Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 104.555 | EURUSD 1.36055 | EURJPY 142.25 | AUDUSD 0.89156 | NZDUSD 0.8339 | USDCAD 1.09346 | EURCHF 1.23627 | USDCHF 0.90867 | GBPUSD 1.63699 | EURGBP 0.83114 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               104.925 | 104.555

EUR/USD             1.36235 | 1.35855

EUR/JPY               142.90 | 142.18

AUD/USD            0.8915 | 0.8797

NZD/USD             0.8339 | 0.8310

USD/CAD             1.0963 | 1.0930

EUR/CHF              1.2375 | 1.2362

USD/CHF             0.9104 | 0.9080

GBP/USD             1.6375 | 1.6347

EUR/GBP             0.8331 | 0.83095

For today

• EUR: A reasonably busy day overall, AUD employment numbers really set the market alight. Opening around the 1.3605 area the market struggled into the Tokyo session not really moving, dipping slightly before the AUD numbers came out, Euro then dropped to below the 1.3586 levels as USD buying initially appeared in the market in reaction to the data. Once the market touched the bottom the Oz had still to break 0.8800 levels and was holding on for grim death, enter EURAUD, AUDJPY up until that point it had been all AUDUSD now anything and everything was been bought against the Oz and Euro’s started to rally strongly back through 1.3600 and to the 1.3620 levels before steadying down and then holding the 1.3615/24 levels for the balance of the session. With still light offers on the topside to mid-1.3600 a push through those levels will see light stops making an appearance before running into the 1.3700 area offers. Downside saw some weak stops triggered however with bids holding the 1.3580 level one suspects further weak stops below to the sentimental 1.3550 area with support from there to 1.3530.
• GBP: Euro’s eventually became the currency of choice of flight, Cable moved off the opening 1.6370 area and moved steadily lower into the Oz numbers then held the 1.6345 area on the number, the market pushed higher as a result of GBPAUD buying going through to reach the 1.6375 areas however, it was unable to break higher and while the Euro ran up GBP remained trapped below that level until eventually giving ground and dropping back to the lows again as EURGBP broke through the 0.8320 levels and some weak stops. For the moment we hold just off the lows. With no real data due, take the lead from the Euro, while there may be continued weakness generally, it will be a question of Euro sentiment for the day.
• JPY: USDJPY initially seemed to be a pair with nowhere to go, opening around the 104.55 levels it held a tight range basing from the opening to just above 104.63 before the AUD numbers threw a sabot into the machinery, with plenty of offers to the 105.00 level first indications were that we would not have the impetus to move too far to the topside, the market moved quickly to the 104.85 levels before drifting back again after the number. Then came the margin calls and the retail selling of anything AUD with dropping from the 93.10 levels almost a big figure in a quick move. USDJPY moved to above 104.90 before running out of steam and has slowly drifted lower since. With a lot of wood chopped from the opening to the 104.90 levels there still remains some significant amounts to go before a clear break of 105.00 triggers some less protected stops, from there the market is a little mixed until we start to near the 105.70-106.00 levels with offers getting stronger the higher you go. Downside now sees some light bids from the 104.30 area getting larger the closer you move to the 104.00 levels, below sees medium sized bids appearing however, light stops are starting to show in that mix below there and only a break below the 103.70 sees any real commitment to sell.
• AUD: The market was expecting a poor number but may be not that poor with the third consecutive month of participation falls and seems to be the trend. Moving off an opening around the 0.8915 level the market slipped slowly into the sub 89cent area before the number however, on the number we dropped quickly to the 0.8820 levels triggering some decent stops through the 0.8880 level. A follow through of cross trading against the AUD kept the pressure going however, it seemed a determined market to push through the 0.8800 level which held on for quite a time before giving way, whether there was a barrier only time will tell however, it felt like it, as once the 0.8800 broke it moved as far as the 0.8797 level before clawing itself back above the figure and then trading between there and roughly the 0.8815 level with continual selling appearing above, again another indication of a large barrier broken. Support now seems to be just below the 0.8800 level and possibly down to the 0.8780 area before weak stops from bottom pickers are likely to be seen. The topside now looks to be open, with just the suspected option protection buyers to cover their longs, so something to think about if we break lower. Apart from that light offers in the 0.8930-50 levels from range players however, they may have been burned already.

Overnight News

AUD:

Australia jobs suffer surprise slide, dollar follows

USD/CNY:

China’s Treasury Holdings Rose to Record in November, Data Show

CNY:

China says 2014 trade growth may lag last year’s rate

December FDI to China +3.3% on Year at $12.08 Bln

JPY:

BOJ’s Kuroda keeps upbeat view on Japan economy

BOJ raises view for 5 of 9 regions in Japan

Japan Nov Core Machinery Orders +9.3% on Mo; Expected +1.2%

Japan to Explain Abe Shrine Visit to Asean Nations: Yamamoto

Asia:

Moody’s sees Largely Stable Ratings for South, Southeast Asia

GBP:

UK house price expectations hit 14-year high in Dec-RICS
Today’s data

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

JPY         Tertiary Industry Index M/M Nov A 0.60% | C 0.80% | P -0.70% | R -0.90%

JPY         Machine Orders M/M Nov A 9.30% | C 1.20% | P 0.60%

JPY         Domestic CGPI Y/Y Dec A 2.50% | C 0.40% | P 2.70% | R 2.60%

GBP       RICS House Price Balance Dec A 56% | C 59% | P 58%

AUD       Employment Change Dec A -22.6K | C 10.3K | P 21.0K | R 15.4K

AUD       Unemployment Rate Dec A 5.80% | C 5.80% | P 5.80%

07:00     EUR        German CPI M/M Dec (F) C 0.40% | P 0.40%

07:00     EUR        German CPI Y/Y Dec (F) C 1.40% | P 1.40%

09:00     EUR        ECB Monthly Bulletin

10:00     EUR        Eurozone CPI M/M Dec P -0.10%

10:00     EUR        Eurozone CPI Y/Y Dec (F) C 0.80% | P 0.80%

10:00     EUR        Eurozone CPI – Core Y/Y Dec (F) C 0.90% | P 0.90%

13:30     CAD       International Securities Transactions (CAD) Nov C 7.21B | P 4.41B

13:30     USD       Initial Jobless Claims (JAN 11) C 327K | P 330K

13:30     USD       CPI M/M Dec C 0.30% | P 0.00%

13:30     USD       CPI Y/Y Dec C 1.40% | P 1.20%

13:30     USD       CPI Core M/M Dec C 0.10% | P 0.20%

13:30     USD       CPI Core Y/Y Dec C 1.70% | P 1.70%

14:00     USD       Net Long-term TIC Flows Nov C 42.3B | P $35.4B

15:00     USD       Philly Fed Survey Jan C 8.8 | P 7

15:00     USD       NAHB Housing Market Index Jan C 58 | P 58

Harry Hindsight

• EUR: Another slow move downwards moving from the opening 1.3680 we moved into Tokyo with cross selling of Euro’s doing a lot of damage early on after and FT article more or less reiterated the comments from Lautenshclaeger former BUBA member with the added twist of what it perceives as the consequences. The Euro dropped to the 1.3635 areas and never recovered. The market moved towards London holding the lows and although early buyers moved in the market still remained near the lows as London came in selling. A small dip in the Eurozone trade balances did little to excite the market and we moved to below 1.3610 in early London. The market then held around the 1.3610-30 areas until the NYK session got under way and with the same result a push through the 1.3600 level and a move towards the 1.3580 levels where the market found support. The market for the most part has traded the 1.3590-1.3605 areas since those early lows in NYK and settled down quietly with volumes dropping off. While the US numbers to my eyes look a little better with PPI numbers a little higher whether these feed through to the retail market remains to be seen.
• GBP: Early trading saw the Cable hold its own during the Asian session moving from the opening levels around the 1.6440 to touch only 30 pips lower as the drag of the Euro pulled it lower. EURGBP weakened over the course of Asia moving to the 0.8300 levels some 20 pips adrift of the start. However, with no data and very little news the pair was dominated by the Eurozone woes or perceived woes. The EURGBP recovered somewhat just before the London opening as bottom pickers moved in but having peaked around the opening areas was again swiftly sold as Euro’s came under pressure this time moving towards the NYK open at the bottom below the 0.8275 levels. A combination of a decent Empire state number and Euro’s moving away from what appears a well supported 1.3580 level forced the Cable lower moving to a low below 1.6330 triggering weak stops below 1.6380 a level the market has been unable to break back through. For the movement we hover just below the 1.6380 as we move to the close.
• JPY: USDJPY opened around the 104.20 area and apart from the early selling that appeared in EURJPY the market moved strongly higher from the Tokyo fix onwards pushing quickly to above 104.35 and then a steadier rise as the market ground through resting offers to the 104.45 areas. We dipped into the London session on fresh EURJPY selling as the Tokyo market rounded off its day and then London session saw EURJPY selling competing with USDJPY buying to leave the market flat around the opening levels for the day. NYK and the release of the Empire state numbers saw the market move quickly to new highs above 104.50 and continue to press slowly higher over the course of the session to above the 104.68 levels before settling back for a finish some 10pips lower on the day.
• AUD: The Oz peaked in early trading moving from the opening 0.8965 to above 0.8970 before dropping back quickly as USDJPY moved higher, the previous 48hrs saw EURAUD trades in and out but today there was barely a murmur and no saving grace as the AUDJPY kept to its ranges we’ve seen most of the week and forced the Oz lower, moving it steadily to below the 0.8915 areas over the course of the Asian session, while London didn’t hold back the 0.8880 level still remains intact as the market managed to move to just below 0.8890 in the first hour of trading in London. Bottom pickers moved in and the market moved off its lows and back to the base levels the market saw in Asia around the 0.8915-20 levels and so it remained for the greater part of the session with a range there after of 0.8895-0.8930 to settle around the midpoint.

Yesterday’s premiership results

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

JPY         Japan Money Stock M2+CD Y/Y Dec A 4.20% | C 4.50% | P 4.30% | R 4.40%

JPY         Machine Tool Orders Y/Y Dec (P) A 28.00% | P 15.40%

CHF        Retail Sales (Real) Y/Y Nov A 4.20% | C 2.30% | P 1.20%

EUR        Eurozone Trade Balance (EUR) Nov A 16.0B | C 16.7B | P 14.5B | R 14.3B

USD       Empire State Manufacturing Jan A 12.5 | C 4.5 | P 0.98

USD       PPI M/M Dec A 0.40% | C 0.40% | P -0.10%

USD       PPI Y/Y Dec A 1.20% | C 0.80% | P 0.70%

USD       PPI Core M/M Dec A 0.30% | C 0.10% | P 0.10%

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

USD       Crude Oil Inventories A -7.7M | C -0.7M | P -2.7M
Good Luck

Andy