Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 97.945 | EURUSD 1.3522 | EURJPY 132.437 | AUDUSD 0.95206 | NZDUSD 0.83727 | USDCAD 1.02231 | EURCHF 1.23333 | USDCHF 0.91192 | GBPUSD 1.6146 | EURGBP 0.83751 |

Harry Hindsight

• EUR: Having opened around the 1.3355 level the market struggled for most of the session to move in either direction with a very tight range and very low volumes throughout the Asian session, whether the market had the FOMC in mind remains to be seen, with the market trading in less than a 15 point range, the move into London didn’t change matters and the range was only slightly better trading to a low just below the 1.3340 level before the London close and in the early part of NYK. The FOMC release was a killer though with all that pent up frustration through the day, the comment no tapering left the market exposed to long USD positions pretty much against everything, with short term players caught the market moved quickly covering some 110 pips in a 2 minute move from the 1.3370 level to 1.3480 before running into some offers before again pushing higher over the next few hours to top above the 1.3540 level to make the highs. Mostly medium and short term players seemed to be the main players on both sides with some willing to step in and average positions during the rise. However, short term players seemed to be squeezed through margins and started to cut adding to the general melee in the early part of the rally.  With a dovish comment the market remained bid into the close even though we fell back to the 1.3515 area.
• GBP: Cable remained quiet throughout the Asian session performing only slightly better than the Euro in terms of range but remaining close to the opening levels just above the 1.5900 levels. Through the grey hours we saw the Cable slowly start to move higher and after the release of the BoE minutes the market moved modestly to above the 1.5960 and holding just below the 1.5980, we remained in that range for several hours from that point with little going through until the FOMC release, EURGBP had been sold from the BoE release and had found a bottom around the 0.8355 range and for the moment seems reluctant to move back above the 0.8400 level although we did find Euro moving slightly higher to recapture the losses and put the cross back to just below that break down point. On the release of the FOMC the Cables rise was quick but not in the same class as the Euro, the market moved off the 1.5970 level and hit 1.6040 in the two minutes before holding steady for 30 minutes or so creeping to 1.6060 before again rising quickly to above 1.6100, at which point margins became stretched and the market started to see renewed buying pushing the pair to trade above the 1.6160 level before drifting back into the close. Much the same type of flow was noticed with plenty of leveraged buying on stops hit the market before the final moves by many medium term shorts kicked in.
• JPY: While the USDJPY has been no different than any other major the drop off started really on the move into London, having stayed fairly quiet in Asia rising from the 99.15 area opening to touch briefly above 99.30 from fix demand and a slight follow through, we then started drifting towards the grey hours with little intent. The move into the London session started to see some selling appear as USD’s suffered its first setback against the GBP, falling to the 98.80 area where some light bids held the market. We returned slowly to above the 99.00 level and just before the FOMC release touched the 99.10 level and then a steady drift lower into the release. 98.85 areas was around the point of the release and the market stopped dropping around 98.10 with a slight bounce then a continuation as retail Japan started to feel the squeeze from short Gold positions to name one. We again started to move lower and in the face of a good move in AUDJPY we started to see profit taking from that quarter above the 93.00 level. This selling moved the market down to a low just below the 97.80 levels so not as severe as the Euro per sae but the close was a weak one around the 97.90 level.
• AUD: The market opened around the 0.9358 levels and struggled as with everything else in the early part of the session, the market saw some moderate selling once we moved into Tokyo to take it below the 0.9340 level where we held for the remainder of Asia rising to just below the opening as we moved into the grey hours. London opened and the market saw some weak buying from leveraged types however the push was limited and we scraped to just above the 0.9360, those players lost patience and the market again drifted back towards the baseline and into NYK pre-FOMC. At this point the market started to see players who’d weighed up the odds and went long on the fact that if they tapered then the market had already built in the movement however, the risk to the upside was more evident and the play before the release seemed to bear this out moving to just below the 0.9380 to make the highs. The release had the effect those players thought and we moved quickly to above the 0.9460 level where some profit taking kicked in, once the short term players were over with the market continued its rise to push above the 0.9500 level and a thick level of offers before again lifting to above the 0.9520 and AUDJPY selling soaking up the move.

Yesterday’s premiership results

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

NZD       Current Account Balance Q2 A -1.25B | C -1.9B | P -0.663B

AUD       Conference Board Leading Index Jul A 0.30% | P -0.20%

AUD       Westpac Leading Index M/M Jul  A 0.60% | P 0.00%

GBP       Bank of England Minutes A 0—0—9 | C 0–0—9 | P 0–0–9

CHF        ZEW (Expectations) Sep A 16.3 | P 7.2

USD       Housing Starts Aug A 891K | C 923K | P 896K | R 883K

USD       Building Permits Aug A 918K | C 950K | P 943K | R 954K

USD       Crude Oil Inventories A -4.4M | C -1.2M | P -0.2M

USD       FOMC Rate Decision A 0.25% | C 0.25% | P 0.30%

For today

USDJPY:
Topside: 98.50-98.70 light offers 98.70-99.10 large offers
Downside: 97.70-98.00 light mix  97.40-97.70 light mix  97.10-97.40 medium sell stops 96.80-97.10 light bids

EURUSD:
Topside: 1.3550-1.3590 light buy stops 1.3600-1.3620 medium offers 1.3620-1.3640 light stops
Downside: 1.3500-1.3510 light stops 1.3450-1.3500 light bids

EURJPY:
Topside: Nothing showing

Downside: 131.40-131.70 light bids

AUDUSD:
Topside: 0.9550-0.9580 medium  buy stops 0.9580-0.9620 light buy stops 0.9620-0.9640 light offers 0.9675-0.9700 light offers
Downside: 0.9430-0.9480 light bids

JPY:

Japan to consider cutting corporate tax rate -Govt source

BOJ Kiuchi: See More Downside Risks For Japan’s Economy

BOJ Ownership of Japan Debt At 15.4% as Of End-June

Aso to Accept Early Scrapping of Reconstruction Corp Tax: Nikkei

Japan Aug exports rise 14.7% YoY – MOF

Japan firms’ mood dips as emerging economies slow -Reuters Tankan

AUD:

Australia central bank sold A$482M in Aug

CNY:

China to crack down on family planning fines after abuses found

NZD:

New Zealand’s Economy Expands in 2Q for 10th Consecutive Quarter

• EUR: Trading has been brisk from the opening 1.3515 areas we’ve seen early players taking an opportunity to sell at these levels above the 1.3500 however, having come close to breaking the market again started to rally as early Japanese retail moved into the market and we again moved above 1.3530 and while the range has been reasonably tight volumes continue to grow as players on both sides swap contracts. For the moment we hold in this 1.3530 area with the market calming down from the first few hours of rebalancing with the EURJPY cross doing plenty of work.
• GBP: Volumes remain high with plenty of two way action, initial sellers from the opening 1.6145 areas moved the market to its current lows below 1.6120 however, as with the Euro as soon as we started to get close to the Tokyo session, Japanese interest started to move in taking the market back to the opening level and we played the 1.6120-45 area a few times as liquidity starts to suffer in Asia after a long squawk. For the moment we are holding around the lows of the day, with EURGBP holding just above the 0.8390 level.
• JPY: Having closed just off its lows the bounce back was reasonable as the USDJPY ran from the opening to trade only just shy of 98.30 as Tokyo opened, helped by bottom pickers and a follow through from early Japanese retail buyers the market moved into the Thursday session with hopes of maybe further buying for the weekend fix, as it was the market dipped first dropping back towards the 98.00 before the suspected demand kicked in and for a few hours we were limited in range to 98.00-30. The session was probably not helped by several holidays in the Asian region most notably China however, the market did start to see fresh buying moving in and we pushed steadily to above the 98.40 level and failed to push through the 98.50 level. For the moment we are just off the highs and holding around that 98.40 level as we move to the grey hours. Retail players have been reasonably active in the market with profit taking continuing in the AUDJPY allowing some buying of straight USDJPY however, there still seems to be plenty willing to sell into the rallies especially with EURJPY above the 133.00 level.
• AUD: The market saw some light AUDJPY selling from the opening as the USDJPY started to rebound, and AUD moved lower to trade around the 0.9500 level. We’ve straddled the level for a good portion of the session and although we’ve attempted to move to the topside the event was lacklustre and all though the volumes have been reasonable the market has struggled to make much of a move and still remains towards the bottom of the range as limited as it is. The market speculates that having not removed the threat of another cut in interest rates the risk is to the downside, given the fact that the AUDJPY is less of a factor in the matter than previously this does cast some doubt on the veracity of that opinion. For the moment we hold just off the lows.

Today’s data

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

NZD       GDP Q/Q Q2 A 0.20% | C 0.20% | P 0.30% | R 0.40%

JPY         Trade Balance (JPY) Aug  A -0.79T | C -0.81T | P -0.94T | R 0.91T

JPY         All Industry Activity Index M/M Jul A 0.50% | C 0.30% | P -0.60% | R -0.70%

06:00     CHF        Trade Balance (CHF) Aug C 2.74B | P 2.38B

07:30     CHF        SNB Rate Decision C 0.00% | P 0.00%

08:30     GBP       Retail Sales M/M Aug C 0.40% | P 1.10%

10:00     GBP       CBI Trends Total Orders Sep C 2 | P 0

12:30     CAD       Wholesale Sales M/M Jul C 1.50% | P -2.80%

12:30     USD       Initial Jobless Claims (SEP 13) C 330K | P 292K

12:30     USD       Current Account Balance Q2 C -$96.3B | P -$106.1B

14:00     USD       Philly Fed Survey Sep C 10 | P 9.3

14:00     USD       Existing Home Sales Aug C 5.25M | P 5.39M

14:00     USD       Leading Indicators Aug C 0.60% | P 0.60%

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               98.48 | 97.88

EUR/USD             1.3535 | 1.3501

EUR/JPY               133.21 | 132.475

AUD/USD            0.9519 | 0.9485

NZD/USD             0.8414 | 0.8327

USD/CAD             1.0233 | 1.0213

EUR/CHF              1.2344 | 1.23315

USD/CHF             0.91365 | 0.9114

GBP/USD             1.6145 | 1.6115

EUR/GBP             0.83955 | 0.83725

 
Good Luck

Andy