Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 99.663 | EURUSD 1.29774 | EURJPY 129.33 | AUDUSD 0.91719 | NZDUSD 0.77885 | USDCAD 1.04652 | EURCHF 1.24372 | USDCHF 0.95821 | GBPUSD 1.50095 | EURGBP 0.86459 |

Harry Hindsight

• EUR: The market started fairly quietly in the 1.2780 area and struggled to improve in the early part of the session only rising to the 1.2887 area before giving ground with light EURJPY selling as the wheels continue to wobble in Europe. The market I suppose at this point was looking at the 1.2740 area and a possible break below the Mar/Apr lows however, as with any best laid plan of men and mice the market was quiet possibly over extending itself and the first signs of this happened as we moved into the grey hours just before London when the Euro moved to just below the 1.2800 area on the back of AUD and JPY movements. London continued to move slowly higher however, it was slow going and only once we moved into the NYK session did things start to increase for the Euro. In what we now see as shorts lightening their positions in front of the FOMC report the pair pushed above the 1.2850 level. Once the report was released the market jumped reasonably quick to touch the 1.2950 level, as Bernanke talked the USD down, having traded the high the market slumped to the 1.2900 area and looked to be done for the day however, with 15 minutes to the end of the session we saw Mr Bernanke on doing his own Q&A on the News channels, although he mentioned tapering off he also put some strong points across about inflation and jobs signal more stimulus and significant monitoring, while I may feel that this doesn’t alter the big picture it was sufficient to see a run higher initial led by a USDJPY move lower the Euro suddenly moved from the 1.2920 area we looked to be settling around to above 1.2990 on the close in NYK, triggering stops in an illiquid market however, given what was to follow this move was not as exaggerated as it first looked.
• GBP: With little in the way of news for the UK let alone good stuff, the market was pulled about by peripheral movements in the other pairs most notably the Euro, the market opened in Asia around the 1.4870 area and slowly drifted in early trading dropping through the 1.4850 level before running into good buying as we moved into the grey hours and pushing quickly to above the 1.4900 area, it drifted back slightly as the market rebalanced the Yen crosses but remained for the most part in positive territory, the market peaked above the 1.4920 level a couple of times however, seemed reluctant to move any higher until we moved into the NYK session where we started to see the same type of buying filtering into the market as the Euro. The market saw some aggressive buying during mid-session in NYK with the Cable rising quickly to just short of the 1.5000 as Bernanke spoke however, once the rally was finished the market immediately pulled back to the 1.4930-40 area and looked to be heading for a slow finish. As with the Euro the Cable caught the moves and with stops appearing just above the 1.5000 and the USDJPY already dropping quickly we moved suddenly to the figure and triggered stops above there into the close. It would seem that no one figured in particular and the stops were mostly margin generated with the EURGBP doing a lot of work itself as Cable fell behind the Euro rally and played catch up. The market finished around the 1.5010 area.
• JPY: The USDJPY had struggled throughout Asia moving up to test above the 101.20 level a couple of times from the opening, but never had the impetus to push through, we saw some AUDJPY selling entering the market as retail Japan jumped on the pair having seen it drop quickly away from the target area, only to bounce back again to give the market a second bite at the cherry, this pushed the USDJPY through the 101.00 level for the first time and for the next couple of hours the market tried hard to push back through but was limited in its movement until we moved into the grey hours where all of a sudden the USDJPY started to move quickly lower, this caused an increase in AUDJPY carry trade selling and USDJPY to start triggering minor stops on a quick move to just above the 100.30 level before normality halted the slide, we should have been warned me thinks. The market then held into the London opening before we saw a second round of selling in what appeared to be a push for the stops rumoured to be below the 99.80 level and while we moved to that area there seemed to be plenty of interest at the level to hold the market, and that made the low for Asia and London, from here it was a quiet session for the most part and the market moved to the FOMC rising to the 100.40-50 level before the first fall occurred. FOMC comments initially set the HFT types off buying and the market moved quickly to above the 100.60 level before collapsing far quicker to push through the 99.80 stops and touch close to 99.60, so much for the big stops abounding in the area, we then bounced back to the 100.20 area and looked to be going out on a whimper holding that level with 15 minutes to go. As stated above a few choice comments and everything changes and considering how long the market is of USD’s the following was when you think about it not that surprising. By the time the market had closed we had touched to 99.40 and bounced back to the 99.80 level for the next session. As the commentary is in two parts at this point you may wonder about the significance of a 80 pip move.
• AUD: The Oz spent the early part of the session drifting lower from the opening 0.9180 levels down to below 0.9160 after a poor consumer confidence number however, the market in general was getting more and more nervous of the record shorts in particular in the futures markets and I have mentioned that stops were beginning to build above the 0.9300 level. China data put the cat amongst the pigeons with a set of numbers that seemed to terrify the Oz market taking the pair down from just short of 0.9190 to trade below 0.9130 in a quick move however, over the course of the next hour or so the market dissected the China numbers and in reality the drop in imports had little effect on the exports from Australia and by the time the first analyst put out his thoughts the market jumped instantly to just short of 0.9220 this in turn allowed more selling in AUDJPY to be completed driving down the USDJPY in the same move, while this movement was going on it allowed those the leveraged guys to pick a top to sell as we moved towards London and the market on the opening was around the 0.9200 level however, London struggled to do anything meaningful in either direction pushing the market to above 0.9230 and touching just below 0.9200. We moved into the NYK session with the Oz again slipping as new sellers appeared in the market, and the market drifted into the FOMC around the 0.9140 level close to the day’s lows. The release seemed to confuse the Oz players or maybe not and what we saw was the usual HFT and Algo’s buying the market initially only for it to be capped at the 0.9200 area and reverse just as quickly to trigger weak fresh longs to be taken out and a fall to the 0.9100 level. The market then struggled around the 0.9120 area and as with the other currencies was completely exposed to the rout that was to follow, with 15 minutes to go the market exploded with USD getting sold across the board against everything, Oz was no different and took off from the 0.9120 level to touch 0.9180 in a quick move into the close.

Yesterday’s premiership results

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

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

EUR        German CPI M/M Jun (F) A 0.10% | C 0.10% | P 0.10%

EUR        German CPI Y/Y Jun (F) A 1.80% | C 1.80% | P 1.80%

USD       Wholesale Inventories May A -0.50% | C 0.30% | P 0.20%

USD       Crude Oil Inventories A -9.9M | C -2.9M | P -10.3M

For today

With the market over the past 24hrs there are not to many levels left anywhere close to the market

EURUSD

Topside: 1.3180-1.3200 light offers 1.3210-1.3230 light buy stops

Downside: 1.3080-1.3060 light bids 1.3050-1.3030 weak stops

USDJPY

Topside: 99.50-100.00 light offers

Downside: 96.80-97.00 light mix

AUDUSD

Topside:  0.9300-0.9320 medium offers 0.9320-0.9350 medium stops 0.9400-0.9430 medium stops

Downside: 0.9200-0.9240 light bids.

JPY:

BOJ stands pat, offers rosier view on economy

AUD:

Australia employment up, but jobless highest since 2009

CNY:

PBOC Sets Yuan Reference Rate at Three-Week High amid Lew’s Call

China Commerce Ministry: 2H Trade Conditions Likely More Difficult

China Advisor: Urbanization Requires Fiscal Reform -Report

• EUR: Having seen the rout in late NYK one would be forgiven in thinking that the pause as the market opened in Asia would be the end of it however, far from it as the retail market was squeezed into margin call area and the rally continued, with Bernanke more or less saying that the QE was balanced and jobs and inflation the main factors to when or if tapering would take place triggered the whole move, even though this had been mentioned a few hours before the TV reporting caught the market sleeping into the close. We opened around the 1.2980 level and paused for some 30 minutes before the market again started to rise pushing through 1.3000 and triggering more sentimental stops and rising over the next hour steadily to above the 1.3050 level. The moves at this point are becoming with the market having risen 1.5 big figures in 45 minutes liquidity was becoming an issue as the major banks suffered from a lack of cover for the myriad of stops being triggered, through the 1.3050 area we again picked up steam and into the run to Tokyo opening the market pushed through 1.3200 to make the high, only once we had the full liquidity of Sydney and Tokyo in place was there any semblance of normality and the market started to drift back from the highs as day traders started to pick the top. The market sagged into the middle of the session moving back to the 1.3070 area where there appeared a reasonable amount of bids forming holding it and reversing the fall back, we have since risen again to above the 1.3120 area and are now holding above the 1.3130 area with the market devoid of orders for the most part.  With exceptionally large volumes going through the market is a little gun shy and jittery.
• GBP: Cable was along for the ride while it caught the same movements along the way the volumes were not as impressive and we ran into offers along the way moving from the opening levels of 1.5010 we struggled around the 1.5050 level, and rose less dramatically until just before Tokyo opening were it moved quickly through 1.5100 to just above 1.5190 before stalling. EURGBP rose quickly as the GBP stubbornly held around the 1.5050 level and only the push above 0.8690 released Cable, EURGBP then drifted back to trade around the 0.8670 area and Cable followed the Euro higher point for point into the Tokyo session. Cable from this point mirrored the movement in the Euro and we dropped back to below 1.5100 before recovering and moving back above the 1.5150 level where we currently hold.
• JPY: USDJPY moved out of NYK around the 99.70-80 area and although we’d already seen a slide it paused for an even greater drop as margins were stretched for the retail market, it was a trickle at first slowly dropping to the 99.60 then the flood gates opened, dropping to 99.00 and holding briefly and then a final move to trigger more stops and only stopping around the 98.30 levels as we moved into the Tokyo session, we bounced at this point back to 99.00 and continued to rise into the main session helped by some fixing demand but could only manage to touch above the 99.60 level once before succumbing to further margin selling. This left the market towards the low and basing off the 98.60 level for the run towards the London session.
• AUD: Having seen everything blasted to the downside in the NYK session the market was caught by the late run from the lows however this short squeeze had been expected in some quarters and we opened in the Asian session having seen only a modest rise considering the other currencies. In Asia though the movement continued and for two hours there was very little pause in the movement higher stalling once at the 0.9200 level before sprinting through to 0.9220 more or less the top of the day’s range in London and again into the Tokyo opening trading just short of 0.9300 with one suspects a little option barrier in play. Once we moved into Tokyo renewed selling in AUDJPY was triggered by margin calls and the Oz started to fall away quickly to the 0.9220 area, once we got past the margin calls the Tokyo fix the market steadily rose again over the course of the session and as we move to the grey hours we again are on the verge of attempting a break through at 0.9300 trading just around the highs of 0.9294.

Today’s data

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

NZD       Business NZ Manufacturing Index Jun A 54.7 | P 59.2

JPY         Machine Orders M/M May A 10.50% | C 1.70% | P -8.80%

AUD       Consumer Inflation Expectation Jul A 2.60% | P 2.30%

AUD       Employment Change Jun A 10.3K | C 0.0K | P 1.1K | R 0.7K

AUD       Unemployment Rate Jun A 5.70% | C 5.60% | P 5.50%

0630       JPY         BoJ Rate Decision Post meeting press conference

08:00     EUR        ECB Monthly Bulletin

12:30     CAD       New Housing Price Index M/M May C 0.30% | P 0.20%

12:30     USD       Import Price Index M/M Jun C 0.00% | P -0.60%

12:30     USD       Initial Jobless Claims (JUL 6) C 335K | P 343K

18:00     USD       Monthly Budget Statement Jun C 42.1B | P -138.7B

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               99.92 | 98.20

EUR/USD             1.32085 | 1.2966

EUR/JPY               130.44 | 129.05

AUD/USD            0.9306 | 0.9203

NZD/USD             0.7970 | 0.7895

USD/CAD             1.0449 | 1.0326

EUR/CHF              1.2461 | 1.23665

USD/CHF             0.9593 | 0.9405

GBP/USD             1.5193 | 1.5035

EUR/GBP             0.86945 | 0.8644

Good luck

Andy