Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 102.51 | EURUSD 1.35898 | EURJPY 139.307 | AUDUSD 0.91357 | NZDUSD 0.82477 | USDCAD 1.06498 | EURCHF 1.22901 | USDCHF 0.9044 | GBPUSD 1.6391 | EURGBP 0.82913 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               102.665 | 102.24

EUR/USD             1.35975 | 1.3582

EUR/JPY               139.49 | 138.93

AUD/USD            0.9140 | 0.9045

NZD/USD             0.8243 | 0.8176

USD/CAD             1.0650 | 1.0639

EUR/CHF              1.22955 | 1.22855

USD/CHF             0.9050 | 0.9040

GBP/USD             1.6396 | 1.6378

EUR/GBP             0.8296 | 0.82895

For today

• EUR: Apart from the AUD the market was very quiet as usually follows a good move and then a reversal, as some lick their wounds and others wonder where the next $ can be made. Euros opening around the 1.3590 area and drifted into the early session to below 1.3583 with the EURAUD cross doing the most damage as buying crept in with a quick move lower in the AUD thus dragging the Euro down a little while the cross rallied. The market moved quickly off the lows as stops were triggered in the EURAUD cross and we moved to above the 1.3597 level before settling back into quiet trading for the rest of the session around the 1.3590 levels.
• GBP: I thought Euro was quiet, we saw the Cable open around the 1.6388 levels and move to just below the 1.6379 area before moving back to above the 1.6396 area, since that point we have ranged around the 1.6390 levels without actually doing much at all.
• JPY: A quiet day in the USDJPY with the market seeing some minor action with the movement of the AUD however, overall we have stayed in line with the market opening around the 102.50 levels with topside offers now showing around the 103.00 areas. Initial selling from the opening to the 102.30 area was reversed as soon as the Tokyo market stepped in and we made the highs in the first hour, trading to above the 102.65 levels before the Oz GDP number sent the market lower through the AUDJPY cross, with USDJPY trading to below the 102.25 levels a little above the daily support areas around the 102.00. Once the move was over the market rallied back to the opening areas and we have stayed in a reasonably tight 15 pip range centring on the open.
• AUD: The Oz opened around the 0.9140 having reversed loses in the previous Asian session, the market struggled into the Tokyo session with the expected Q3 GDP numbers due. Early Tokyo did nothing in front of the number and when the number was released the Oz dropped quickly from the 0.9135 level to pause around 0.9075 before continuing to a low below 0.9050, the follow through was mostly AUDJPY carry trade led and while the numbers were less than expected they were in line with the previous quarter, private investment seemed to be the biggest drag with an estimated reduction to growth by 1.4 percentage points. Although this was in the detail and algo’s were almost completely to blame for the savage move. For the moment the market eyes the 0.8975 levels as the lows from earlier in the year. As we move to the grey hours the market holds close to the 0.9060.

Overnight News

CNY:

China Raises Yuan Reference Rate to Record 6.1300/Dlr

China services industry growth steady in Nov -HSBC PMI

AUD:

Australia economic growth disappoints in Q3

Hockey: Australia Faces ‘Growth Hole’ as Mining Invest. Drops

JPY:

Sato: Unrealistic to Expect CPI to Keep Rising Much Above 1%

BOJ’s Sato: No need to ease if tax hike pain is temporary

GPIF’s Mitani: Japan Inflation Likely to Stay Between 0.1%-1.0%

Japan econ package to total $182 bln sources

Japan Econ. Minister Amari in Hospital Until Tomorrow, Suga Says

GBP:

British retail sales growth lacklustre in November – BRC

NZD:

English Says New Zealand Current Account Deficit Revised Lower

NZ Central Bank to Regulate Non-Bank Deposit Holders

Today’s data

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

GBP       BRC Shop Price Index Y/Y Nov A -0.30% | P -0.50%

AUD       GDP Q/Q Q3 A 0.60% | C 0.70% | P 0.60%

09:00     EUR        Eurozone PMI Services Nov (F) C 50.9 | P 50.9

09:30     GBP       PMI Services Nov C 62 | P 62.5

10:00     EUR        Eurozone GDP Q/Q Q3 (P) C 0.10% | P 0.10%

10:00     EUR        Eurozone Retail Sales M/M Oct C 0.20% | P -0.60%

13:15     USD       ADP Employment Change Nov C 173K | P 130K

13:30     CAD       Trade Balance (CAD) Oct C -0.65B | P -0.44B

13:30     USD       Trade Balance Oct C -$40.2B | P -$41.8B

15:00     CAD       BoC Rate Decision C 1.00% | P 1.00%

15:00     USD       ISM Non-Manufacturing Composite Nov C 55.1 | P 55.4

15:00     USD       New Home Sales Sep C 427K | P 421K

15:00     USD       New Home Sales Oct C 430K

15:30     USD       Crude Oil Inventories C -500K | P 3.0M

19:00     USD       Fed’s Beige Book

Harry Hindsight

• EUR: Asia opened quietly with RBA announcement on the horizon only, we traded quietly from the 1.3540 area into Tokyo and a little movement lower as USD buyers appeared in the market around the Tokyo fix, the market moved to make its lows to the 1.3525 level before trading sideways until just before the grey hours. The market started to trade higher as we moved closer to the London opening with Middle Eastern interest leading the way and the move into the grey hours was picked up lightly by East European players taking the market to above the 1.3550 levels in quiet trading. London opened with a continuation of the move, the market paused in the run to the Eurozone numbers which saw a drop in PPI however, the market was unaffected by the numbers and slowly moved into the NYK session with initial buying taking the market to above the 1.3590 area before dropping back and then a further rise into the NYK option cut taking the market to above 1.3610 levels. It would seem that most of the drive in Euro’s was more JPY related as the USDJPY dropped the Euro was pushed higher for comparable moves. Also the market still remains strong in front of Thursdays ECB meeting and judging by the levels unconcerned with mid-afternoon reports from a think tank about deflation appearing in the Q1 2014 for the Eurozone. The market drifted from the highs as profit taking kicked in from day traders and we finished the day back below the 1.3600 levels.
• GBP: Cable remained strong throughout the day with the opening levels around the 1.6357 areas sold back to below 1.6350 before beginning to rise as with the Euro as Middle Eastern markets opened. The Cable rise was a little more aggressive with the cross sole from the 0.8280 levels down to below 0.8260, and Cable holding to a tight channel to above the 1.6435 levels into the NYK session. NYK was largely sellers of the GBP with an early reversal of the losses in EURGBP corrected as the GBP drifted against both the USD and Euro however; again early London losses in USDJPY became a general USD sell off dragging with the strengthening JPY the crosses. Cable finished the day around the 1.6390 levels. Most of the early strength came from the pleasing PMI number which had been worrying over the past months. Strong equity markets also attracted GBP buyers.
• JPY: USDJPY was quiet on the opening with a minor dip into the Tokyo session moving from the opening areas around the 102.95 to push higher and make a move to just short of 103.40. Talk of option knock outs been taken out from the move above the 103.25, which would explain the move higher initially and then a further attempt for the yearly highs from May left the market vulnerable to a sell off having failed to the topside, London picked up on it, especially the leverage tech guys who sold the 5 minute chart from the 103.10 levels and quickly left the market running through weak stops below 102.80 before the market paused and profit taking ensued. Once the leveraged guys were out of the way with a quick profit the market continued lower into the NYK session and apart from one brief move higher the market pushed down into support areas around the 102.00 area pushing just through the figure to make the low for the day. We moved back off the short term support areas and managed to finish the day around the 102.50 area in light trading into the close.
• AUD: The AUD was all about the RBA, there were no surprises in the no change release and the conference after the announcement, the market still read more than was healthy in the words spoken the last time never mind this time. AUD spiked early in the session from an opening 0.9108 the market moved quickly to above the 0.9135 on the retail sales numbers before the sellers moved in selling before the announcement in a move contrary to the number in general. From there the selling continued through to the announcement although volumes were particularly light. The RBA announcement as I said held no surprises and the market moved quickly to below the 0.9060 level before holding and moving into the grey hours in the same areas. London was the chief seller of USD’s particularly against the Yen and the AUD moved higher on this as a static AUDJPY allowed room for it to gravitate, moving steadily into the NYK session to top above the 0.9140 levels. The market then went to sleep, with next to nothing happening and holding around the 0.9120 levels into late NYK. Early Sydney bought on turning on there machines and the market pushed too close to the highs before finishing the day.

Yesterday’s premiership results

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

JPY         Monetary Base Y/Y Nov A 52.50% | P 45.80%

GBP       BRC Sales Like-For-Like Y/Y Nov A 0.60% | C 1.10% | P 0.80%

AUD       Retail Sales M/M Oct A 0.50% C 0.40% | P 0.80% | R 0.90%

CNY        Non-manufacturing PMI Nov A 56 | P 56.3

JPY         Labour Cash Earnings Y/Y Oct A 0.10% | C 0.10% | P 0.10% | R -0.20%

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

GBP       PMI Construction Nov A 62.6 | C 59 | P 59.4

EUR        Eurozone PPI M/M Oct A -0.50% | C -0.20% | P 0.10% | R 0.20%

EUR        Eurozone PPI Y/Y Oct A -1.40% | C -1.00% | P -0.90%
Good Luck

Andy