Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 98.014 | EURUSD 1.35262 | EURJPY 132.562 | AUDUSD 0.9398 | NZDUSD 0.82736 | USDCAD 1.03252 | EURCHF 1.22486 | USDCHF 0.90553 | GBPUSD 1.61963 | EURGBP 0.83512 |

 

Harry Hindsight

• EUR: The early market was contained for the most part with an opening around the 1.3525 area dipping to just below 1.3520 into the Tokyo opening before holding somewhere between the two levels belaying the fact that the market was fairly active. As time ticked on the market became more and more focused on the deadline for some sort of compromise in the US, as it stood the closer we got the more USD selling appeared in the market with speculation and rumours abounding about how much it will cost the US economy, estimates varied but it’s worth noting that the Clinton administration’s few days off 17yrs ago cost 0.5% of GDP however, as people look at the little picture one has to wonder what it’s going to cost globally, for example the Euro spent the first 3 months of the year dropping down to below the 1.3000 level and is now again moving towards the yearly highs as green shoots of recovery start to appear in some areas, will the high Euro squeeze the exporters? Will the recovery in the Eurozone as well as the UK by stymied by a high currency rate? I suppose we have to wait and see, for me it’s the same the world over these people are elected to represent the people and I fail to see how stopping the mechanism from working is in their interests, Kenny Everett’s US General had the right idea. However, I digress, fortunately for the Euro the market had other more localized concerns with the talk of several members of the Italian PdL party forming a breakaway to stay in line with the coalition goals, now he’s a bunch of elected that are sticking to the principle of why they are there rather than pander to side issues within their own party. This I believe has kept a lid on some of the movements in the Euro over the past few days. The market moved to touch the 1.3540 level meeting some slight resistance before pushing for a second time after the RBA announcement to the 1.3550 and into the grey hours. Early Europeans started to buy a little more aggressively as we moved to the London opening chasing the market quickly to above the 1.3585 level, only poor numbers put a lid on the moves and having hit the highs on the Federal US government news we started to fall back on more home grown news and data. The market fell back to the 1.3545 area where the breakout started and limped somewhat into the NYK session, decent ISM numbers out of the US led the market back to its lows however, it was unable to break back below the 1.3500 area and stalled in the 1.3520 on a few attempts before finishing the day only just in positive territory around the 1.3530 level.
• GBP: As with the Euro really a quiet start opening around the 1.6190 area and struggling for several hours into mid-session in Tokyo before the CNY PMI number started the Cable higher and then the US deadline, the market quickly jumped above the 1.6200 area to trade initially above 1.6240 before the RBA announcement led to further USD selling and the market peaked above the 1.6245 level moving into the grey hours. At this point the Euro move left the GBP behind and the market saw reasonable buying in the EURGBP taking it from below the 0.8335 level to a peak just short of the 0.8370 level before falling back again as Cable remained bid in the 1.6240 area all the way into the NYK session pushing the highs to above the 1.6260 level, EURGBP fell back to below 0.8340 and only once the ISM numbers where released in the US did the Cable come back to hold around the 1.6205 into the close and as with the Euro only just in positive territory for the day.
• JPY: With talk of a further 5T Yen of stimulus package to offset the expected sales tax rise to 8% from 5% the USDJPY was fairly bid from the opening in Tokyo, having opened around the 98.25 area the market slowly climbed to above the 98.70 level in early trading with only AUDJPY selling offsetting the early gains. However, as with the rest of the market the Fed US deadline had a more profound effect on the trading and the general USD selloff affected the USDJPY in particular and the market began to decline from the Tokyo fix onwards. The USDJPY had several legs lower with the RBA announcement in particular setting off AUDJPY profit taking as the AUD climbed and by the time we moved to the grey hours the market was resting on the 98.10 level. The move into the London session saw renewed USD selling and the USDJPY again dropped to the 97.90 level hitting some light bids which held the market for a couple of hours before the final leg lower triggering minor stops down to the 97.70 level. The market held at this point and was steady into the NYK session and the release of the ISM numbers bolstered the USDJPY back to above 98.30, with so much changing hands the market in between this 98.30 and 97.70 was now almost void of orders and the market again dropped slowly into the close to finish the day around 97.90 and needing a clear out one way or the other one would say.
• AUD: The AUD opened around the 0.9325 level and struggled quietly into the Tokyo session with fixing supply in AUDJPY sending the market quickly lower to 0.9290 being the only action early in the session with the impending RBA announcement to come. From the low the market bounced to its previous level and then slowly ground higher to 0.9340 and into the unchanged release from the RBA, for the most part the market had already wrote in an unchanged result which everyone expected however, there was some leaning in the market that given the rise in the currency rate over the past few weeks and the fact they didn’t take lowering rates off the table in the last minutes and the moves we’ve seen in the USD over the last few weeks that we could have a surprise. However, with the announcement the market moved reasonably quickly to the 0.9400 level with some stiff resistance seen during the grey hours, as the AUD rose the market saw plenty of AUDJPY selling coming to market as longs took advantage of the move higher to profit from the move. As we approached the London session we saw the 0.9400 level give and push to the 0.9420-30 levels where the market held into the NYK session, even with the ISM numbers the market was pushed only back to the 0.9390 holding area we’d seen just pre London and the market goes out around those levels at the close.

Yesterday’s premiership results

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

JPY         Household Spending Y/Y Aug A -1.60% | C 0.10% | P 0.10%

JPY         Unemployment Rate Aug A 4.10% | C 3.80% | P 3.80%

JPY         Tankan Large Manufacturers Index Q3 A 12 | C 7 | P 4

JPY         Tankan Non-Manufacturing Index Q3 A 14 | C 14 | P 12

CNY        Manufacturing PMI Sep A 51.6 | C 51.6 | P 51

AUD       Retail Sales M/M Aug A 0.40% | C 0.30% | P 0.10%

JPY         Labour Cash Earnings Y/Y Aug A -0.60% | C -0.30% | P -0.10%

AUD       RBA Rate Decision A 2.50% | C 2.50% | P 2.50%

CHF        SVME-PMI Sep A 55.3 | C 54.9 | P 54.6

EUR        Italian PMI Manufacturing Sep A 50.8 | C 51.1 | P 51.3

EUR        German Unemployment Change Sep A 25K | C -5K | P 7K

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

EUR        Eurozone PMI Manufacturing Sep (F) A 51.1 | C 51.1 | P 51.1

GBP       PMI Manufacturing Sep A 56.7 | C 57.5 | P 57.2

EUR        Eurozone Unemployment Rate Aug A 12.00% | C 12.10% | P 12.10%

USD       ISM Manufacturing Sep A 56.2 | C 55.1 | P 55.7

USD       ISM Prices Paid Sep A 56.5 | C 55 | P 54

For today

USDJPY:
Topside: 98.20-98.40 light offers 98.40-98.70 light offers 98.70-99.00 medium offers
Downside: 97.40-97.60 light mix  97.20-97.40 light sell stops 97.00-97.20 light bids 96.60-96.80 medium stops

EURUSD:
Topside: 1.3550-1.3580 light offers 1.3580-1.3600 light buy stops 1.3600-1.3640 medium mix 1.3640-1.3660 light offers
Downside: 1.3470-1.3500 light bids 1.3440-1.3470 light mix

AUDUSD:
Topside: 0.9410-0.9425 light offers 0.9425-0.9450 light buy stops 0.9450-0.9470 light buy stops 0.9500-0.9510 medium offers
Downside: 0.9350-0.9365  medium bids 0.9320-0.9350 light mix 0.9300-0.9320 light bids

GBP:

BoE economist cautions market over early rate talk

EUR:

Berlusconi faces revolt over Italy confidence vote as senior ministers within his party call for members to back Letta and the coalition

EU’s Rehn says Spain may not need further bank assistance programme

AUD:

Decreased the surplus on goods and services for 201011 by $7,335m

Decreased the surplus on goods and services for 201112 by $6,842m, resulting in a deficit

Increased the deficit on goods and services for 201213 by $7,061m.

CNY:

Focusing on quality, efficiency of growth President Xi says

JPY:

Japanese Govt. decides on large scale corporate tax cuts to counter sales tax hike.

USD:

White house rejects latest Republican offer to end shutdown

• EUR: The market opened around the 1.3525 level, falling away into the Tokyo session and dropping quickly on strong selling to touch below 1.3510 before holding for the first time. AUD data killed the drop and the market started to see new buyers in EURAUD entering the market forcing the Euro back to above the 1.3520 level as we move towards the grey hours.
• GBP: Cable traded in line with the Euro initially moving from the opening 1.6195 level and drifting into Tokyo, then a quick drop to below the 1.6165 level. However, this is where it differs as Cable has been unable to replicate the recovery that the Euro did and currently holds around the 1.6175 levels as we move to the grey hours.
• JPY: Initially the market moved higher from the opening level of 97.95 to push towards the 98.10 before the market started to dip once we moved into the Tokyo session properly as safe haven buyers of JPY moved into the market, from here the market never recovered and it continued steadily lower to touch below the 97.70 level where the market held yesterday. The market was impacted as both early selling of EURJPY dominated and then later AUDJPY selling hit the market with retail players cutting long positions they’d accumulated over the past 24hrs.
• AUD: The AUD opened around the 0.9420 area where the market had some light resistance, we moved into the Tokyo session with some minor selling coming into the market, the early new home sales numbers had the market again rallying with a large move from the previous month however, the market being bid was short lived as the market moved from the mid-teens in a quick move to 0.9380 where the market met the first levels of support, the market dropped through those levels quickly moving to just above the 0.9360 level on the back of the trade balance and its revision and the revision of 2010-11 by A$7.335B 2011-2012 by A$6.842B (which would have created a deficit for the year) and 2012-2013 by A$7.061B, now there is a surprise as big as the one where the Fed didn’t start tapering! Obviously these figures are yet to be put into GDP and net export numbers yet. For the moment the market holds just above the 0.9360 level, even so the revision for last month gives food for thought even if my cynical thoughts are wrong.

Today’s data

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

JPY         Monetary Base Y/Y Sep A 46.10% | C 45.30% | P 42.00%

AUD       HIA New Home Sales M/M Aug A 3.40% | P -4.70%

AUD       Trade Balance (AUD) Aug A -0.82B | C -0.45B | P -0.77B | -1.38B

AUD       Building Approvals M/M Aug A -4.70% | C -0.70% | P 10.80%

08:30     GBP       PMI Construction Sep C 60.1 | P 59.1

11:45     EUR        ECB Rate Decision C 0.50% | P 0.50%

12:15     USD       ADP Employment Change Sep C 177K | P 176K

12:30     EUR        ECB Press Conference

14:30     USD       Crude Oil Inventories P 2.6M

 

Interbank Ranges as of 6am London time

Highs    Lows

EUR                        1.3529 | 1.3508

JPY                         98.09 | 97.675

GBP                       1.6197 | 1.6162

CHF                        0.9077 | 0.90525

AUD                       0.9408 | 0.9362

CAD                       1.0349 | 1.0329

NZD                       0.8279 | 0.8194

EURCHF                1.2264 | 1.2250

EURGBP               0.8360 | 0.8350

EURJPY                 132.62 | 132.10
Good Luck

Andy