Daily FX Market Commentary

Andy Harrison

Good morning,

 

LMAX Close

USDJPY 101.786 | EURUSD 1.36672 | EURJPY 139.114 | AUDUSD 0.9063 | NZDUSD 0.82117 | USDCAD 1.0652 | EURCHF 1.22551 | USDCHF 0.89667 | GBPUSD 1.63362 | EURGBP 0.83661 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               102.17 | 101.63

EUR/USD             1.3675 | 1.3657

EUR/JPY               139.53 | 138.96

AUD/USD            0.9071 | 0.9036

NZD/USD             0.8232 | 0.8191

USD/CAD             1.0665 | 1.0644

EUR/CHF              1.2257 | 1.2252

USD/CHF             0.89735 | 0.8960

GBP/USD             1.6342 | 1.6319

EUR/GBP             0.83705 | 0.83635

 

For today

  • EUR: After yesterday you’d at least expect some movement however, it’s been very quiet during the session with only middling volumes going through as the market has drifted from the NYK close to trade just below the 1.3660 levels. With a cluster of offers and stops all the way to the 1.3700 area the market did not seem to have sufficient impetus to push through the bottom of a brown paper bag, and the downside seems to be the weakest area with nothing concrete until the 1.3640 areas and that is likely on the weak side. NFP obviously the dominant factor and the Asian market have covered up for the weekend as we head to the grey hours around the lows.
  • GBP: Same story for the Cable, holding a tight range for the most part between 1.6330/40 with a peak early on just above there. The market has started to drift lower as the session reaches the end and moves to the grey hours and dipping to 1.6320 areas. EURGBP remains quiet unchanged, with what looks like bids around the 1.6300 area and no change to my fundamental view of UK is doing ok and Europe isn’t but let’s see what NFP comes with and the Tapering question.
  • JPY: USDJPY while subdued saw some volume going through as yesterday’s equity selloff stabilises and the USDJPY slowly rises higher, while that may be the case it wasn’t massive volume but then you’d expect that around a NFP day, the market opened around the 101.80 levels and slowly moved higher into the Tokyo session before a late round of buying appeared after Tokyo lunch spurring the market through the 102.00 which seemed fairly resistant in early trading to push above the 102.10 levels. Again volumes haven’t been great and a good deal was done on the last rally to improve the day for the pair. There are offers out there to the topside but its light and patchy for obvious reasons. Downside has some decent bids showing all the way down with the market still with the bit between the teeth for a weaker JPY or I should say a stronger USD over the coming months. Below the lows of yesterday the bids increase in size and are possibly real money bids.
  • AUD: The AUD at the moment needs any excuse to try the downside, with the market opening around the 0.9060 areas we moved slowly into Tokyo with light carry trade selling taking the market to below the 0.9055 levels when the Qantas article hit the news, while I’m sure it’s a big company the net effect was a further 20 pip loss why don’t ask me I’m at a total loss. However, it immediately bounced back higher and to just below the 0.9070 highs. From there it’s been a slow movement lower to the 0.9050 area as weekend joy breaks out and they start to head home. Still fairly mixed to the downside but the 0.9005 for the moment has to be respected and until we move through the 0.8975 levels there is little to change my mind however, below that then its anyone’s guess. Topside has really nothing noteworthy having been there several times the market is now empty for the most part, suspected call levels for those that may want to sell but we seem to be on hold for the moment.

Overnight News

CNY:

China Sets Yuan Reference Rate at Strongest Since July 2005

China to tighten restrictions on coal mining to tackle overcapacity

China regulators establish joint committee for reform pilot zone

JPY: Japan Pension Fund Needs to Start Selling Bonds Now, Ito Says

Japan’s Abe: Stimulus Will Create Positive Cycle -Nikkei

Japan November foreign reserves fall to $1.275 trln

Japan DPJ Considers No-Confidence Motion Against Cabinet: Kyodo

Japan Oct coincident indicator index up 1.2 points

AUD:

Qantas Loses Investment-Grade Credit Rating from S&P

 


Today’s data

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

JPY         Leading Index Oct (P) A 109.9 | C 109.8 | P 109.2

08:00     CHF        Foreign Currency Reserves Nov P 434.7B

08:15     CHF        CPI M/M Nov C -0.20% | P -0.10%

08:15     CHF        CPI Y/Y Nov C -0.10% | P -0.30%

11:00     EUR        German Factory Orders M/M Oct C -0.90% | P 3.30%

13:30     CAD       Net Change in Employment Nov C 7.5K | P 13.2K

13:30     CAD       Unemployment Rate Nov C 7.00% | P 6.90%

13:30     CAD       Labour Productivity Q/Q Q3 C 0.50% | P 0.50%

13:30     USD       Change in Non-farm Payrolls Nov C 183K | P 204K

13:30     USD       Unemployment Rate Nov C 7.20% | P 7.30%

13:30     USD       Personal Income Oct C 0.30% | P 0.50%

13:30     USD       Personal Spending Oct C 0.20% | P 0.20%

13:30     USD       PCE Deflator M/M Oct C 0.00% | P 0.10%

13:30     USD       PCE Deflator Y/Y Oct C 0.70% | P 0.90%

13:30     USD       PCE Core M/M Oct C 0.10% | P 0.10%

13:30     USD       PCE Core Y/Y Oct C 1.10% | P 1.20%

14:55     USD       U. of Michigan Confidence Dec (P) C 76.2 | P 75.1

 

Harry Hindsight

  • EUR: The Euro remained quiet in the first half of Asia sticking close to the 1.3590 opening levels with minor dips to the 1.3580 area early on. Only as Middle Eastern and then early Europeans did we see movement in the market. The move through the 1.3605 area triggered some weak stops however, once we had pushed above the 1.3610 area the market again sat on hold for a short period into the grey hours. The pre London market saw some strong buying to 1.3640 as early players set there book for the day. The London opening saw the opposite reaction and we saw a steady amount of supply over the course of the next hour or so and the market returned to those opening levels again before we reached the release from the ECB. As could be seen over the past week the Euro has not been shy of going higher however, the topside was limited to some degree and all because the market had already decided that they wouldn’t cut. Once the data was released and then the failure of Draghi to mention anything useful the market began slowly selling the Euro lower, with NYK now open they started to buy USD’s really on the back of nothing but the fact that tapering is coming and the Europeans are not prepared but then a weaker Euro would be more beneficial to them. Only trouble is the data released in the US was mixed with the big numbers like GDP coming in better than expected and initial claims the same. However, with both Draghi’s speech and US data occurring at roughly the same time the lack of information about LTRO’s or any liquidity provisions left the market with only one choice buy Euro’s, it was also worth noting that while there was a good leap in the US’s GDP a good proportion of this was built on the increasing inventories building up in warehouses. So from the move below the 1.3545 areas the market turned on a dime and immediately struck for the previous 1.3640 highs, trading through and triggering stops to just short of 1.3670 and then a steady rise to above the levels into the close. From first glances a confusing day and everything is in the detail, no easing policy for the moment in Europe as we go forward, but then I never expected one. The US shows good numbers however, will it remain or will those numbers disappear as quickly as European liquidity.
  • GBP: Cable for the most part was pulled around by outside factors with around a big figure of range. Asia was reasonably quiet with the market staying around the opening 1.6380 levels and trading quietly higher as we moved into London, probably on the basis of no change for the BoE. We topped out just above the 1.6400 levels and stalled into the official opening. The market dropped back quickly moving to the 1.6350 levels before slowing its decent. With the Autumn statement dominating the local market the trend lower continued. With future outlooks looking bright you’d have thought it would be going the other way however the US data had a minor effect and we eventually stopped falling in the middle of the NYK session just above the 1.6300 area. The lows were helped by good buying in EURGBP with Cable not able to follow the Euro EURGBP moved quickly on the US releases and moved to 0.8350 from below 0.8300 in the first move and then after a brief pause continued at a more steady pace to the 0.8380 levels. Once the fun and games were out of the way the market slowed and action petered out across the board with Cable moving steadily higher for a 1.6335 areas close.
  • JPY: USDJPY struggled throughout the day while ranges were reasonably tight given the action in Euro’s per sae. Moving a little higher in pre-Tokyo to the 102.40 areas before dropping back with AUDJPY selling after the AUD Trade balance number, from there the market struggled to do much however, one suspects the market was likely to be like this in a run to the ECB, BoE announcements and then Fridays Non Farm Payroll. With comments for Komeito’s Yamguchi on the subject of the stimulus package for next year the market again dropped lower falling to the 102.00 and near term support. The grey hours saw early players in Europe join the selling as well as those returning from lunch in Tokyo and before the official opening the market had moved through the 101.90 levels this for the time being provided support and we ranged to 102.30 from the area into NYK, and while the data releases had only minor effects on the market the factory order number seemed to be the last straw and the market dropped to the 101.65 areas and stayed mired there until the close around the 101.80 levels.
  • AUD: With a worse than expected trade balance the day could have been far worse, the market opened around the 0.9030 area and moved a little higher into the opening Tokyo market, the release of the Trade balance saw the market scrambling to cover longs in the AUDUSD as well as the carry trade sending the market to the 0.9015 levels The market recovered with Algo’s doing the damage both ways. From that point the market was reasonably quiet and we pottered around the 0.9040 into the grey hours where some early buying took the market higher to above the 0.9055. London’s opening was fraught as good fund selling came into the market taking the pair from the highs to trade again at the 0.9005 levels before moving back to the opening levels, NYK on the opening tried the same trick however for the moment the bids below seem to be strong enough to hold the market. US data worked favourably for the Oz and we quickly moved to the 0.9075 levels with very little in the way of offers to stop it, volume on the move was light suggesting that the earlier sellers had completed what they needed to do. The move into the late session like the rest of the complex was a drab affair with the market holding the 0.9065 areas for much of the period.

Yesterday’s premiership results

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

AUD       Trade Balance (AUD) Oct A -529M | C -375M | P -284M | R -271M

GBP       BoE Rate Decision A 0.50% | C 0.50% | P 0.50%

GBP       BoE Asset Purchase Target A 375B | C 375B | P 375B

USD       Challenger Job Cuts Y/Y Nov A -20.60% | P -4.20%

EUR        ECB Rate Decision A 0.25% | C 0.25% | P 0.25%

CAD       Building Permits M/M Oct A 7.40% | P 1.70%

USD       Initial Jobless Claims (NOV 29) A 298K | C 322K | P 316K | R 321K

USD       GDP (Annualized) Q3 (S) A 3.60% | C 3.10% | P 2.80%

USD       GDP Price Index Q3 (S) A 2.00% | C 1.90% | P 1.90%

USD       Factory Orders Oct A -0.90% | C -1.00% | P 1.70%

CAD       Ivey PMI Nov A 53.7 | C 60 | P 62.8
Good Luck

Andy

LMAX Exchange Market Commentary   AUDUSD   Andy Harrison  

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