Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 102.304 | EURUSD 1.36058 | EURJPY 139.182 | AUDUSD 0.91023 | NZDUSD 0.81256 | USDCAD 1.05818 | EURCHF 1.23195 | USDCHF 0.9056 | GBPUSD 1.6345 | EURGBP 0.83246 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               102.61 | 102.17

EUR/USD             1.3622 | 1.3600

EUR/JPY               139.705 | 139.09

AUD/USD            0.9107 | 0.9055

NZD/USD             0.8123 | 0.8084

USD/CAD             1.0600 | 1.0582

EUR/CHF              1.2326 | 1.2321

USD/CHF             0.90615 | 0.90465

GBP/USD             1.6375 | 1.6335

EUR/GBP             0.83295 | 0.8315

For today

USDJPY
Topside: 102.40-102.70 large offers 102.70-103.00 large offers
Downside: 101.80-102.10 large bids 101.50-101.80 small mix 101.00-101.30 medium bids

EURUSD
Topside: 1.3620-1.3640 light mix 1.3640-1.3670 light buy stops
Downside: 1.3570-1.3600 light sell stops 1.3540-1.3570 light bids

EURJPY
Topside: 139.70-140.00 light mix
Downside: 138.50-138.80 medium sell stops 138.20-138.50 small sell stops

AUDUSD
Topside: 0.9150-0.9180 light buy stops 0.9210-0.9240 light buy stops
Downside: 0.9000-0.9030 light bids 0.8960-0.8990 light sell stops

• EUR: The Euro opened with a quick move higher before holding the opening 1.3605 and drifting into the Tokyo session just off the 1.3600 levels. With the US still basically out the market looked set for a quiet one only for system buying in EURJPY to kick in and trigger stops along the way as key areas tumbled. Euro was initially moved to the topside by some 15 pips however, USDJPY seemed to take most of the movement, and one imagines the Euro leg was soaked up. Having pushed above the 1.3620 area the market stalled with light offers topping the Euro but nothing holding the USDJPY. With EURJPY completing a move through to 139.70 the technical run was over and the market dropped back quicker than it rose, with the cross falling back below the opening levels around 139.20. Euro’s slipped back to the 1.3605 areas as S+P cut the Netherlands to AA+ from the AAA rating it had, it all so left the outlook stable which for me is slightly confusing and the market after the initial drop is holding at the 1.3610 and we’ve seen more movement in the Cable.
• GBP: A quiet opening in Cable opening around the 1.6345 area and slipping to the 1.6335 area in early pre-Tokyo trading, the move in EURJPY sparked a similar move in GBPJPY and Cable rose on the back of this to above the 1.6373 areas triggering light and weak stops along the way, having made its way to above the 1.6370 area we held for several hours with EURGBP making an appearance to push below 0.8316, the cross was unable to push through the lows of yesterday and moved back to the 0.8320 level and has started a mild recovery as Cable drifts from its highs. For the moment the Cable is holding just above the 1.6350 area with some light volume still appearing in the market from short term funds.
• JPY: Another poor set of numbers set the tone for the market however, it wasn’t until we moved into Tokyo that the technical traders kicked in with EURJPY with stops triggered through 139.20 and again through the 139.40 levels. While the move was reasonably strong the vacant US players and some liquidity issues within the market left it vulnerable to the selloff which occurred a few hours after the rally, whether this negates the move remains to be seen. EURJPY dropped back through its opening levels and USDJPY came with it moving to the 102.20 over the course of a couple of hours. With leveraged and retail selling into the real money and technical players. The move back was of course dominated by the short term technical players being caught long. For the moment the market hangs around the initial break up level for EURJPY. AUDJPY also played its part to a lesser degree, with sellers appearing above the 93.00 levels and forcing the AUD back as the weakest link. All so of note was a report in one of the daily’s in Japan of the supplementary budget was to be 7trln as opposed to the originally report 5trln. This helped to trigger the EURJPY move higher.
• AUD: The Oz dropped quiet quickly from the opening moving from the 0.9110 level to below 0.9065 before finding some support and bouncing back to the 0.9085 levels, the movement was caused by Treasurer Joe Hockey rejecting a bid from ADM (Archer Daniels Midland’s) $3B takeover of local grain handler Grain Corp. This triggered some stops along the way and although there was a mild bounce the market saw a follow through in some of the crosses including EURAUD which briefly touched above 1.5000 and AUDJPY selling back below 93.00. The AUD eventually drifted to the 0.9057 area before stabilizing and finding a steady stream of buyers to slowly move the market back towards the 91cent level. For the moment the market looks to heading into London just short of the figure.

Overnight News

JPY:

BOJ has no plan to monetise debt via monetary policy-Kuroda

Japan Plans Fiscal 2013 Supplementary Budget of 7t Yen: Mainichi

Your Party Chief Urges BOJ Easing to Offset Sales Tax Increase

Noda: Plans to Submit Casino Bill to Current Diet Session

Japan to Ease Rules for Insurers to Invest in Startups: Nikkei

Japan May End Tax Benefits for Golf-Membership Sales, Asahi Says

Japan EconMin: CPI data shows clear progress in escaping deflation

Japan factory output rises 0.5 pct in October

Japan Oct Core CPI +0.9% On Year; Mkt Expected +0.9%

Japan Oct household spending rises 0.9 pct yr/yr

Japan fund managers keep stock weighting at 1-1/2 yr high

NZD:

N.Z. Household Borrowing Rises 5.7% on Year, Fastest in 5 Years

GBP:

U.K. Nov. GfK Consumer Confidence -12 vs Est. -10

Today’s data

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

NZD       Building Permits M/M Oct A -0.60% | C 1.70% | P 1.40%

JPY         Nomura/JMMA Manufacturing PMI Nov A 55.1 | P 54.2

JPY         Household Spending Y/Y Oct A 0.90% | C 1.00% | P 3.70%

JPY         Unemployment Rate Oct A 4.00% | C 3.90% | P 4.00%

JPY         National CPI Core Y/Y Oct A 0.90% | C 0.90% | P 0.70%

JPY         Tokyo CPI Core Y/Y Nov A 0.60% | C 0.40% | P 0.30%

JPY         Industrial Production M/M Oct (P) A 0.50% | C 2.00% | P 1.30%

GBP       GfK Consumer Sentiment Nov A -12 | C -10 | P -11

JPY         Housing Starts Y/Y Oct A 7.10% | C 5.00% | P 19.40%

07:00     EUR        German Retail Sales M/M Oct C 0.50% | P -0.40%

08:00     CHF        KOF Leading Indicator Nov C 1.81 | P 1.72

09:30     GBP       Mortgage Approvals Oct C 68.5K | P 66.7K

09:30     GBP       M4 Money Supply M/M Oct C 1.10% | P 0.60%

10:00     EUR        Eurozone Unemployment Rate Oct C 12.20% | P 12.20%

10:00     EUR        Eurozone CPI Estimate Y/Y Nov C 0.80% | P 0.70%

13:30     CAD       GDP M/M Sep C 0.10% | P 0.30%

Harry Hindsight

• EUR: Opening around the 1.3578 area the market struggled in early selling with EURJPY having already pushed deeply into the 138.00 handle early players were sellers of the cross with both legs doing work to the downside into early Tokyo. Once the supply was exhausted the market started to turn helped by a good AUD number and a lack of US players the Euro again started a steady rise pushing through the opening levels in the run into the grey hours saw the market paused above the 1.3585 levels. A minor sell off on the back of the German import price index before strong buying appeared on the London opening from real money to quickly take the market above the 1.3610 level. Although the high was extended shortly after to just short of 1.3620 the rise seemed to be hampered by offers around the key 139.20 area in the EURJPY the cross remaining firmly stuck in a 138.90/1.3918 range for the remainder of the day. This limited the upside in Euro and with only limited movement from numbers the Euro drifted in a similar 20 pip range without the benefit of the US players, we close only just north of the 1.3600 level for a gain on the day and some probably wishing they’d not spoken out of turn over the past week or so.
• GBP: With the BoE back tracking a little on FLS (Funding for Lending Scheme) and mention of concern by both the ECB and  BoE of what happens when the tapering kicks in, the market started to perceive that interest rates are closer to rising than the market previously was led to believe. Whether they hold to the 7% or change the goal completely one way or the other remains to be seen and I was never a great believer on any fancy names they gave policies. However, Cable continued to rise throughout the day with volumes much reduced with the US out of the picture. We opened around the 1.6287 area and although early trading saw the lows set below 1.6280 the market moved through Asia trending higher to the 1.6320 levels. Euro moves saw minor gyrations in EURGBP with the pair rising to above the 0.8350 level from the mid 0.8320’s however, once the rest of the data was released the cross dropped back to previous levels. This was reflected in an hours trading with the push towards the 1.6350 and fall back to the figure. The market again moved to the highs and we moved through a slow NYK session with the market holding around the 1.6340/50 levels into the close.
• JPY: Early traders took the opportunity to sell the EURJPY in front of the 139.00 levels however, having chased the market down into the 138.30’s a minor AUD number reversed the losses sending both the USDJPY higher and a steady rise in EURJPY. USDJPY opened around the 102.18 area and in early trading moved some 10 pips higher before early Japanese sold into the rally and pushed USDJPY to below the 102.00 level, While the AUD rallied on data the USDJPY struggled around the figure before starting a gradual climb through the day to touch close to 102.40 with most of the volume being cross related in one way or another. We go out on the day slightly higher than the opening after a lacklustre session from the early trading onwards.
• AUD: With investment in Oz above what was expected the market jumped from the opening 0.9075 areas to above 0.9120 in early Tokyo before adding to the highs as resistance in AUDJPY carry crumpled under the large buying seen in AUD and resurgence in USDJPY however, even though the Oz touched the 0.9140 levels after the initial rally it still struggled through the Asian session with a combination of continual drip feed from the AUDJPY and lack of a full market. The move into London was little different and while they extended the highs there was some weak selling as the day progressed and with a bank holiday in the US the market again started to fall back through lack of support in the day’s range. Triggered really by profit taking in mid-session the market moved steadily back below 91cent before finishing the day in a tight range around that area.

Yesterday’s premiership results

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

JPY         Retail Trade Y/Y Oct A 2.30% | C 2.10% | P 3.10% | R 3.00%

CHF        GDP Q/Q Q3 A 0.50% | C 0.40% | P 0.50%

EUR        German Import Price Index M/M Oct A -0.70% | C -0.30% | P 0.00%

EUR        German Unemployment Change Nov A 10K | C 0K | P 2K | R 3K

EUR        Eurozone M3 Y/Y Oct A 1.40% | C 1.70% | P 2.10% | R 2.00%

EUR        Eurozone Economic Confidence Nov A 98.5 | C 98 | P 97.8 | R 97.7

EUR        Eurozone Industrial Confidence Nov A -3.9 | C -4.5 | P -4.8 | R -5

EUR        Eurozone Services Confidence Nov A -0.8 | C -3.5 | P -3.7

EUR        Eurozone Consumer Confidence Nov (F) A -15.4 | C -15.4 | P -15.4

EUR        German CPI M/M Nov (P) A 0.20% | C 0.10% | P -0.20%

EUR        German CPI Y/Y Nov (P) A 1.30% | C 1.20% | P 1.20%

CAD       Industrial Product Price M/M Oct A -0.30% | C -0.40% | P -0.30%

CAD       Raw Materials Price Index M/M Oct A -2.30% | C -2.00% | P -1.50%
Good Luck

Andy