Daily FX Market Commentary

Andy Harrison

Good morning,

 

LMAX Close

USDJPY 104.52 | EURUSD 1.35462 | EURJPY 141.594 | AUDUSD 0.88537 | NZDUSD 0.83079 | USDCAD 1.10872 | EURCHF 1.23479 | USDCHF 0.91162 | GBPUSD 1.65733 | EURGBP 0.81736 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               104.845 | 104.275

EUR/USD             1.35565 | 1.3530

EUR/JPY               141.93 | 141.21

AUD/USD            0.8853 | 0.8787

NZD/USD             0.8314 | 0.8262

USD/CAD             1.1157 | 1.1084

EUR/CHF              1.2361 | 1.2349

USD/CHF             0.9134 | 0.9113

GBP/USD             1.6577 | 1.6558

EUR/GBP             0.8180 | 0.81725

 

For today

  • EUR: As with previous sessions we see a quiet opening this time around the 1.3545 levels and then USDJPY movement higher with offers in EURJPY suppressing the Euro, this time the market dropped to just above the 1.3530 level before bouncing back as the demand in USDJPY subsided. The market from that point rose steadily to above the 1.3555 levels but was unable to continue rising as EURGBP seemed in good supply above the 0.8180 levels. The market has slipped off the highs and currently holds around the opening levels as we move into the grey hours. The topside has a good sized mixture through the 1.3600 levels however, for the moment it has to get through some supply around the 1.3580 levels. Once above 1.3600 the market still remains mixed however, with a busy number day either direction is open to movement. Downside has some light to medium bids through 1.3500 and the support still remains intact even though we have attempted it a few times.
  • GBP: As with the Euro really early buying in USDJPY chased the Cable a little lower from the 1.6570 areas to just below 1.6560 however, the market remains focused on the 1.6600 level and given that there is only the CBI figure one has to wonder whether the market has the legs to push higher. Downside sees some weak stops below the 1.6550 levels and again below 1.6500 but with buyers coming to the market on calls.
  • JPY: USDJPY opened just above the 104.50 level and as soon as Tokyo opened moved quickly to above the 104.80 levels again. It failed and without the fixing demand to push the market started to pull back as quickly as it moved up, initially stalling at the opening levels before continuing the move as weak stops and a weaker AUD triggered margin calls as equities and gold fell in the same direction. The market in all honesty was not the busiest and the impact was limited to the 104.30 levels before finding sufficient support to hold into the grey hours. With the USDJPY still offered on the topside from the highs to 105.00 and then in larger offers above to the 105.40 levels it’s hard to see the market moving through the level without some massive leading indicator number out of the US later today. Saying that as we’ve seen the market doesn’t particularly like the downside this week and we’ve remained above the 104.00 for the most part, and with standing bids around the 103.60 level to the 103.20’s while not as thick as the topside it will take some considerable effort to move through.
  • AUD: Almost the exact opposite to yesterday, with a quiet opening and a steady drift lower into the Tokyo session with the Oz being squeezed lower as USDJPY rose, the market held around the 0.8830 level some 20 pips of the opening before the consumer inflation number showed an increase over the previous month however, the market believes it was insufficient to worry about and the call in the CNY PMI number is of more concern, with the market dropping quickly after the China number to the 0.8795 levels and ultimately to just below the 0.8790 level for the second day running one has to wonder whether that levels is something to pay attention too. With either side of the market now totally mixed, the market feels uncertain and usually this for me is a turning point. Topside 0.8900 remains the resistance level and the downside has light bids to the 0.8750 levels before any stops are seen.

 

Overnight News

CNY: China Jan flash PMI falls to 49.6, first contraction in 6 months

China to Ease Approvals for Foreign Investment Projects

China’s Top Four State Banks Post Strong Loan Growth in January -Report

China’s yuan climbs to world’s 8th most-used payment currency – SWIFT

JPY:

Shinohara: BOJ Needn’t Ease More If Progress Made Toward Goal

IMF says BOJ inflation target likely to take more than 2 yrs

Japan’s Abe Defends Visit to Shrine

EUR:

ECB Draghi: Risk of Deflation or Inflation in Euro Zone Limited – Report
Today’s data

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

NZD       Business NZ manufacturing index Dec A 56.4 | P 56.7 | R 57

AUD       Consumer Inflation Expectation Jan A 2.30% | P 2.10%

CNY        HSBC/Markit Flash Manufacturing PMI Jan A 49.6 | C 50.4 | P 50.5

08:00     EUR        French PMI Manufacturing Jan (P) C 47.6 | P 47

08:00     EUR        French PMI Services Jan (P) C 48.2 | P 47.8

08:30     EUR        German PMI Manufacturing Jan (A) C 54.4 | P 54.3

08:30     EUR        German PMI Services Jan (A) C 53.9 | P 53.5

09:00     EUR        Eurozone Current Account (EUR) Nov C 19.2B | P 21.8B

09:00     EUR        Eurozone PMI Manufacturing Jan (A) C 53 | P 52.7

09:00     EUR        Eurozone PMI Services Jan (A) C 51.4 | P 51

09:00     EUR        Eurozone PMI Composite Jan (A) C 52.4 | P 52.1

11:00     GBP       CBI Reported Sales Jan P 34

13:30     CAD       Retail Sales M/M Nov C 0.30% | P -0.10%

13:30     CAD       Retail Sales Less Autos M/M Nov C 0.40% | P 0.40%

13:30     USD       Initial Jobless Claims (JAN 18) C 331K | P 326K

14:00     USD       House Price Index M/M Nov C 0.30% | P 0.50%

15:00     EUR        Eurozone Consumer Confidence Jan (A) C -12.6 | P -13.6

15:00     USD       Existing Home Sales Dec C 4.95M | P 4.90M

15:00     USD       Leading Indicators Dec C 0.10% | P 0.80%

16:00     USD       Crude Oil Inventories P -7.7M

 

Harry Hindsight

  • EUR:  Euro’s on the whole had a quiet day, opening around the 1.3560 area the market initially tried the topside in the Asian session moving to just above 1.3580 before rejecting the level and moving steadily lower, with a whippy USDJPY causing most of the movement for the session, the move into the London session saw the Euro on its lows just above 1.3550 and with no data out of Europe was susceptible to a good UK number, dropping against Cable it was forced to give ground against the USD dropping to the 1.3535 levels before seeing some support. For a change though GBP rise dragged the Euro with it into the NYK opening and the market moved steadily to push lightly through the high before interest waned and the GBP plateaued. Overall the market ended lower than at the start of the day holding just 10 pips above the lows into the close after the flirtation with the 1.3580 level.
  • GBP: The mover of the day opening around the 1.6475 areas and struggling to do anything meaningful in Asia and holding around the 1.6480 levels with only a single brief flirtation to the topside above 1.6490. We moved into the official opening with early day traders picking a supposed range player only for the figures to come out better than expected and perceived as just that little bit closer to a rise in interest rates. Moving off the 1.6460 area lows the market quickly moved to the 1.6540 levels before running into minor resistance and then bursting through the 1.6550 levels and then in successive waves top above the 1.6580 level, the move into late NYK saw Cable holding onto most of its gains as the move is just as much technical now as fundamental having broken through the 1.6550 levels and maybe a fresh attempt to push through the 1.6600 stopping area. The market settled around the 1.6575 areas. EURGBP broke to new lows with the movement after the numbers, moving quickly to below 0.8200 and finding limited support around the 0.8180 levels. It held into the region for several hours before slowly giving ground as we moved deeper into the NYK session to drop to below the 0.8170 levels briefly before settling around the 0.8175 areas. Of note was the failure of the BoE to mention a movement of the 7% threshold for rate increases, it had been rumoured that this was likely to be set at 6.5% however, the market now wonders whether we have a rate hike earlier rather than later.
  • JPY: USDJPY had a strange day with the market trading quietly during the early part of the session opening around the 104.30 levels and then dipping as commentary around the BoJ rate decision sent the USDJPY lower. The market bounced off the lows just below 104.00 and immediately caught a short squeeze helped by a drop in the all industry number which came in a little weaker than expected, this then set the targets for the highs and we traded just short of the 104.60 levels. The movement until late into the NYK session was then subdued as the market focused on the GBP and crosses leaving the USDJPY to trade the 104.30/50 range until into the close above that 104.50 level.
  • AUD: With CPI figures above expectations the likelihood of another rate cut receded somewhat however, a word of caution the last one was more as a control on a rampant currency than a requirement for the economy per sae. The market opened around the 0.8810 levels and dipped slightly lower to set the low for the day into the Tokyo session at just below the 0.8790 levels however on the release the market quickly moved above the 0.8850 level. Although the market moved on and topped above the 0.8870 level in Asia some tough resistance was seen over the course of several hours before moving into the grey hours and a follow through from early Europeans to take the market to just below the 0.8890 levels again the resistance was too much for the market and we slowly drifted back away from the 89cent area moving to the 0.8860 levels again and then a break down as weak stops were triggered and the market fell to the 0.8840 levels and held into the close.

Yesterday’s premiership results

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

AUD       CPI Q/Q Q4 A 0.80% | C 0.50% | P 1.20%

AUD       CPI Y/Y Q4 A 2.70% | C 2.50% | P 2.20%

AUD       CPI RBA Trimmed Mean Q/Q Q4  A 0.90% | C 0.60% | P 0.70%

AUD       CPI RBA Trimmed Mean Y/Y Q4 A 2.60% | C 2.30% | P 2.30%

AUD       CPI RBA Weighted Median Q/Q Q4 A 0.90% | C 0.60% | P 0.60%

AUD       CPI RBA Weighted Median Y/Y Q4 A 2.60% | C 2.30% | P 2.30%

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

GBP       Claimant Count Change Dec A -24.0K | C -32.3K | P -36.7K

GBP       Claimant Count Rate Dec A 3.70% | C 3.70% | P 3.80%

GBP       ILO Unemployment Rate (3M) Nov A 7.10% | C 7.30% | P 7.40%

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

GBP       Public Sector Net Borrowing (GBP) Dec A 10.4B | C 12.3B | P 14.8B

CHF        ZEW (Expectations) Jan A 36.4 | P 39.4

CAD       BoC Rate Decision A 1.00% | C 1.00% | P 1.00%
Good Luck

Andy

LMAX Exchange Market Commentary   AUDUSD   Andy Harrison  

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