Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 102.302 102.25-45 | EURUSD 1.36777 1.3675-90 | EURJPY 139.914 139.70-140.35 | AUDUSD 0.86848 0.8690-98 | NZDUSD 0.8227 0.8210-46 | USDCAD 1.10848 1.1077-90 | EURCHF 1.22336 1.2245-53 | USDCHF 0.8942 0.8930-65 | GBPUSD 1.64849 1.6477-85 | EURGBP 0.82971 0.8280-0.8305 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               102.55 | 101.77

EUR/USD             1.3691 | 1.3672

EUR/JPY               140.30 | 139.25

AUD/USD            0.8736 | 0.8678

NZD/USD             0.8244 | 0.8195

USD/CAD             1.1078 | 1.1057

EUR/CHF              1.22465 | 1.2228

USD/CHF             0.8951 | 0.89345

GBP/USD             1.6515 | 1.6471

EUR/GBP             0.8305 | 0.82865

Overnight News

JPY:

Japan’s Dec Trade Deficit Doubles, While Annual Deficit Hits Record High

BOJ Minutes: Need to Pay Close Attention Effects of Fed Tapering on Emerging Econs

Japan’s Public Debt to reach 1,144T Yen at End March 2015: MOF

Abe Govt Upholds View of Past Japan Governments on Comfort Women: Suga

CNY:

China needs to invest more in overseas iron ore – NDRC

For today

• EUR: Trading off the 1.3680 levels the market struggled to do anything meaningful with a brief flirtation with the 1.3690 level once Tokyo opened only to drift back into the 1.3680-90 range, EURJPY appeared from the start however, this was more an effect of the USDJP rally than pure EURJPY however, what strength was seen is attributable to this. Topside is totally mixed to last Fridays highs with offers only just offsetting the stops, with light protection in front of the 1.3800 level and from there a bit patchy. With the focus again on the topside, fresh stories of Greece and the non-word deflation start to arise over the weekend. With very little to the downside having been there and back again like a hobbit we have a similar story to the topside with 1.3600 easily exposed.
• GBP: While the market has made little headway today it has been a slow move higher, albeit probably dragged along by GBPJPY buying, having opened around the 1.6480 levels as JPY crosses were hit in the gap down Cable has risen slowly to above the 1.6411 showing a little resilience after Friday’s bad day. For the moment 1.6740 remains the target to the topside however, weak chatter of a strong pound affecting commerce is likely to be floated out. Downside remains open with a move back through 1.6400 negating the move up, with tech types watching for confirmation of a formation.
• JPY: USDJPY gapped open lower with Margins hit in the retail market after Friday’s run down. We opened around the 101.80 levels and slowly but surely reversed the losses and filled the gap on the charts, the market continued higher with buyers appearing across the market with everyone selling Yen in good numbers to reset their positions or take advantage of a price the BoJ is not going to particularly enjoy. As we head to the grey hours the market has pushed to above the 102.50 area and struggles to maintain the levels. Offers appear close to the topside now but nothing large with some weak stops above the 103.00 levels. With bids from the 101.60 level below there sees a lot of mixture to the 101.20/30 levels before bids thicken.
• AUD: The Oz struggled in early trading moving to the 87cent levels from and opening around where the market finished on Friday however, this was quickly reversed as Tokyo opened and some light AUDJPY selling entered the market as the USDJPY started to push higher. Having touched briefly below the 0.8680 level the Oz started to track the move higher in USDJPY pushing to above the 0.8735 areas into late session with the carry trade looking somewhat attractive for the retail market. With very little in the way on the topside, likely to be weak stops above the 0.8720 area however, from there very patchy and nothing concrete until the 88cent levels. Bids to the downside from offshore provide the base around the 0.8620/40 area however, again we see some weak stops below those levels.

Today’s data

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

JPY         Trade Balance (JPY) Dec A -1.15T | C -1.33T | P -1.35T | R -1.29T

9:00        EUR        German IFO – Business Climate Jan C 110 | P 109.5

9:00        EUR        German IFO – Current Assessment Jan C 112.2 | P 111.6

9:00        EUR        German IFO – Expectations Jan C 108 | P 107.4

15:00     USD       New Home Sales M/M Dec C -1.30% | P -2.10%

15:00     USD       New Home Sales Dec C 458K | P 464K                    

Weekend News

JPY:

Kuroda Says Japan Monetary Policy Achieving Significant Progress
Japan Pension Fund Won’t Buy Domestic Bonds on Inflation Risks
Biggest Japan Banks Poised to Post 30% Profit Increase: Nikkei
Former Health Minister Masuzoe Leads Tokyo Governor Race: Kyodo
JPY/INR:

India, Japan Plan Joint Defence Exercise in Pacific Ocean in 2014
CNY:

Beijing Government End-June Debt Rises 9% From End-2012
Xinjiang Police Kill 6 Rioters,  6 Die in Blast, Tianshan Says
Chinese Legal Activist Xu Sentenced to Four-Year Prison Term
China Reports Second Human Case of H10N8 Bird Flu, Xinhua Says
CNY/GBP:

China’s Wang Plans Up to $5 Billion Investment in U.K. Projects

EUR:

Knot Says No Immediate ECB Action Needed as Market Rates Studied
Schaeuble Says Euro Area No Longer Centre of Global Concern
GBP:

U.K.’s Labour Party to Reverse Tax Cut If Party Wins 2015 Vote

Harry Hindsight

• EUR: The Euro’s struggled during Asia with the market unable at the time to push through the 1.3700 levels until into the grey hours just before the London opening, with the market slowly slipping from the 1.3695 area to just below the 1.3680 levels. Half way through the Tokyo market the trend began to shift as early Middle Eastern and then East Europeans took up the mantle and drove the market through the level only to see it slip back even before we moved into the official London market to trade down to the 1.3665 areas. With no real data on the board the move through 1.3700 in mid-morning saw a proper break triggering weak stops from sellers after the initial attempt and some medium term money. Having broken through and hit the 1.3740 areas early NYK took it as further opportunity’s to sell and the market moved quickly back into its previous range to hold the 1.3690/1.3670 for the most part into the close.
• GBP: Cable remained quiet in Asia holding to the 1.6620-40 range for the most part, early Europeans moved the pair higher through 1.6660 in line with the movements in Euro however, like the Euro it was short lived and soon dropped back to below the 1.6620 area and slowly started to decline through the early part of the London session. What looks to be a reversal of fortunes in the EURGBP saw the Euro rally while GBP dropped at the same time. With EURGBP moving off its lows of 0.8210 to top just above the 0.8300 levels into the NYK session with US players following through on the back of the rally to 0.8280. Cable was forced lower as a consequence and traded to the 1.6480 in mid-NYK session before petering out around the 1.6500 mark in to the close. With many of the mornings broadsheets floating the story that BoE’s Carney was set to increase interest rates having failed to mention the movement of the target from the current 7% during the last week, you can see why the market reacted once Mr Carney stated that the BoE MPC had a number of options to look at and will look to evolve the guidance at the February quarterly inflation meeting.
• JPY: USDJPY moved steadily higher during the early part of the session moving from the 103.30 areas to just short of 103.60 however, by mid-way through the session the market had begun to wilt a little as those leaving for an early bath cut positions and the market had drifted to just below the 103.20 level as we entered the grey hours. With the imminent start of the Chinese New Year and Australia day the appetite for the USDJPY disappeared and the market quickly pushed through the 103.00 as we moved into the London market and continued triggering some longer term stops and setting up margin calls within the retail market. The market found the NYK players willing to pick up the slack and they pushed away from the 102.00 level and then held it in a tight range to the close around 102.25.
• AUD: Having opened around the 0.8770 area the market struggled with early AUDJPY sellers before the opening in Tokyo. Comments from RBA’s Ridout set the market back on its heels forcing it down from the 0.8760 levels to hold in the 0.8690 levels when he told the market that he wanted the Oz to fall further and the market took it quite literally and sold it quickly, it recovered slightly into the grey hours however, once the official London market stepped in it struggled to hold its levels and slipped quietly to the 0.8660 levels just before NYK entered the market. They helped to take the market back to above the 87cent area only for the market to see closing take profits cutting the gains away to leave the pair just below 87cents.

Friday’s premiership results

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

GBP       BBA Mortgage Approvals Dec A 46.5K | C 47.2K | P 45.0K

CAD       CPI M/M Dec A -0.20% | C -0.20% | P 0.00%

CAD       CPI Y/Y Dec A 1.20% | C 1.40% | P 0.90%

CAD       BoC CPI Core M/M Dec A -0.40% | C -0.50% | P -0.10%

CAD       BoC CPI Core Y/Y Dec A 1.30% | C 1.30% | P 1.10%

Stay lucky

Andy