Daily FX Market Commentary

Andy Harrison

Good morning,

 

LMAX Close

USDJPY 104.283 | EURUSD 1.36847 | EURJPY 142.715 | AUDUSD 0.88607 | NZDUSD 0.8222 | USDCAD 1.06987 | EURCHF 1.22323 | USDCHF 0.89386 | GBPUSD 1.63911 | EURGBP 0.83492 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               104.37 | 103.77

EUR/USD             1.3694 | 1.36495

EUR/JPY               142.80 | 141.88

AUD/USD            0.8862 | 0.8823

NZD/USD             0.8238 | 0.8179

USD/CAD             1.0726 | 1.0696

EUR/CHF              1.2247 | 1.22305

USD/CHF             0.8963 | 0.8935

GBP/USD             1.6397 | 1.6365

EUR/GBP             0.83585 | 0.8340

 

For today

  • EUR: An opening around the 1.3685 saw a follow through of selling spilling over and a run to the 1.3570 driving through some reasonable profit taking from medium term shorts from a big figure above and Sydney day traders who appeared in the market for the FOMC number, the profit taking kicked in from the retail market in Japan before the official opening and the market returned to the opening levels. With Tokyo now open, the market started to function as normal and the weaker players were side-lined as real money started to enter the market and the selling renewed with the market returning to its lows and tumbling on stops through the previous lows. The slide eventually ground to a halt around the 1.3655 area and we’ve hung around the 1.3660 level since. With the topside market now wide open and a limit to the offers, the downside still remains buoyant below the lows with some reasonable real money hedge strategies and medium term take profits in the market. For the moment the ECB sycophants will be side-lined from making comments that might strengthen the Euro however, with less USD’s in the system come next year they should be happy in thinking that we are moving towards a period of resurgence for the USD. Best laid plans of men and mice.
  • GBP: Cable flat lines in Asia should be the headline, having been the only one to make headway on the day against the USD after a good set of numbers the market is confused over what to do with the pair, opening around the 1.6380 levels we’ve barely moved from the level all session and hold for the moment around the mid 1.6370’s. We now have to look back to 2011 for the next resistance levels with plenty of congestion in the mid 1.6400’s probably not having that much of a bearing on the situation but worth noting, as long as they keep rolling out the figures the GBP should keep pace with the USD and the old USD, GBP link will be a fact of life however, this all remains just speculation until we see the results of the tapering in the late Q1 probably.
  • JPY: USDJPY having rallied swiftly to above the 104.00 and blasting through the offers saw the market holding the 104.30 levels in pre Tokyo, the opening in Tokyo started to see a number of USDJPY sellers appearing, from leveraged to real money, with the market short JPY positions near record highs this obviously seemed like an opportunity to start paring back a little and the long term players took the market initially down to the 104.00 levels and weak stops through the level saw the market touch 103.80 levels, once the market settled down after a couple of hours the market started to gradually rise back to above the 104.00 levels and we currently hold around the 104.10-15 levels as we head towards the London session. Volumes in the first couple of hours were good showing a reasonable two way action with the volumes dropping off through the session. With scattered bids running from the lows to 103.00 the market still looks capable of pushing higher again however the BoJ’s initial targets for the currency from many months ago have now been passed, if so and a recovery starts will we start to see a reversal in the market as exporters start reporting in the New Year. As with each big figure we’ve seen taken out there remains option barriers in front of the 105.00 level and more profit taking from longer term players so it will probably need another day like yesterday with plenty of impetus.
  • AUD: The Oz well I’ve been wrong for several months on the Oz, the movements to above parity seemed more in line with the carry trade buying out of retail Japan and while some still talking of continued interest, one has to wonder how 2.5% compares to the fall back we’ve seen from the years highs in AUDJPY above 105 To the current levels around the 92.00 level. I suppose the fact that the market has stabilized to some extent is again attracting attention, and where will the Oz stop, as a commodity currency the fact of a broad based USD rise would continue to weight on the Oz for the simple reason that the commodity prices are dominated by the USD, as we saw from the rise in Energy and Gold prices once USD slumped, could we see a similar result from a strong USD in the future. For the moment the Oz has again pushed through this year’s lows and while in this session we’ve held above yesterday’s lows the market is still a little mixed and one assumes will take the lead from the USD, and or AUDJPY. We opened around the 0.8850 levels and has struggled to just above the 0.8860 into the Tokyo session with the carry trade however, with the fall in USDJPY the Oz followed as the retail market sold into the rally, since then the Oz and cross have risen slightly and hold just below the lows as the market slows down.

Overnight News

JPY:

Japan’s Suga: Fed Tapering Appropriate Decision Based on Data

Tokyo Governor Inose Resigns Post amid Loan Scandal

Toyoda Says U.S. Tapering to Have Limited Car Sales Impact

CNY:

China inflation expectations rising – CB survey

China 1st-Tier City Home Prices May Hit Peak in 1Q: Sec. News

China to Speed up Building of Free Trade Area Along Silk Road


Today’s data

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

NZD       GDP Q/Q Q3 A 1.40% | C 1.10% | P 0.20%

JPY         All Industry Activity Index M/M Oct A -0.20% | C -0.30% | P 0.40%

07:00     CHF        Trade Balance (CHF) Nov C 2.80B | P 2.43B

09:00     EUR        Eurozone Current Account (EUR) Oct C 14.2B | P 13.7B

09:30     GBP       Retail Sales M/M Nov C 0.30% | P -0.70%

13:30     USD       Initial Jobless Claims (DEC 14) C 332K | P 368K

15:00     USD       Philly Fed Survey Dec C 10 | P 6.5

15:00     USD       Existing Home Sales Nov C 5.02M | P 5.12M

15:00     USD       Leading Indicators Nov C 0.70% | P 0.20%

 

Harry Hindsight

  • EUR: A quiet session during Asia with volumes a little bit better but ranges still cramped, moving from just below 1.3770 trading for the most part just slightly higher and not pushing through the 1.3780 level, the move into London saw some early selling, with a mixed IFO set of numbers the market moved down to the 1.3750 areas holding then until we moved into the NYK session around the level. NYK started taking the Euro back to its opening levels however, the market remained quiet until just before the release as the banks backed away from the market the storm started with a run to the topside as the number came out instigated by algo’s picking up on limited and we traded above the 1.3815 area in just over a second and then reversed as the more longer term players saw that $10B per month is an awful lot of liquidity to be removed and we traded to the 1.3705 level in the next second. Fair amounts changed hands at this point however, having hit the lows the market again saw the price head above 1.3800 as the market reacted to one comment and then the next, when the dust finally settled and the risks were measured the market started to drop off dropping again to the 1.3705 area and then triggering weak stops below 1.3700 and pushing to below the 1.3680. With no real recovery to mention the Euro finished the day on those lows.
  • GBP: A strong day for Cable with a quiet Asian session the market really started to move away from the 1.6260 levels the day started with. Asia left the market just above the 1.6280 levels and the decent set of numbers released again jobless claims fell had the Cable pushing back above the 1.6300 and trading to the 1.6360 levels, with unemployment falling the 7% threshold gets closer. Then the move into NYK saw a steady rise to the 1.6400 levels touched then a pause between there and 1.6380 into the FOMC, unlike the Euro the market dipped first to below the 1.6350 level before a strong rally as the Cable became linked to the USD, rally only because the Euro was having trouble staying afloat, the EURGBP cross has been bought all week and all of a sudden Euro’s is collapsing requiring Cable to be bought for the legs of the cross and in sufficient amounts to soak up any selling against the USD. EURGBP had already fallen back with the mixed German numbers and a set of good UK number dropping from the 0.8460 level to the 0.8410 area with weak stop through 0.8380. The break there after the FOMC, sent the pair to the 0.8350 area close. Cable broke through the 1.6400 from the FOMC and traded to a high above the 1.6480 levels as a lack of offers left the market struggling to cover its risk. Once the illiquidity was passed the market again dropped back more in line with the movements in the Euro however, the downside was limited and the day ended with Cable going out around the 1.6380 levels.
  • JPY: USDJPY moved up a little in the Asian session pushing from the 1.0270 area to gradually rise to above the 103.00 areas for a good portion of the day. London had nothing to add to the complex and we managed to push to the 103.20 areas into the FOMC numbers, USD dipped first but quickly rose over the next 3 hours or so to above the 104.30 levels and into the close. While volumes were better than expected the gradual moves rather than the sudden ones seemed to suggest a mixture of players becoming involved in the rally and some profit taking appearing to supply the rise.
  • AUD: Oz refused to set new lows throughout the Asian session and even London stayed away from the pair as we held for the most part above the 89cent levels having peaked just short of 0.8930 in early Tokyo. The opening in NYK saw some light selling and the market eventually triggered stops through the 0.8880 level to make new lows of 0.8870 and then a pregnant pause into the FOMC. The Oz reacted more than others with the low posted around the 0.8820 and a high above the 0.8940 levels in that order. However, the movement seemed to be a little more spread over a 30 minute period unlike the Euro and once the lows had been made there was no reason after the initially rally to the highs for the market to move in any direction other than down. By the time we moved to the close we’d seen a decent volume moving through the AUDJPY carry trade as the Oz dipped and USDJPY rallied allowing weak longs to exit. Oz eventually finished around the 0.8860 levels.

 

Yesterday’s premiership results

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

NZD       Current Account Balance Q3 A -4.780B | C -4.600B | P -1.252B

AUD       Westpac Leading Index M/M Nov A -0.10% | P 0.10%

JPY         Trade Balance (JPY) Nov A -1.35T | C -1.13T | P -1.07T | R -1.09T

NZD       NBNZ Business Confidence Dec A 64.1 | P 60.5

CNY        Conference Board Leading Index Nov A 1.40% | P 0.60%

EUR        German IFO – Business Climate Dec A 109.5 | C 109.5 | P 109.3

EUR        German IFO – Current Assessment Dec A 111.6 | C 112.5 | P 112.2

EUR        German IFO – Expectations Dec A 107.4 | C 106.5 | P 106.3 | R 106.4

GBP       BoE Minutes A 0–0—9 | C 0–0—9 | P 0–0–9

GBP       Jobless Claims Change Nov A -36.7K | C -35.0K | P -41.7K | R -42.8K

GBP       Claimant Count Rate Nov A 3.80% | C 3.80% | P 3.90%

GBP       ILO Unemployment Rate 3M Oct A 7.40% | C 7.60% | P 7.60%

CHF        ZEW (Expectations) Dec A 39.4 | P 31.6

GBP       CBI Reported Sales Dec A 34 | C 10 | P 1

CAD       Wholesale Sales M/M Oct A 1.40% | C 0.30% | P 0.20%

USD       Housing Starts Nov A 1.09M | C 0.95M | P 0.89M

USD       Building Permits Nov A 1.01M | C 0.99M | P 1.03M | R 1.04M

USD       Crude Oil Inventories A -2.9M | C -2.4M | P -10.6M

USD       FOMC Rate Decision A 0.25% | C 0.25% | P 0.25%
Good Luck

Andy

LMAX Exchange Market Commentary   AUDUSD   Andy Harrison  

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