Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 101.156 | EURUSD 1.2781 | EURJPY 129.298 | AUDUSD 0.9177 | NZDUSD 0.78693 | USDCAD 1.05282 | EURCHF 1.24368 | USDCHF 0.97306 | GBPUSD 1.4866 | EURGBP 0.85974 |

Harry Hindsight

• EUR: The Euro opened around the 1.2870 area and moved steadily lower on weak sentiment, with peripheral Greece and Portugal still weighting on the market. The market throughout the Asian session was broadly speaking quiet with light cross selling in EURJPY, mixed numbers out of China clouded the market and the Euro traded down to below 1.2850 before rising back to the opening levels into the grey hours. London opened just below the 1.2900 level after east Europeans ran the market up however, from that point it was a steady drift toward NYK. Once we moved into the NYK session the market saw several fund buyers for the USD and Euro’s was pushed lower quiet quickly with only lower yields across the board to suggest anything other than USD buying to add to growing positions. We eventually found a base holding around the 1.2770 area and although we breached the level on two occasions it instantly returned to the level and moved to a quiet close around the 1.2780 level for a low not seen since March. Eurogroup chief Dijsselbloem reiterated that Greeks will need to fulfil prior conditions before the July 19^th deadline before a further €2.5B is released, so the question remains.
• GBP: Cable followed the Euro for a good portion of the day moving to a low of 1.4920 from the opening 1.4950 area, it recovered and rallied from the lows to reach the 1.4980 level in quiet trading. Macroeconomic releases looked particularly shaky given the previous backdrop of good numbers and this sent the market in a quick drop to an initial 1.4900 then 1.4880 clearing out some reasonable bids before hitting below 1.4840 pre-NYK before recovering slightly. Once NYK entered the market we saw another round of selling during the session not so deep but taking the market to below 1.4820 which pushed through the low from March and may have been the intention as the timing was around the NYK option expiry time. From there the market started to recover and rallied to the 1.4870 area into the close after the revision by the IMF of the expected GDP.  EURGBP rose dramatically from the figures rallying to just short of 0.8670 before reversing into the NYK session again around the NYK option cut with a slightly less aggressive move taking the pair to the 0.8600 level.
• JPY: USDJPY had a choppy if somewhat contained range throughout the day, drifting during pre-Tokyo to below the 100.80 and then putting in a rally into the Tokyo fix with USD buyers out in force but only managing to put it back above the 101.00 level the rally continued to some extent and we eventually made a high of 101.30 into the grey hours. London came in selling on the opening and the market may have gone lower if the UK numbers had been at least in line with expectations however, USD was the star for the day and we moved back to the 101.30 area and spent much of the London session moving between the figure and 30. NYK saw selling pressure as the EURJPY came under pressure in the post London part of the session and USDJPY again moved towards the lows of Asia before rallying in the closing couple of hours to finish the day almost unchanged
• AUD: The AUD spent the early part of the session under pressure after the NAB confidence number still remained low. However, the market began to rally once the CNY data was released moving from the lows below 0.9090 to the opening area of 0.9130. We moved into the grey area with buyers appearing in the market with some weak carry trade buying however, the AUDUSD pair seemed to be in reversal mode and by the time we moved into the London session profit taking from some of the record number of shorts was firmly believed to be behind the move. The demand for the Oz then became patchy and we traded in a 0.9140-0.9190 range for most of the NYK session with the Oz escaping the carnage in Cable and the Euro as dips were met with sufficient demand to keep the market buoyant into the close just below 0.9180.

Yesterday’s premiership results

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

NZD       NZIER Business Opinion Survey Q2 A 32 | P 23

GBP       BRC Sales Like-For-Like Y/Y Jun A 1.40% | P 1.80%

GBP       RICS House Price Balance Jun A 21% | C 9% | P 5%

JPY         Japan Money Stock M2+CD Y/Y Jun A 3.80% | C 3.40% | P 3.40% | R 3.50%

AUD       NAB Business Confidence Jun A 0 | P -1

CNY        CPI Y/Y Jun A 2.70% | C 2.50% | P 2.10%

CNY        PPI Y/Y Jun A -2.70% | C -2.60% | P -2.90%

JPY         Machine Tool Orders Y/Y Jun (P) A -12.40% | P -7.40%

CHF        Retail Sales (Real) Y/Y May A 1.80% | C 3.70% | P 3.30% | R 3.10%

GBP       Industrial Production M/M May A 0.00% | C 0.20% | P 0.10%

GBP       Industrial Production Y/Y May A -2.30% | C -1.40% | P -0.60% | R -1.40%

GBP       Manufacturing Production M/M May A -0.80% | C 0.40% | P -0.20%

GBP       Manufacturing Production Y/Y May A -2.90% | C -1.50% | P -0.50% | R -0.90%

GBP       Visible Trade Balance (GBP) May A -8.5B | C -8.4B | P -8.2B

CAD       Housing Starts Jun A 200K | C 190.0K | P 200.2K | R 205K

GBP       NIESR GDP Estimate Jun A 0.60% | P 0.60%

For today

USDJPY:
Topside: 101.20-101.60 light mix 101.60-101.90 light offers 101.90-102.20 light offers
Downside: 99.80 and below stops building.

EURUSD:
Topside: 1.2800-1.2835 light offers 1.2840-1.2870 light buy stops 1.2870-1.2910 light buy stops
Downside: 1.2740-1.2770 light bids 1.2700-1.2735 light sell stops 1.2670-1.2700 light bids

AUDUSD:
Topside: 0.9220-0.9240 medium offers 0.9300 stops building
Downside: 0.9100-0.9120 medium sell stops

CNY: China June exports fall for first time in 17 months

China Premier Says Government Can Maintain Long-Term Reforms

China Official: Trade Difficulties to Continue in Next Few Months

JPY: As Japan PM Abe weighs labour reform, IBM emerges as test case

Japan plans to switch inflation gauge; may up pressure on BOJ

Japan June wholesale prices rise 1.2% YoY

Japan consumer mood slips in June

NZD:

English Says N.Z. Rates Will Rise Eventually Even Amid Kiwi Risk

N.Z. Committee Recommends Monthly CPI as being ‘High Priority’

AUD:

Australian consumer sentiment steady in July survey

• EUR: Another quiet session for the Euro, opening around the 1.2780 area and struggling from the start rising to a high of only 1.2787 area before slipping back on EURJPY selling as the retail market moves cautiously out of the pair with eyes on the 1.2740 levels dating back to Mar/Apr. We dipped to below the 1.2766 level just after the CNY fix and the drag of the Oz before moving back to around the opening levels where the market looks to moving to London.
• GBP: Cable initially traded lower in quiet trading on the Sterling, we moved off the 1.4865 level and dropped to just below 1.4850 however, as time ticked by we started to see some light buying of cross GBP buying whether in light of the IMF announcement yesterday revising the UK’s GDP growth or having failed to break below the 1.4800 level to set up a move into levels not seen for three years remains to be seen. The market overall has managed to hold onto yesterday’s close and is currently holding the 1.4870 level having stalled just below 1.4880 as it did several times in late NYK.
• JPY: USDJPY held on to the 101.00 level in early trading touching above 101.20 in pre-fix trading, once the market moved deeper into the session and a failure to move higher the market absorbed the BoJ minutes, we started to see some carry trade selling in the face of AUDUSD buying with profit taking forcing the USDJPY leg to move below the 101.00 dipping to below 100.90 but like the first half of the session with no conviction at all, we currently hold in the mid 100.90’s as we move towards London.
• AUD: The Oz spent the early part of the session drifting slowly from the opening levels around the 0.9175 area to move down to below 0.9155 on a weaker consumer confidence number. The market held around that level as we ran to the data releases in CNY with some poor results over all setting the Oz tumbling from the highs above the 0.9187 area to just short of 0.9125 in a very quick move, we bounced almost instantly and moved back to the 0.9140 with a steady rise to above 0.9150 before triggering weak stops to push to above the 0.9180 to negate the whole move. We currently hold around the 0.9180 level as we move to London. Some AUDJPY selling has been seen in the late part of the session leaving the Oz unaffected as it pushed higher but sending USDJPY lower a little, it’s as if the initial move lower frightened some of the leveraged accounts and they are cutting out.
• Post 6am: With the release of the Consumer confidence in Japan which happened to be weaker than expected and below the previous months number we saw USDJPY make a quick and savage move to the downside clearing some weak stops, this allowed the other currencies to rise with Oz in particular breaking through the 0.9200 level to trigger stops. I initially believed the move was USDJPY related however, given the AUDJPY selling we’d seen over the past few hours I am more inclined to think with record shorts in the Oz we saw some cutting of short Oz positions before the session closed and this had a knock on effect in the USDJPY with AUDJPY sellers taking profit in the rise in Oz. With analysts taking a second look at the CNY numbers to find that overall the Australians didn’t do so badly.

Today’s data

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

JPY         Domestic CGPI M/M Jun A 0.10% | C 0.00% | P 0.10% | R 0.00%

JPY         Tertiary Industry Index M/M May A 1.20% | C 0.80% | P 0.00% | R -0.50%

AUD       Westpac Consumer Confidence Jul A -0.10% | P 4.70%

CNY        Exports YoY Jun A -3.1% | C 3.7% | P 1.0%

CNY        Trade Balance Jun A $27.12B | C $27.8B | P $20.42B

CNY        Imports YoY Jun A -0.7% | C 6.0% | P -0.3%

JPY         Consumer Confidence Index Jun  A 44.3 | C 47.2 | P 45.7

06:00     EUR        German CPI M/M Jun (F) C 0.10% | P 0.10%

06:00     EUR        German CPI Y/Y Jun (F) C 1.80% | P 1.80%

14:00     USD       Wholesale Inventories May C 0.30% | P 0.20%

14:30     USD       Crude Oil Inventories P -10.3M

18:00     USD       FOMC Minutes

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               101.22 | 100.95

EUR/USD             1.27875 | 1.2765

EUR/JPY               129.35 | 128.89

AUD/USD            0.9216 | 0.9125

NZD/USD             0.7873 | 0.7824

USD/CAD             1.0540 | 1.0514

EUR/CHF              1.24475 | 1.2428

USD/CHF             0.9745 | 0.9725

GBP/USD             1.4888 | 1.4845

EUR/GBP             0.86065 | 0.85825

Good luck

Andy