above 1.3035 in what was a quiet session with very little movement overall, the market had expected USD demand in the run towards the month end however, this failed to materialize and USD’s drifted lower overall, as we moved into the grey hours we saw some East European selling enter the market however, the supply was short lived and the market again rallied again into the London open. London opened on the highs and steadily dropped down as German numbers failed to inspire the market, having reached close to the opening levels the market found comfort in the confidence numbers which generally were better than expected and the Euro moved slowly higher catching some weak stops, we moved into the NYK session around the 1.3040 area and while the US data was pretty much in line with expectations we saw the USD start to gain again in a choppy day well suited to day traders, we made new lows touching the 1.3000 level briefly helped briefly by the incessant dovish comments from the ECB who continue to interfere in the markets to weaken the Euro, pretty much the same way the Fed will if the USD goes to high, and they bitch about the Japanese. The market moved back to the previous highs and we again saw a little short squeeze as the market pushed through the previous levels and touched above 1.3055, to be honest the volumes have not been tremendous as with the range today, we drifted into late NYK with the market a little spent after a tight whippy day settling around the high 1.3030’s.
• GBP: The Cable held its own through Asia moving from the opening 1.5310 to above the 1.5335 area  in quiet trading, moving into the grey hours we saw sellers enter the market as the Euro dropped back however, the Cable bounced smartly off the opening area, the market had other ideas and the second move lower was more sustained with EURGBP buying and Cable selling sending the market to the 1.5270 area waiting for the UK releases, while some look towards the Feds QE tapering as the answer for the selloff after the releases, it has to be noted that while the Q1 number was in line with expectations the revision of YoY number meant that the fall from the peak has been 7.2% nearly a full per cent greater. The second selloff of the day came as we moved into the NYK session and the point was not lost on the US players taking the market from the 1.5300 to trade only just above the 1.5200, reversing the slow gain over the weak in EURGBP and putting the market barely holding on to this range. Having touched the lows the market recovered somewhat moving up to the 1.5260 into to the close; again summer volumes seem to be in play.
• JPY: The Yen weakened steadily against the back drop of dull day range wise for the other majors, rising slowly from the opening 97.80 with only a couple of minor dips to below 97.60 during early Asia, the expected USD buying the market had expected for the month end seemed to be all against the Yen and while Asia was reasonably flat as we moved into the grey hours USDJPY jumped to above the 98.00 and continued to consolidate above that level into the London session, once we saw the US open and the US date we had a little flurry as HFT sold the numbers only for the pair to bounce immediately in their faces and push again to make a new high above the 98.50 level, where we eventually closed for the day.
• AUD: Having seen a breakdown in the AUDJPY carry trade earlier in the week, the rise to 91.00 was a little surprising technically however, with a weakening Yen the Oz was able to rise in the Asian session as the offers from earlier the weak that held that topside in AUDJPY had all disappeared on the shake out of downside stops. The Oz moved from the opening 0.9280 to push to the 0.9340 but with the carry trade pushing through the 91.20 level the Oz slowly started to come under pressure as the Yen continued to weaken, while the Oz move steadily lower over the session it did eventually hold on into the close with only a few pips loss on the day, with the AUDJPY topping above 91.60 and settling back only 20 pips for a decent gain.

Yesterday’s premiership results

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

NZD       Trade Balance (NZD) May A 71M | C 427M | P 157M

NZD       NBNZ Business Confidence Jun A 50.1 | P 41.8

JPY         All Industry Activity Index M/M Apr A 0.40% | C 0.40% | P -0.30%

EUR        German Import Price Index M/M May A -0.40% | C -0.20% | P -1.40%

EUR        German Unemployment Change Jun A -12K | C 8K | P 21K

EUR        German Unemployment Rate Jun A 6.80% | C 6.90% | P 6.90%

EUR        Eurozone M3 Y/Y May A 2.90% | C 2.90% | P 3.20%

GBP       Current Account (GBP) Q1 A -14.5B | C -12.0B | P -14.0B

GBP       GDP Q/Q Q1 (F) A 0.30% | C 0.30% | P 0.30%

EUR        Eurozone Economic Confidence Jun A 91.3 | C 90.4 | P 89.4

EUR        Eurozone Industrial Confidence Jun A -11.2 | C -12.3 | P -13

EUR        Eurozone Consumer Confidence Jun (F) A -18.8 | C -18.8 | P -18.8

EUR        Eurozone Services Confidence Jun A -9.5 | C -8.5 | P -9.3

USD       Personal Income May A 0.50% | C 0.20% | P 0.00%

USD       Personal Spending May A 0.30% | C 0.30% | P -0.20%

USD       PCE Deflator M/M May A 0.10% | C 0.10% | P -0.30%

USD       PCE Deflator Y/Y May A 1.00% | C 1.10% | P 0.70%

USD       PCE Core M/M May A 0.10% | C 0.10% | P 0.00%

USD       PCE Core Y/Y May A 1.10% | C 1.10% | P 1.10%

USD       Initial Jobless Claims (JUN 22) A 346K | C 348K | P 354K

USD       Pending Home Sales M/M May A 6.70% | C 1.00% | P 0.30%

For today

USDJPY
Topside: 98.90-99.20 medium offers  99.30-99.60 medium buy stops 99.80-100.00 medium offers
Downside: 98.00-98.30 light sell stops 97.70-98.00 medium sell stops 97.30-97.60 light sell stops

EURUSD
Topside: 1.3080-1.3110 medium buy stops
Downside: 1.2980-1.3010 light bids 1.2950-1.2980 light bids

AUDUSD
Topside: 0.9300-0.9330 light mix  0.9340-0.9370 light offers 0.9420-0.9440 medium stops
Downside: 0.9240-0.9270 light bids 0.9200-0.9230 light bids

CNY:

China to Allow Trading of Yuan with More Currencies: PBOC’s Zhou

China CB chief: to guide financial firms to keep reasonable lending policies

JPY:

Japan’s Amari: Hard to keep interest rates low when econ data rising

Japan FinMin Aso: Not Easy To Reverse Deflation

Japan fund managers lift domestic bond weightings, cut global stocks

Japan June manufacturing PMI shows fastest growth in over 2 yrs.

Japan core CPI stops falling in May for first time in 7 months

Japan May household spending falls 1.6% vs. yr. ago

Japan May industrial output rises 2.0% MoM

NZD:

New Zealand new housing consents rise 1.3% in May

N.Z. Household Borrowing Posts Biggest Annual Gain Since 2008

GBP:

Britons less Pessimistic about the Economy

• EUR: Euro opened around the 1.3035 area and traded quietly into the Tokyo session trading around the opening level, early Tokyo was little different and only once most of the data was in from Japan did we start to see some movement in the markets. With the lead coming from the AUD which started to decline, which led to the Gold hitting stops below the 1,200.00 area dipping savagely some $20 to trade hit 1,180.00 before recovering and beginning a slow slide. Euro’s moved higher quickly with EURJPY stops being triggered and EURAUD buying entering, Euro’s quickly moved to 1.3075 before the demand finished holding for the past few hours between the high and the 1.3060 level as we move to London.
• GBP: Cable struggled from the opening drifting lower into the Tokyo opening and trading to just above the 1.5240 level before catching the move higher by Euro’s moving quickly to just below 1.5275 however the GBP still remains on the back foot losing ground against the Euro in particular.
• JPY: USDJPY weakened the whole session taking out stops along the way in the crosses in particular, moving from the opening 98.40 area we moved steadily through into the Tokyo opening just above the 98.55 level and the market started to accelerate once the data was released with broadly speaking a mix of results that the market took its time to appreciate, with Industrial production shining through however, it would seem that the market initially missed the household spending number which was dramatically lower than expected and the Yen started to weaken quickly gapping as EURJPY, the fact that a new fund started to day was not lost with some $25B collected and aimed at some of the of the less attractive sovereign and corporate bonds in  KRW/ZAR/TRY/MXN/RUB/BRL. USDJPY eventually topped out just above the 99.00 area before running out of steam however, given the moves it is likely to go anywhere from here and we hold around the 98.85 area as we move to London.
• AUD: Having put in so much work yesterday the Oz ran out of room with the Yen continuing to decline it found itself under pressure from the opening levels around the 0.9285 dropping quickly back to the 0.9250 even before moving into the Tokyo session, then with a sudden drop in the Gold as it dropped through 1,200.00 and hitting 1.1800 the Oz being a commodity currency followed the move and it dropped quickly to 0.9215 before finding some legs, as with the gold they both started to repair the damage once the supply was out of the way and one wouldn’t be surprised to hear one of the big funds on the wires discussing their gold strategy as they unwind whatever lump they have. For the moment the Oz has pushed back to above the 0.9260 level and is holding as we head towards the London session.

 

Today’s data

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

NZD       Building Permits M/M May A 1.30% | C -3.90% | P 18.50%

GBP       GfK Consumer Sentiment Jun A -21 | C -21 | P -22

JPY         Nomura/JMMA Manufacturing PMI Jun A 52.3 | P 51.5

JPY         Household Spending Y/Y May A -1.60% | C 1.30% | P 1.50%

JPY         Unemployment Rate May A 4.10% | C 4.00% | P 4.10%

JPY         National CPI Core Y/Y May A 0.00% | C 0.00% | P -0.40%

JPY         Tokyo CPI Core Y/Y Jun A 0.20% | C 0.20% | P 0.10%

JPY         Industrial Production M/M May (P) A 2.00% | C 0.20% | P 0.90%

JPY         Retail Trade Y/Y May A 0.80% | C 0.00% | P -0.10%

JPY         Housing Starts Y/Y May A 14.5% | C 6.20% | P 5.80%

06:00     GBP       Nationwide House Prices M/M Jun C 0.40% | P 0.40%

06:00     EUR        German Retail Sales M/M May C 0.40% | P -0.40%

07:00     CHF        KOF Leading Indicator Jun C 1.2 | P 1.1

08:30     GBP       Index of Services 3M/3M Apr C 1.10% | P 0.60%

12:00     EUR        German CPI M/M Jun (P) C 0.00% | P 0.40%

12:00     EUR        German CPI Y/Y Jun (P) C 1.70% | P 1.50%

12:30     CAD       GDP M/M Apr C 0.00% | P 0.20%

12:30     CAD       Industrial Product Price M/M May C 0.70% | P -0.80%

12:30     CAD       Raw Materials Price Index M/M May C 2.30% | P -2.20%

13:45     USD       Chicago PMI Jun C 55 | P 58.7

13:55     USD       U. of Michigan Confidence Jun (F) C 83 | P 82.7

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               99.03 | 98.37

EUR/USD             1.3075 | 1.3031

EUR/JPY               129.38 | 128.31

AUD/USD            0.9287 | 0.9215

NZD/USD             0.7814 | 0.7760

USD/CAD             1.0502 | 1.0467

EUR/CHF              1.2335 | 1.23195

USD/CHF             0.9458 | 0.9429

GBP/USD             1.5275 | 1.5242

EUR/GBP             0.85635 | 0.85435

Good luck

Andy