Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 102.491 102.50-60 | EURUSD 1.37379 1.3724-45 | EURJPY 140.789 140.67-141.02 | AUDUSD 0.89754 0.8980-85 | NZDUSD 0.82807 0.8266-0.8300 | USDCAD 1.1114 1.1110-1.1115 | EURCHF 1.21982 1.2189-1.2207 | USDCHF 0.88787 0.8865-85 | GBPUSD 1.66171 1.6615-35 | EURGBP 0.82668 0.8246-72 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               102.68 | 102.165
EUR/USD             1.3743 | 1.37285
EUR/JPY               141.04 | 140.325
AUD/USD            0.8987 | 0.8938
NZD/USD             0.8289 | 0.8259
USD/CAD             1.1143 | 1.1101
EUR/CHF              1.2195 | 1.2187
USD/CHF             0.88815 | 0.8869
GBP/USD             1.6648 | 1.6616
EUR/GBP             0.8265 | 0.8253

Overnight News

CNY:

China confident can maintain same growth pace in trade this year

China Should Cut Yuan Intervention, Researcher Says: China Daily

China Weakens Yuan to Curb Speculation, Market News Says

China Jan home prices rose 9.6% YoY

China Property Stocks Fall after Report of Loan Tightening

China Average Disposable Income up 8.1% in 2013

JPY:

Abe Says Japan’s GPIF Must Find Way to Manage Funds Flexibly

USD/JPY:

Sands CEO says will spend “whatever it takes” for Japan casino

NZD:

Key Says Minimum Wage Increase Shouldn’t Pressure RBNZ

GBP:

BOE Governor Carney Says in No Rush to Raise Interest Rates: ABC

UK’s Osborne says ready to provide assistance to Ukraine through IMF, EU

For today

• EUR: The opening was in line with Friday’s close around the 1.3740 area. The market while a little more active than Friday’s Asian session still struggled to move in any definitive direction, with selling appearing in the EURJPY into the Tokyo session pushing the Euro to below 1.3730 briefly before the market slowly rose back to above the 1.3740 level to set the range for the moment. With a few weak stops now showing through the 1.3750 area and into the 1.3780 levels the market meets its first resistance level from then until just beyond the 1.3800 area with a few break out stops appearing beyond 1.3820. Light bids to the downside around the lows to 1.3700 with weak stops behind give you an idea of why we are stuck in a tight range with no clear indication.
• GBP: Cable has been a steady gainer however, the market is still quiet and from the opening just above the 1.6630 level we have only managed to push some 15 pips higher, with the market now below the 1.6650 levels technically we should be looking for a move lower however, generally speaking this is in the face of the fundamentals. Topside has light offers from the 1.6680 to 1.6700 levels now weak stops behind the level with stronger offers the closer you get to 1.6800. The downside is just as mixed though with bids from the 1.6620 levels into 1.6600 and then weak stops below, 1.6550 has light bids however, a break beyond 1.6500 opens up a deeper move to the 1.6200 handle, however, I’m still not overly convinced about going against the better numbers.
• JPY: Having managed to push a little higher in the NYK session on Friday, it would seem the sellers appeared today from the retail side with the market opening around the 102.50 the market rallied into early Tokyo pushing to the 102.70 levels however, the offers taken out during Friday’s session were replenished and the market was unable to push through them and started to reverse lower, with the Yuan fix again climbed for the 4^th day in a row with comments from the PBoC on reducing abundant liquidity not helping some of the markets the USDJPY slowly moved lower squeezing down through the 102.50 levels and clearing some small stops, the market eventually found some support around the 102.20 levels for the moment and holds just off the lows. Some light mix in the 102.70 levels before offers appear to the 103.00 level and then an increase in offers from there 59 103.30 area in front of some better stops. Downside has support now around the 102.20 areas to 102.00 before giving way to stops through to 101.80, while one would expect the stops to continue the market looks a little mixed from then on until the 101.30 area where support appears with bids becoming larger the closer to 101.00.
• AUD: The Oz initially moved up from the lows just after the opening, trading into Tokyo just above the 0.8985 level but a China fix with comments sent the pair lower and AUDJPY selling kicked in as USDJPY dropped back combining to set the lows just below the 0.8940 areas before rebounding. With onshore and offshore disparity to be tightened to cramp speculative bubbles the market in the AUD again began to move back to the opening levels around the 0.8975 levels before moving into the grey hours. With mixed interest now above the 0.9030 level there does not seem to be much in the way of a clear indication until you start to move closer to the 91cent level where clear strong offers rest. The downside has light bids from the lows to the 89 cent level with light stops below them and a repeat pattern down around the 88cent area.

Today’s data

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

09:00     EUR        German IFO – Business Climate Feb C 110.6 | P 110.6

09:00     EUR        German IFO – Current Assessment Feb C 112.9 | P 112.4

09:00     EUR        German IFO – Expectations Feb C 108.2 | P 108.9

10:00     EUR        CPI M/M Jan C -0.40% | P 0.30%

10:00     EUR        CPI Y/Y Jan C 0.70% | P 0.80%

10:00     EUR        CPI – Core Y/Y Jan C 0.80% | P 0.70%

Weekend News

G20:

G-20 Backs Accommodative Policy as Target Set of Higher Growth
CNY:

Economic Growth at 7%-8% Suitable for China: PBOC’s Zhou
China’s Lou Says Yuan Fall Last Week ‘Within Normal Range’
China to Boost Investment, Consumption Via Urbanization
PBOC’s Yi: Recent Emerging-Market Turmoil Related to Fed Taper
Lou: China Shadow Banking Risks Smaller Than Western Countries
Zhou Rejects Chinese-Growth Concerns as G-20 to Meet in Sydney
China Moves Toward Allowing More Yuan Loans From Overseas
USD/CNY:

Obama Meeting With Dalai Lama Shows Balancing Act in China Ties
GM Says China Auto Sales May Rise as Much as 10% This Year
EUR:

Draghi Says ECB Is Ready to Act If Needed on Inflation
Spain’s Rating Raised to Baa2 by Moody’s Amid Structural Changes
Rehn Says Europe Recovery Accelerating as Domestic Demand Grows
Moscovici Says Emerging Markets Not at Risk of Crisis from Taper
JPY:

Kuroda: Told G-20 Japan Already Working on Growth Strategy
Japan’s Aso Says Emerging Nations Need to Fix Their Own Problems
Japan Insurers Face 60 Billion Yen Claims on Snow Damage: Nikkei
Fukushima Leak May Have Been Caused by Mishandling, Yomiuri Says
USD:

Health-Care Law Making Progress, New Hampshire Governor Says
Bullard Says He May Push Back Forecast for Rate Increase in 2014
GBP:

U.K.’s Osborne Says Global Tax Rules Not Fit for 21st Century
GBP/AUD:

U.K.’s Osborne Says Australia Right to Push for Spending Cuts
NZD:

Fed Tapering Could Hurt New Zealand via Trade, English Says

Harry Hindsight

• EUR: A quiet session for the first half with the market moving in a very tight range through the Asian session barely breeching 1.3715 on the downside and 1.3720 on the top, early players bought smalls in the grey hours to push it to the 1.3725 levels only for it to be sold lower after the move to the 1.3710 levels and into the official London opening. With little in the way of data expected on the day the market held to the widened ranges for the most part dipping to the 1.3705 levels a few times and then into NYK, A analysts at a particular French bank indicated that the ECB are expected to start purchasing bonds over the second half of the year to combat deflationary risk, a tall order if they have the willpower to do it, the market took it in its stride and although we saw a minor short squeeze through the 1.3725 level to top just short of 1.3760 the highs were short lived before dropping back again before settling in around the 1.3740 levels for the close. Both Spain and Italy’s debt rates were increased by Moody’s during the day however, both had limited impact on the market.
• GBP: There was a little more movement in the Cable opening around the 1.6655 area the market slowly moved lower over the course of Asia to below 1.6640 from the highs above the 1.6660 level. Only once we moved towards London did the market start to move higher into the 1.6690 level as the London session opened. While the market expected a poor set of numbers it wasn’t quite prepared for those it got and the market dropped quickly on their release to below 1.6620 before recovering however, the market took it in its stride and the knee jerk reaction out of the way saw the market recover to spend the next few hours in the 1.6660-90 range before moving higher on the upgrade of Italy and Spain before the market turned against GBP with EURGBP buying come to the fore and Cable was forced from the highs above the 1.6720 level to the 1.6620’s, the EURGBP had been holding around the 0.8220 levels before moving quickly to above the 0.8260 area and into a close above the 0.8265 levels as Euro buying across the board pushed GBP lower. Cable eventually closed on its lows unable to bounce much beyond the 1.6640 level.
• JPY: USDJPY moved firmly on the opening in Tokyo and by the fix the market touched above the 102.50 levels from the opening 102.30 which given the state of the rest was a large move in comparison, the market pulled back a little before rising to stop around the 102.60 levels towards the end of the session to set the highs from the low opening. The grey hours saw a replication of the early move towards the topside and just as before a failure at the level with plenty of leveraged types willing to sell into any rally in front of the 102.70 levels where good offers remain. Having now failed twice at the same level the market slipped back to consolidate before moving into the NYK session. Again there were a couple of attempts at the topside before the third one broke through and set up a little bit of a squeeze to the 102.80 levels before the fresh level of offers defeated the market and we started to drift over the next 6hrs into a close around the 102.50 levels.
• AUD: The Oz in late NYK had tried to recoup some of its losses over the previous 24hrs and although we entered the Asian session above the 0.9010 levels, early sellers of AUDJPY as USDJPY rose pushed the Oz lower to the 0.8990 levels and for several hours the market remained in a very tight 0.8985/95 range. A couple of breaks back above the 0.9000 levels met with the same reaction of AUDJPY selling coming through that once we entered in to the London market the topside was limited to say the least and we started to move lower again once the USDJPY tried to break higher in NYK with the Oz moving down to the 0.8950 levels and holding that as a base line eventually into a close around the 0.8970 levels.

Friday’s premiership results

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

GBP       Retail Sales M/M Jan A -1.50% | C -0.90% | P 2.60% | R 2.50%

GBP       Public Sector Net Borrowing (Pounds) Jan A -6.4B | C -9.3B | P 10.4B | R 9.0B

CAD       Retail Sales M/M Dec A -1.80% | C -0.50% | P 0.60%

CAD       Retail Sales Less Autos M/M Dec A -1.40% | C -0.10% | P 0.40%

CAD       CPI M/M Jan A 0.30% | C 0.10% | P -0.20%

CAD       CPI Y/Y Jan A 1.50% | C 1.30% | P 1.20%

CAD       BoC CPI Core M/M Jan A 0.20% | C 0.10% | P -0.40%

CAD       BoC CPI Core Y/Y Jan A 1.40% | C 1.30% | P 1.30%

USD       Existing Home Sales Jan A 4.62M | C 4.75M | P 4.87M

Stay lucky

Andy