Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 100.432 | EURUSD 1.31088 | EURJPY 131.663 | AUDUSD 0.91697 | NZDUSD 0.79016 | USDCAD 1.03773 | EURCHF 1.23848 | USDCHF 0.9447 | GBPUSD 1.52234 | EURGBP 0.86097 |

Harry Hindsight

• EUR: The Euro opened in Asia around the 1.3125 area and dropped to the 1.3110 area during early trading as a continued over analysis of Greece, Portugal and Italy moved through the market, the market moved into Tokyo quietly regaining the small losses with fixing demand for EURJPY moved through the market however once this demand disappeared the market again started to drift lower pushing back to the 1.3110 area and then after holding the level for a few hours dropped q1uickly to the next bunch of bids around the 1.3090 level, this level held into the grey hours and the market started to recover as we moved into the London session, with a current account number less than expected but in line with the previous month the market moved steadily to above the 1.3120 level, with very little data or news from the zone the market again started to drift with only bond auctions in France and Spain being of any note both being successful and raising €8B and €3B respectively. We moved into the NYK session with early sellers appearing to take the Euro to a low of 1.3070, but the market looked somewhat out of sorts and although we did make a new low by a few pips the market reversed and moved back towards the opening levels late in the session as Bernanke toned down his comments somewhat however, the same import was implied as the House testimony so nothing changes, with tapering likely to happen later in the year if circumstances permit. We go out just above the 1.3100 level with most of the day traders flat for the weekend.
• GBP: A slightly bigger range for the Cable compared to Euro for a change with the market in early Asia rising in a move that seemed like catch up time, pushing from the opening levels around 1.5210 to above the 1.5220 level before moving down in line with the Euro selling, we drifted successfully lower in 3 separate waves pushing into the London opening around the 1.5160 level as expectations for the Retail sales number seemed downcast, while the number was not as good as expected it still showed signs of growth and the market started to turn back to the upside. We saw a short squeeze appear in the market as real money came to the market taking out stops around each of the pauses we’d seen in the movement down before pushing to above the 1.5240 level as with any exaggerated move the highs were short lived and the market again started to gravitate towards the 1.5200 level where we continued to trade around the area until we moved through the NYK option cut and another spike to above 1.5220 where the market currently holds into the NYK close.
• JPY: The JPY continued to weaken against the majors with USDJPY opening around the 99.60 area and struggling until after the fix with supply offsetting some of the EURJPY demand, once we moved past the fix the market started to rally in earnest moving steadily higher and stalling a few times as it met light offers, however, by the time we reached the London opening the market had moved to above the 100.30 level and held in a 100.00-100.30 range throughout the session into NYK where the market again began to rise as end of week operations saw USDJPY buying through NYK breaking to above the 100.60 and taking out the near term orders, we held between 100.50-60 for much of the session and only in the final stages in NYK did we see some light profit taking enter the market to push the level just below the range as the market goes out in the mid 100.40’s
• AUD: The market Started the day above the 0.9240 level and started to drift almost from the onset of the market, regaining some of its losses into the Tokyo fix but once this was over with talk of 0.9200 call strikes expiring later in NYK took over and the market began to move towards the level over the next hour or so holding around the 0.9190 level for a short period before giving up and dropping down to touch the 0.9160 level into the grey hours. London opened in a similar move and we saw light EURAUD buying enter the market while Euro slipped lower taking the AUDUSD down to 0.9140 before we started to see a mild recovery to the previous 0.9190 level. The market then became pinned between the low and 0.9170 with a rise to the level into the closing period once the Greek players cut there delta and gamma hedges and we finish the day around those areas.

Yesterday’s premiership results

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

AUD       Conference Board Leading Index May A 0.00% | P 0.30%

AUD       NAB Business Confidence Q2 A -1 | P 2

CHF        Trade Balance (CHF) Jun  A 2.73B | C 2.41B | P 2.22B

EUR        Eurozone Current Account (EUR) May A 19.6B | C 21.3B | P 19.5B

GBP       Retail Sales M/M Jun A 0.20% | C 0.40% | P 2.10%

CAD       Wholesale Sales M/M May 2.30% | C 0.40% | P 0.20%

USD       Initial Jobless Claims (JUL 12) A 334K | C 349K | P 360K

USD       Philly Fed Survey A 19.8 | C 6.8 | P 12.5

USD       Leading Indicators Jun A 0.00% | C 0.2% | P 0.2%

For today

USDJPY:
Topside: 100.80-101.00 light mix 101.00-101.30 medium offers 101.30-101.60 light offers 102.00-30 medium stops
Downside: 99.70-100.00 medium bids 99.00-99.30 medium bids

EURUSD:
Topside: 1.3140-1.3160 light mix 1.3180-1.3210 medium offers 1.3210-1.3240 light buy stops
Downside: 1.3020-1.3050 medium bids 1.2990-1.3020 light sell stops

EURJPY:
Topside: 132.10-132.20 light offers
Downside: 131.00-131.20 light sell stops

AUDUSD:
Topside: 0.9180-0.9210 light offers 0.9210-0.9240 light offers 0.9240-0.9270 light offers 0.9280-0.9300 light mix
Downside: 0.9100-0.9130 light bids 0.9080-0.9100 medium bids

GBPUSD:

Topside: 1.5270-1.5320 light buy stops

JPY:

Japanese Investors Scoop Up Foreign Bonds As US Yields Stabilize

Nikkei retreats from 8-week high on profit-taking before election

Abe Adviser Hamada Says He Remains Cautious on Sales Tax Rise

Japan May All Activity Index Rises 1.1% M/m; Est. +1.2%

EUR/JPY:

SoftBank $8.5 Billion Bid for Universal Said Rejected by Vivendi

G20:

Lew Urges Europeans to Spur ‘Engine of Growth’ as G-20 Convenes

S.Korea Urges G-20 Action to Lessen Impact of Slower Fed Buying

• EUR: The market opened around the 1.3110 level and traded sideways in what was a quiet market, the market moved into the Tokyo session around similar levels to the open and started to move lower as the USDJPY moved higher as a by-product of EURJPY offers with the Euro being forced below the 1.3100 level to touch just below 1.3090, with a combination of profit taking in the Nikkei and the reversal of the USDJPY Euro rose just as quickly to the opening levels and then squeezed higher as weak stops were taken out with the market touching the 1.3150 level before settling down to drift back to 1.3135, as the market heads towards London.
• GBP: Cable more or less tracked the Euro movement with very little independent movement in the market and light volumes for the pair, the market opened around the 1.5220 area and immediately moved to above the 1.5230 levels, as the Euro weakened so did the Cable dropping down to dip below the 1.5200 level, before rallying with the benefit of the Euro move higher, the GBP lost ground against the common currency moving some 15 pips into deficit from the 0.8610 level to 0.8625 however, Cable moved nearly as aggressively upwards as the Euro touching above the 1.5250 level before drifting back into the low 1.5230’s where we look to be heading into London.
• JPY: USDJPY started the session around the 100.40/45 levels and slowly rose into the Tokyo opening once we moved into the session we started to see interest in AUDJPY buying which increased into the Tokyo fix as with previous sessions once the fixing demand was over and the market had touched the 100.87 we started to see supply increase, during the rise the market had seen leveraged types fading the rise from the 100.60 level, mixed with short dated option writing in the 104/105 area. As it happens the Nikkei market started to see large profit taking going through in front of this weekend’s Upper House election and in a 15 minute period something like 33% of the average daily volume went through as the market moved -2.7%, USDJPY dropped some 40 pips on the movement and seemed to be holding around the 100.40 areas only for the markets failure to bounce caused a  continuation to ensue, the market took another leg downwards trading close to 99.80, this time however, there was a bounce back to above the 100.00 level and we currently hold above the 100.10 level.
• AUD: As with yesterday there seemed to be plenty of interest pre-Tokyo to buy the carry trade with the market moving down initially in what appeared to be a spoof, this is where a larger player needs to do something large and finds the rates a little unattractive so they sell aggressively before lining up several banks and buying quickly into this declining market, from the open around 0.9170 we saw the AUD drop quickly to below 0.9160 before moving to just short of 0.9185, of course I could be wrong and the move lower could have triggered a buy order, either way by the time we moved into Tokyo the market was above the 0.9185 area and running towards a fixing demand for USDJPY relieving the pressure driving the Oz higher, we dropped back to the 0.9155 levels and once the fix was over and the Nikkei selling kicked in the trend was reversed just as quickly and the Oz found itself moving quickly to the topside triggering weak stops from the earlier shorts and touching above the 0.9195 before stopping and slowly drifting after a somewhat hectic few hours. We currently hold around the 0.9180 level as we head to London with the market quiet with some heavy volumes across Euro’s, Oz and USDJPY.

  
  Today’s data

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

JPY         All Industry Activity Index M/M May A 1.10% | C 1.20% | P 0.40%

06:00     EUR        German PPI M/M Jun C -0.10% | P -0.30%

06:00     EUR        German PPI Y/Y Jun C 0.60% | P 0.20%

08:30     GBP       Public Sector Net Borrowing (GBP) Jun C 9.3B | P 10.5B

12:30     CAD       CPI M/M Jun C 0.10% | P 0.20%

12:30     CAD       CPI Y/Y Jun C 1.30% | P 0.70%

12:30     CAD       BoC CPI Core M/M Jun C -0.30% | P 0.20%

12:30     CAD       BoC CPI Core Y/Y Jun C 1.30% | P 1.10%

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               100.87 | 99.80

EUR/USD             1.3151 | 1.3089

EUR/JPY               132.105 | 131.245

AUD/USD            0.9196 | 0.9155

NZD/USD             0.7923 | 0.7887

USD/CAD             1.0389 | 1.0360

EUR/CHF              1.23875 | 1.23685

USD/CHF             0.94605 | 0.9406

GBP/USD             1.5249 | 1.5199

EUR/GBP             0.86255 | 0.86085

Good luck

Andy