Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 103.238 103.15-30 | EURUSD 1.37418 1.3738-44 | EURJPY 141.862 141.71-97 | AUDUSD 0.89638 0.8959-67 | NZDUSD 0.82661 0.8250-75 | USDCAD 1.05859 1.0585-1.0604 | EURCHF 1.22185 1.2215-22 | USDCHF 0.88926 0.8885-0.8915 | GBPUSD 1.62954 1.6271-1.6310 | EURGBP 0.84322 0.8415-46 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               103.34 | 102.645

EUR/USD             1.3761 | 1.3727

EUR/JPY               141.91 | 141.22

AUD/USD            0.8963 | 0.8920

NZD/USD             0.8288 | 0.8252

USD/CAD             1.0596 | 1.0578

EUR/CHF              1.2232 | 1.2218

USD/CHF             0.8904 | 0.8882

GBP/USD             1.6310 | 1.6292

EUR/GBP             0.8442 | 0.8420

Overnight News

JPY:

Japan business sentiment improves in December – BOJ tankan

Japan Small Cos. Confidence Shows Sign of Economic Recovery: Suga

CNY:

China Dec HSBC flash PMI slips to three-month low of 50.5

China to Ease Foreign Investment Rule, Minister Says: Qiushi

GBP:

UK Average Home Asking Price Expected to Rise in 2014 -Rightmove

For today

• EUR: The market opened on the weak side from Friday’s close around the 1.3730 areas before a steady climb to above the 1.3760 levels which were a sticking point on Friday. We held the regions for a couple of hours before slipping back a little with USD on the back foot as USDJPY seemed to be the main focus on the day to the downside allowing the Euro to regain a little of Fridays movements, in front of the FOMC this week we are likely to see further positioning cut. Euro’s still remains with some mixed interest from the 1.3760 level going back to the 1.3800 with larger size the further you go, even above the 1.3800 offers still predominate the market as longer term players take profit in front of the FOMC. Downside has similar plays with long players looking to exit the market on a break below 1.3700 and then nothing really out there from the mid 1.3600’s. For the moment the market holds just off its highs as we move into the grey hours.
• BP: Cable opened in line with expectations and has held around the 1.6300 in very quiet trading for the day with hardly a 10 pip range.
• JPY: USDJPY opened around the 103.20 areas and moved quietly into the Tokyo session where sellers materialised in numbers, with a reasonably good set of numbers indicating a recovery in progress and the looming FOMC later in the week we’ve seen longs covering positions all day and with the light volumes seen the pressure downwards has been exaggerated somewhat. For the moment you have to respect that 103.90/104.00 levels with a more mixed view above that area going back to stronger sellers from the 104.50 suspected. The downside has seen the market drive through some light support and a break through 102.00 will see stops connected with weak longs connected to Friday’s rally. Support areas start to show below the 101.50 levels but this is only going to matter if the selling becomes more aggressive than we have seen. For the moment the market holds the 102.80 levels in the London session.
• AUD: The Oz was quiet with the rest of the market however, was further weakened today by AUDJPY selling as USDJPY fell back and then the release of the HSBC number weaker than expected and having a quick impact taking the market from the opening 0.8970 levels to a low below 0.8920 in a quick stab lower, the market bounced as the PMI number still shows growth if not at the speed the market expected and the Oz has struggled higher since pushing back above the 0.8950 levels. With some light offers in the market it’s a struggle to push back above the 0.9000 level however, once we start to move into the mid 0.9000 level we should see some medium term shorts being forced out of the market and possibly a move for the 91cent level. Downside still remains the target but with significantly more support than there is resistance at the moment with bids from the lows to below 0.8900 and really nothing in the way of stops making much of an appearance with one sector bidding in the face of stops from another sector. However, FOMC is the talk of the town and the market is still long AUDJPY and to a certain extent the Oz in general.

Today’s data

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

NZD       Westpac NZ Consumer Confidence Q4 A 120.1 | P 115.4

JPY         Tankan Large Manufacturers Index Q4 A 16 | C 15 | P 12

JPY         Tankan Non-Manufacturing Index Q4 A 20 | C 16 | P 14

GBP       Rightmove House Prices M/M Dec A -1.90% | P -2.40%

CNY        HSBC/Markit Flash Manufacturing PMI Dec A 50.5 | C 50.9 | P 50.8

08:00     EUR        French PMI Manufacturing Dec (P) C 49 | P 48.4

08:00     EUR        French PMI Services Dec (P) C 48.7 | P 48

08:30     EUR        German PMI Manufacturing Dec (A) C 53 | P 52.7

08:30     EUR        German PMI Services Dec (A) C 55.3 | P 55.7

09:00     EUR        Eurozone PMI Manufacturing Dec (A) C 51.9 | P 51.6

09:00     EUR        Eurozone PMI Services Dec (A) C 51.5 | P 51.2

10:00     EUR        Eurozone Trade Balance (EUR) Oct C 14.5B | P 14.3B

13:30     CAD       International Securities Transactions (CAD) Oct C 9.24B | P 8.36B

13:30     USD       Empire State Manufacturing Dec C 5 | P -2.21

13:30     USD       Non-Farm Productivity Q3 (F) C 2.80% | P 1.90%

13:30     USD       Unit Labour Costs Q3 (F) C -1.40% | P -0.60%

14:00     USD       Net Long-term TIC Flows Oct C $40.0B | P $25.5B

14:15     USD       Industrial Production Nov C 0.60% | P -0.10%

14:15     USD       Capacity Utilization Nov C 78.40% | P 78.10%                      

Weekend News

JPY:

Abe to Unveil Japan National Security Strategy Next Week
Japan to Provide 2 Trillion Yen of ODA to Asean Nations
Japan-Asean Agree to Boost Security Amid China Disputes
Japan to Issue Record 180t Yen of Govt Bonds Fy14, Nikkei

JPY/GBP:

Sompo Japan Buys UK’s Canopius Group for 100 Bln Yen: Nikkei
JPY/CNY:

China ‘Strongly Dissatisfied’ With Abe Defence Zone Comments
JPY/KRW:

Japan Denies Report of Strategic Talks With South Korea
JPY/PHP:

Aquino Says Sumitomo Metal, Nidec Plan Philippine Investments
USD:

U.S. Says 15,000 Health-Care Enrolments Didn’t Get to Insurers
EUR:

ECB’s Hansson Says He’s Sceptical on Conditional Long-Term Loans
Samaras Says Greek Crisis Exit to Start in 2014: Kathimerini
German SPD Sets Up Merkel’s Third Term With Coalition Approval
CNY:

China Sets Out Urbanization Plans to Support Economic Growth
China Vows to Tackle Local Government Debt Amid Reform Push
China to Relax Market Access for Foreign Investors, CCTV Says
China State Council Approves OTC Market Expansion for SMEs
PHP/CNY:

China Air Zone May Be Used to Expand Territorial Claims: Aquino
AUD:

Australia Budget Deficit to Reach A$50 Billion, Australian Says
Abbott Says Australia May Support Changing Qantas Ownership Rule

Harry Hindsight

• EUR: With tapering again coming to the fore and talk of negative deposit rates again doing the rounds the market in the Euro’s having opened above the 1.3750 levels and moved quietly through Asia peaked in early London just short of the 1.3770 level before dropping back quickly to the 1.3710 levels. Although not a big day the market to some extent was caught by the move and volumes through that early fall in London were significant as short term specs took the brunt of the hurt. We bounced off the lows but it was limited and the whole the move into NYK was little better with a small move to the opening levels before again failing and dropping back and slowly petering out to a close around the 1.3740 areas with light volume through the late session.
• GBP: Cable was in no way different to the Euro with the cross EURGBP staying in a quiet tight range for the day, it was all about the USD tapering, and Euro negative deposit rates. For my mind the thought of negative rates would be a big psychological move for which most of the Northern countries would grumble about, but the Med states would certainly be up in arms, so not something I can see being done, and is likely to be used like this in verbal interventions. We opened around the 1.6350 area and peaked in mid-Tokyo touching just above 1.6360 before drifting back off and moving into London holding the 1.6340 levels. The drop back as broad based USD buying kicked in took the market to a low just above the 1.6270 levels before seeing a slow steady grind to a 1.6300 area finish in a very lacklustre day overall.
• JPY: With the market hitting highs eclipsing the May highs and not seen since 2009 it gave the longer term players a level to unload, and by the looks that’s what occurred, Having opened around the 103.40 level we quickly moved to 103.60 before running into a wall, then a steady grind over the next few hours saw that level fall and the market move to the 103.80 level, while the level halted the rise for a short period it was shorter lived than the 103.60 levels and broke with market pushing to 103.92 however, it could not push any higher and the market was quickly sold back to the 103.60 level into the London session. We held the 103.60 level into the early London session however, with USD on the rise at this point USDJPY came under pressure as the Crosses came into play with heavy selling in EURJPY, GBPJPY and a few others helping the USDJPY back to below the opening levels and some reasonable volume into the NYK session. The market touched the 103.00 level before bouncing a little and holding on to a 103.20 areas close in NYK. The market seemed more liquid than the rest of the market and while we had good volumes you have to remember therefore it wasn’t all one way.
• AUD: AUD had a tight range on the last day of the week, having broken down through this year’s lows the market was a little less volatile than it has been in the past with the market opening around the 0.8930 area at the widest through the day we touched the 0.8910 levels and 0.8970 levels into the close. The Oz for the most part was driven by the Yen with AUDJPY buying occurring in Asia as the USDJPY moved to its highs and looked like a possible break out through the 104.00 levels however, when it failed those same carry trade buyers were quick to unwind the positions and the Oz moved to its lows, then in the London session the opposite was the case with USDJPY moving lower and all the crosses responsible for the move including the AUDJPY, and the lows were made. The Oz from this point made gains as the USDJPY slowly drifted off through the NYK session and the Oz benefited from the room to the topside for a solid recovery and a day’s finish on its highs. Apart from the downside there seemed only light resistance on the day generally speaking.

Friday’s premiership results

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

NZD       Business NZ Manufacturing Index Nov A 56.7 | C 55.7 | P 55.9

CHF        Producer & Import Prices M/M Nov A -0.10% | C 0.20% | P -0.40%

CHF        Producer & Import Prices Y/Y Nov A -0.40% | C -0.10% | P -0.30%

USD       PPI M/M Nov A -0.10% | C 0.00% | P -0.20%

USD       PPI Y/Y Nov A 0.70% | C 0.60% | P 0.30%

USD       PPI Core M/M Nov A 0.10% | C 0.10% | P 0.20%

USD       PPI Core Y/Y Nov A 1.30% | C 1.40% | P 1.40%

Stay lucky

Andy