Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 102.425 | EURUSD 1.37861 | EURJPY 141.202 | AUDUSD 0.90484 | NZDUSD 0.82295 | USDCAD 1.05891 | EURCHF 1.2221 | USDCHF 0.88644 | GBPUSD 1.63757 | EURGBP 0.84186 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               102.755 | 102.39

EUR/USD             1.3798 | 1.37735

EUR/JPY               141.61 | 141.20

AUD/USD            0.9083 | 0.9010

NZD/USD             0.8286 | 0.8252

USD/CAD             1.0597 | 1.0586

EUR/CHF              1.2233 | 1.22185

USD/CHF             0.8873 | 0.8862

GBP/USD             1.6379 | 1.6354

EUR/GBP             0.8431 | 0.84165

For today

• EUR: The Euro opened around the 1.3786 area and was very quiet until we moved into Tokyo and while there was some movement it was less than exciting with spec’s selling from early in the session taking the market to below 1.3775 to set the low and then a steady climb higher again and a small squeeze to the 1.3797 level before holding to 1.3790/1.3795 for the remainder of the quiet session. With a mixture to the topside above the 1.3800 level we still are likely to struggle for a range, that is unless the ECB actually have something to say in its monthly report other than we are ready to go to negative rates, German makes too much money and the City of London should be closed. The downside looks fairly empty as the buyers are either set or reluctant to come in at the current levels without a good reason to do and we will have to move to the 1.3700 areas before it starts to thicken. Of course if we get there they’ll all revise what they’re thinking?
• GBP: Cable dipped in early Tokyo having ranged in the 1.6370/80 from the opening in Sydney, a very quiet day with the market dipping to the mid 1.6350’s and then stabilising round the 1.6360 areas. Nothing really showing and support is likely to be around the 1.6300 levels for the moment and one has to watch for the ECB monthly report (just in case) with offers now around the 1.6420-50 area from short term/range players.
• JPY: While the USDJPY took itself off the lows over the course of the session, it was slow going until the fix in Tokyo and we saw light demand as we move towards the weekend roll, taking the USDJPY to above the 102.75 levels the market once finished dropped back to the 102.50’s and apart from some brief moves higher in what looks like liquidity issues the market has remained close to the level and heads into the grey hours around the 102.65 levels. Weak stops above the highs quickly meet some light offers around the 103.00 area and only once you get to the 103.50 area do you see any significant levels and orders to provide resistance. Downside remains the weak side with nothing really standing out until deep into the 101 handle and at which point we could find a clear-out on the cards.
• AUD: A brief spike higher from the opening levels around the 0.9040 levels to above the 0.9080 as employment numbers came in higher than expected, the move though was dominated by black box types and needless to say once the flurry was over the news traders found themselves stuck in positions quickly turning red. The follow through from the highs took the market down to the 0.9025 level and we never recovered from the movement, one suspects they need to tinker with their programmes so it takes the information at more of a face value. Mid-session in Tokyo saw the lows set as the market made a dip to the 0.9015 areas before finding sufficient support to take the market to the 0.9025 and only just off its lows. Topside offers now seem an awful way off from the 0.9070-90 resistance, with large players looking to set shorts around the 91 cent levels. The downside as we’ve seen has bids probably running to the 0.8980 area before the break traders make an appearance with stops, and I still feel a little concerned of a bear trap.

Overnight News

AUD:

Australia jobs beat forecasts, unemployment rate up

NZD:

RBNZ’s Wheeler Says Rising Rates Will Curb Home Prices

New Zealand November House Price Index Rises 1.2% From October

NZ Food Price Index Lower on Month as Meat Prices Fall

JPY:

Japan’s GPIF Needs to Decrease JGBs, Increase Other Assets: Ito

Japan LDP Lawmaker: GPIF Should Aim for 4.7% Return

Japan Ruling Parties to Study Lower Effective Corporate Tax Rate

Japanese Bought Net 413.2 Billion Yen Overseas Debt Last Week

Today’s data

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

AUD       Consumer Inflation Expectation (Dec) A 2.10% | P 1.90%

AUD       Employment Change Nov A 21K | C 10.3K | P 1.1K

AUD       Unemployment Rate Nov A 5.80% | C 5.80% | P 5.70%

08:30     CHF        SNB Rate Decision C 0.25% | P 0.25%

09:00     EUR        ECB Publishes Monthly Report

10:00     EUR        Eurozone Industrial Production M/M Oct C 0.40% | P -0.50%

13:30     CAD       New Housing Price Index M/M Oct C 0.30% | P 0.00%

13:30     USD       Advance Retail Sales Nov C 0.30% | P 0.40%

13:30     USD       Retail Sales Less Autos Nov C 0.20% | P 0.20%

13:30     USD       Initial Jobless Claims (DEC 6) C 321K | P 298K

13:30     USD       Import Price Index M/M Nov C -0.80% | P -0.70%

15:00     USD       Business Inventories Oct C 0.40% | P 0.60%

Harry Hindsight

• EUR: Another quiet day in Asia with the market opening around the 1.3760 area and dipping to below the 1.3750’s before moving back to a level keel into the grey hours. The market saw early buyers just before the London opening and those buyers remained in the market until the London opening which took the pair straight to the lows. Having traded towards the 1.3740 levels the market reversed and again settled into a slow climb from the 1.3760 levels into the NYK session. German CPI was no different than expected and while it looked as though there was a late reaction, I would guess the timing suggests a system sell. With rate spreads continuing to increase the Euro was squeezed higher from the opening taking the market to above the 1.3790 level before failing as it did the previous day and dropping back however, the market wasn’t done and with talk in the markets of tapering and non-tapering the market quickly found itself close to the 1.3790 for a second time and this time the market ground through the offers triggering some weak stops to 1.3810. Once the market was done with the topside it slid back a little over the remaining few hours for a close around the 1.3785 levels. While the topside broke under the pressure the market was still contained in a narrow range over the day so although some banks are talking of other factors in the market, on this it does seem to disprove that and we are waiting for the FOMC to clarify something even if it’s what colour socks they wear.
• GBP: The market opened around the 1.6445 areas and apart from some brief cross buying into the Tokyo opening and topping just short of 1.6460, the market was in decline for the majority of the day, slipping in Asia to the 1.6430 levels slowly, and then dropping on the opening in London and never quiet recovering. With BoE’s Carney on the wires with talks of prepared actions once Tapering starts to occur in the US and the stimulus required to balance the UK through the period, you have to wonder whether he’ll be wasting his time and effort as the ECB is only likely to be prepared to talk and moan about the Germans making money. The market continued to fall against the USD and Euro across the day with a the market running to 1.6340 in mid-NYK before finding any kind of support, while the range was more impressive than the Euro apart from a couple of periods the market volume was significantly below what you’d expect. The EURGBP rose steadily throughout the sessions to touch above the 0.8430 level before settling back to a quiet close around the 0.8420 levels. Cable eventually finished the day around the 1.6380 areas.
• JPY: USDJPY slipped back further over the course of the day, with the high made just before Tokyo opened at the mid 102.90’s having risen only a few ticks from the opening. Once Tokyo opened the market did flirt with the topside but seemed a half-hearted attempt before falling back to the 102.60 levels, the grey hours provided some USD selling and the market moved to the next set of bids around the 102.40 areas and stayed there until we moved into NYK. I’d like to say volumes picked up however while there was a minor recovery as the futures markets opened it was short lived and the market again started to trend lower trading this time down below 102.20. The market struggled to the 102.60 and really just ran out of steam altogether into the close around 102.40 with little interest it would seem. There was however, significant flows through the day of the carry trade and while the market eased back moving over a big figure from its highs above 94.00 to the mid 92.60’s into the close, there was a break through 93.40 with some stops triggered in early NYK however, other than that period it would look as if it was a measured selloff with no real surprises.
• AUD: The Oz was sliding from the opening 0.9150 levels trading in a tight gentle channel into the NYK session with very little action going through, AUDJPY seemed to be the main provider of liquidity through the day and this broke a little lower triggering stops early in NYK before settling down to a slow decline again, AUD held the 0.9040 levels into the close with really nothing that could be said for a big figure move that was so gentle if you watched it you’d have nodded off.

Yesterday’s premiership results

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

AUD       Westpac Consumer Confidence (Dec) A -4.80% | P 1.90%

JPY         Machine Orders M/M Oct A 0.60% | C 0.90% | P -2.10%

JPY         Domestic CGPI Y/Y Nov A 2.70% | C 2.70% | P 2.50%

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

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

USD       Crude Oil Inventories A -10.6M | P -5.6M

USD       Monthly Budget Statement Nov A -$135.2B | C -$140.0B

NZD       RBNZ Rate Decision A 2.50% | C 2.50% | P 2.50%
Good Luck

Andy