Daily FX Market Commentary

Andy Harrison

Good morning,

 

LMAX Close

USDJPY 104.173 | EURUSD 1.35534 | EURJPY 141.186 | AUDUSD 0.88117 | NZDUSD 0.82602 | USDCAD 1.09467 | EURCHF 1.23321 | USDCHF 0.9100 | GBPUSD 1.64303 | EURGBP 0.82491 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               104.695 | 104.15

EUR/USD             1.3561 | 1.3537

EUR/JPY               141.83 | 141.075

AUD/USD            0.8838 | 0.8800

NZD/USD             0.8342 | 0.8308

USD/CAD             1.0966 | 1.0942

EUR/CHF              1.2359 | 1.2336

USD/CHF             0.9124 | 0.9099

GBP/USD             1.6435 | 1.6414

EUR/GBP             0.8254 | 0.8243

 

For today

  • EUR: While volumes are reasonable it was quiet overall for most of the session, with most of the volume going through in the first few hours. EURJPY was again offered strongly once Tokyo opened and the Euro moved from the mid 1.3550’s to trade into Tokyo below 1.3538 before finding support and rebounding on CNY mid-range fix. Since that point it’s been a slow move lower with the market holding for the moment in the mid 1.3540’s, offers appear in bits to the 1.3580 level and thicken a little to 1.3600 however, weak stops are likely to be building from range players beyond that point. Downside has bids still appearing just below the lows for yesterday 1.3510 areas to just below the figure level and thickening as you move towards the 1.3450 levels, beyond this are some medium term stops but nothing of special note.
  • GBP: JPY buying at the start of the session seemed to be prevalent across the board with GBP no different. The market opened around the 1.6430 levels and moved into the Tokyo session only slightly lower as EURGBP drifted off a little from the 0.8255 areas for 10 pips lower, Cable then got caught in the move lower  trading to below 1.6412 on the move before a steady rise back to those 1.6430’s were the market started. For the moment the Cable is dead in the water with better economic news keeping the level separated from the mainland economic woes.
  • JPY: While the crosses were all sold off at the start of the session the actual USDJPY moved higher squeezing the respective base currencies with Euro, Cable and to a lesser extent AUD pushed lower as the USDJPY moved from the opening of Tokyo. USDJPY opened around the 104.15/20 areas and moved quietly in the first couple of hours before starting a quick rise into the Tokyo session moving to the 104.45 levels holding and then repeating the process 4 further times before running out of steam just short of the 104.70 levels. Rumours of importers buying USD’s having failed to see the market continue lower were behind the moves however, I would take that with a pinch of salt and look more towards a retail market reinitiating positions after the long weekend and having been unceremoniously dumped out of the market last week. For the moment the market has drifted back from the highs once Tokyo lunch took the pressure off and we hold around the mid 104.50’s. 104.70 is still the level to respect for the moment and as with previous days the amounts continue to grow on the topside as leveraged types fade the moves upwards, of course there are weak stops appearing just above the 105.00 levels from those same players however, while there may be stops the offers continue to grow beyond 105.00 and 105.50 is the real break out point for the moment. The bottom seems to be light with minor stops through 103.60 with only light bids showing below however, if rumours are correct one could expect some medium sized bids to hold the market from those importer types.
  • AUD: Apart from the initial selling of the carry trade as the USDJPY moved higher it’s all changed direction with that same pair being bought from the lows around 0.8800 before making its way back through the 0.8815 area close to move to above the 0.8835 in limited action for the pair, the Oz had already started to move quickly through the 88cent area into the close on the back of local buying in a thin market. However, once the dust settled the market has held to the 0.8815/20 levels which is where we are heading into London.

Overnight News

USD:

Next Cut in Fed Bond Buys Looms (By Jon Hilsenrath)

CNY:

PBOC injects 255 bln yuan through open market after rate spike

China’s Growth to Stabilize at 7.5%-8% in Coming Years: Fan Gang

China’s 2014 Growth Rate Likely Below 7.5%: CASS’s Zhang Ming

China to See Shadow-Banking Defaults in 2014: Researcher

JPY:

Amari Says Japan Still Faces Risk of Falling Back Into Deflation

JPY/CNY:

Japan PM may attend Sochi Games, China says no plans to meet Xi

AUD:

RBA Paper Says Real Exchange Rate May Fall With Terms of Trade

NZD:

NZ 4Q Consumer Price Index Rises 0.1%, Beats Expectations

Key Won’t Rule Out Working With NZ First Party After Election
Today’s data

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

NZD       CPI Q/Q Q4 A 0.10% | C 0.00% | P 0.90%

10:00     EUR        German ZEW (Economic Sentiment) Jan C 63 | P 62

10:00     EUR        German ZEW (Current Situation) Jan C 34 | P 32.4

10:00     EUR        Eurozone ZEW (Economic Sentiment) Jan C 70.2 | P 68.3

11:00     GBP       CBI Trends Total Orders Jan C 12 | P 12

13:30     CAD       Wholesale Sales M/M Nov C 0.60% | P 1.40%

13:30     CAD       Manufacturing Shipments M/M Nov C 0.40% | P 1.00%

 

Harry Hindsight

  • EUR: Cross JPY was the name of the game during the early part of the session with the Tokyo market selling EURJPY and AUDJPY in particular as a follow on from Friday’s Euro sell off. Moving the market from the opening 1.3535 areas to below 1.3510, at this point the market found enough support to hold and while volumes were good it was unable to break lower over the course of 2hrs of trading at the level. A good set of China numbers set the USD back and the Euro benefited from this and rose back to just below the opening levels. The move into the grey hours saw early leveraged types buying and the market struggled slowly to above 1.3545 and limped into London gaining ground however, with a US bank holiday the action was then limited and while the German numbers were better than expected thus the rise it was nothing to shout about and the market traded sideways from that point onwards rising to above the 1.3565 levels and into the close.
  • GBP: Cable was limited in movement somewhat and a little choppy at times particularly during London. Opening around the 1.6420 levels the market saw early selling in GBPJPY pushing the Cable to below 1.6400 the level however, it was short lived and bounced back just after the fixing supply dried up and moved through Asia pretty much unchanged and in a narrow band. The move higher by the Euro caught the GBP up with it and we moved steadily to above the 1.6450 levels as EURGBP moved steadily upwards against the grain as it was. Some light profit taking above the 1.6450 level held the rise in check and the market chopped around for several hours between 1.6420/50, before drifting off late in the session once the London market started to move towards its close. The market however held around the 1.6430 into the close.
  • JPY: Early sellers into the Tokyo session set the tone during Asia pushing lower with cross selling against the JPY, taking the market from the opening highs above 104.30 to a fairly sharp move for the day to below 103.90. The rest of the session was a slow recovery after the move and as we moved into the London session. London held the market above the 104.20 levels for a good period of time before we moved into mid-session and US players not taking the time away from the desk were seen moving in and selling the pair back below the 104.00 level with further cross selling entering the market. Again the market recovered somewhat however, it was a lacklustre afternoon and the pair slowly struggled to the 104.20 areas into the close.
  • AUD: Apart from early selling in the AUDJPY the day moved quietly higher spiking in Asia after hitting lows below 0.8760 with carry trade selling doing much of the damage. We moved up on a good set of CNY numbers to above the 88cent area before a more lengthy rally to above 0.8820 trough into the London session, from there the market was very quiet and only in the dying moments did we see Oz buying from the local markets taking advantage of a thin market.

Yesterday’s premiership results

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

AUD       TD Securities Inflation M/M Dec A 0.70% | P 0.20%

GBP       Rightmove House Prices M/M Jan A 1.00% | P -1.90%

CNY        GDP Y/Y Q4 A 7.70% | C 7.60% | P 7.80%

CNY        Industrial Production Y/Y Dec A 9.70% | C 9.80% | P 10.00%

CNY        Retail Sales Y/Y Dec A 13.60% | C 13.60% | P 13.70%

JPY         Industrial Production M/M Nov (F) A -0.10% | C 0.10% | P 0.10%

EUR        German PPI M/M Dec A 0.10% | C 0.00% | P -0.10%

EUR        German PPI Y/Y Dec A -0.50% | C -0.60% | P -0.80%
Good Luck

Andy

LMAX Exchange Market Commentary   AUDUSD   Andy Harrison  

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