Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 101.998 | EURUSD 1.38553 | EURJPY 141.314 | AUDUSD 0.93891 | NZDUSD 0.87183 | USDCAD 1.08799 | EURCHF 1.21869 | USDCHF 0.87962 | GBPUSD 1.67922 | EURGBP 0.82508 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               102.14 | 101.64

EUR/USD             1.3871 | 1.3845

EUR/JPY               141.555 | 140.795

AUD/USD            0.9440 | 0.9371

NZD/USD             0.8746 | 0.8711

USD/CAD             1.0902 | 1.0868

EUR/CHF              1.21905 | 1.21785

USD/CHF             0.8800 | 0.8783

GBP/USD             1.6821 | 1.6789

EUR/GBP             0.8250 | 0.8242

For today

• EUR: The day started quietly with the market opening for the Asian session around the 1.3855 levels, it held this level for a few hours into Tokyo and then Japanese banks were seen as buyers of both USDJPY and EURJPY taking the Euro higher with the help of the AUD numbers, Euro’s briefly moved above the 1.3870 level however, it then ran out of steam and moved back at a steadier pace. The drop back continued through the opening levels and pushing into the high 1.3840’s for a larger range that we’ve seen for a while in Asia. For the moment the market holds around the 1.3850 area as we move to the grey hours. Offers appear to the topside around the 1.3870/80 area with stops very close behind the level and rising to the 1.3900 levels. Above those the market is a little mixed to the 1.3930 area where another group of stops appear before the market starts to thicken with decent offers in the run towards the 1.4000 level, with option barriers and medium sized leveraged guys looking to fade the move. Weak stops appear below the 1.3810 areas and again through 1.3790 before the market is taken over with a mixture of light bids and patches of stops to the 1.3750 levels. For me the market is likely to hear more from ECB officials and individuals from the various countries that continue to struggle with a high Euro, saying that it did nothing for them yesterday.
• GBP: The market opened steadily however, with the chance of a new high for the year and possibility of stops being above it the market moved steadily higher through some limited offers to hit the proverbial brick wall just above the 1.6820 level and slightly short of the 1.6823 high from earlier in the year, having touched through the level the market slowly eased back towards the opening levels of 1.6790 area before holding as we move towards London around the 1.6800 level and another chance into London for the market to attempt a higher move. To be honest I’m always nervous of moves like this in Cable the market has used a fair bit of energy in getting here and a failure or a rogue piece of news could just as easily drop the market quickly lower however, apart from February when the market made its highs we have to look back to 2009 for the last time the market hit these levels always stalling in the 1.6500/1.6600 levels in the intervening years. With offers from the 1.6820 level onwards there still is a little wood to chop especially as leverage types will be looking to pick tops, and likely to see light offers all the way to the 1.6880 level where the real resistance level will be and stops through there will quickly open up the 1.7000 handle. Downside has very light bids with a mixture of weak stops in really no-man’s land until better bids appear around the 1.6720 levels, a break back through the level will see weak stops below the 1.6700 level and will signify a temporary halt to the rise. While the move higher has been fundamentally driven the move lower will be a technical move and/or loosely connected to movements in the Euro. EURGBP remains fairly buoyant considering the move overall in the Cable this year and for the Cable to continue the cross is either got to break below the 0.8100 level or Euro has to push through 1.4000, saying this if the Cable moves higher then manufacturing will start to struggle more than it currently is and the imbalance in the economic recovery will be blatantly apparent.
• JPY: From the opening early buyers pushed steadily from the 101.95 area onwards slowly initially but gathering pace as we move into the Tokyo session, Japanese banks were again seen as good buyers from the start in both the USDJPY and EURJPY pushing the USDJPY up to the 102.14 areas before the demand petered out and the market began to settle back, falling steadily to again test the 101.70 areas. A light mixture above the highs with no real winners until we move above the 102.40 levels where the bias is towards offers on into the 102.60 areas, weak stops appear above 102.80 but again they are light with several opportunities for profit taking have already occurred. Downside has a mixture also with a bias towards bids to the 101.60 level with a small gap before better bids start to appear from 101.50 thickening towards the 101.20 levels. Stops now start to make and appearance for a test below the 101.00 level, and while there is limited scattering of levels through the 101 level the real technical support would appear to be around the 100.10 areas.
• AUD: The Oz drifted from the start moving steadily lower from the opening 0.9390 levels as day traders picked tops, dipping into early Tokyo to the 0.9373 level before the data releases, Consumer inflation was slightly higher than expected however, as with every nation the concern has been declining inflation and this helped to lift the Oz from its lows and into the next two employment/unemployment. On the face of it the employment change was pleasing however, it would take me a day to try and unravel the methods used to find the ratios of how it is all calculated and even those that try to explain employment to population to vacancies to etc. leave me with glazed eyes, suffice it to say the market rallied quickly taking out the offers as if they were not there and touched above the 0.9440 levels, as the market digested the numbers and then dug out the individual pieces the Oz slowly turned from its highs and moved steadily back to the 94 cent level, it couldn’t break through and remains above the level. Topside now sees light offers from the highs to 0.9470 levels with larger suspected barriers from there into the 0.9500 level with negligible stops. The other way sees light bids around the 0.9400 level to 0.9390 then weak stops below that level and nothing special until another level of light bids below 0.9350 and again around 0.9300.

Overnight News

CNY:

China says March exports -6.6% on Year ago (Reuters poll +4.0%)

China says March Imports -11.3% on year ago (Reuters poll +2.4%)

China says March Trade balance +$7.7B (Reuters poll +0.9%)

China Customs say from May Exports. Imports will recover YoY growth, and enter stable growth stage

China Customs say this year, external environment will be better for trade

CNY: China exports fall for 2nd straight month in March

CNY: China Premier: Economic Growth Can Be Slightly Lower or Higher Than Target

CNY: China won’t resort to stimulus for temporary fluctuations: premier – XINHUN

CNY: China to Further Open Up Service Economy, Capital Markets: Li

AUD:

Australia adds jobs, unemployment drops unexpectedly

JPY:

Miyao: BOJ Easing Has Element of Being Open-Ended Program

USD:

Tarullo Says Fed’s Unconventional Policy ‘Critical’ to Recovery

NZD:

New Zealand March Manufacturing Activity Expands for 19th Straight Month

GBP:

U.K. March RICS House Price Index at 57 vs. Est. 43

Today’s data

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

NZD       Business NZ Manufacturing Index Mar A 58.4 | P 56.2 | R 56.5

GBP       RICS House Price Balance Mar A 57% | C 43% | P 45% | R 47%

JPY         Machine Orders M/M Feb A -8.80% | C -2.80% | P 13.40%

AUD       Consumer Inflation Expectation Apr A 2.40% | P 2.10%

AUD       Employment Change Mar A 18.1K | C 2.5K | P 47.3K | 48.2K

AUD       Unemployment Rate Mar A 5.80% | C 6.10% | P 6.00% | 6.10%

CNY        Trade Balance Mar A $7.71B | C $1.80B | P -$22.99B | -22.98B

06:00     JPY         Machine Tool Orders Y/Y Mar (P) P 26.10%

11:00     GBP       BoE Rate Decision C 0.50% | P 0.50%

11:00     GBP       BoE Asset Purchase Target Apr C 375B | P 375B

12:30     CAD       New Housing Price Index M/M Feb C 0.20% | P 0.30%

12:30     USD       Initial Jobless Claims (APR 5) (APR 5) C 320K | P 326K

12:30     USD       Import Price Index M/M Mar C 0.20% | P 0.90%

18:00     USD       Monthly Budget Statement Mar  C -$72.0B | P -$106.5B

Harry Hindsight

• EUR: Asia was the usual slow going for the Euro with very little going on, the market opened around the 1.3795 area and drifted lower through the 1.3790 and eventually touched the 1.3780 level into the grey hours having hovered around the 1.3790 level for the best part of the session. The move into London again saw good German trade balance numbers and the market moved steadily back above the 1.3800 levels but remaining below the offer area as the market held off for the FOMC. With the market gyrating around the 1.3800 level with no real testing of either side, even though several ECB members entered the fray pointing out the currency was too strong however, for the most part Messrs Rajoy (SP PM) Noyer and Bonnici all doing little to impact the market. NYK players started to buy into the run in to the FOMC as they became more convinced there’d be no faux pas from Yellen this time and that the interest rates would remain on hold for the foreseeable future, once the minutes were released the market rallied quickly in the Euro as a broad USD fall back occurred, nothing spectacular however, the buyers were proved right with commentary firmly placing interest rates on hold into the first quarter of next year, although there was arguments about ditching the connection to employment figures. The market reached the 1.3860 level pushing through some reasonable offerings before holding in the mid 1.3850’s into the close. As for the ECB they wanted to be a reserve currency. Also worth noting for the USD is the ever increasing inventories with the number being in line with expectations the worry now appears to be the monthly revision with last month’s number revised to 0.20% higher.
• GBP: The Asian session was a washout for most pairs as volumes continue to be reasonably poor. The market opened around the 1.6750 areas and remained in the area through into the grey hours slipping lightly back into the grey hours, the market in London was a little mixed and post visible trade the market dipped to the mid 1.6720’s were it met some light support. As with any number these days its more about the detail and while the number on the face of it looks good with a revision lower and a better number than expected the actual detail is less imports and the export business is not growing at all and the worst for several years and shows that the recovery is unbalanced and whether this remains sustainable remains to be seen. As the market digested the news the pair struggled to above the 1.6760 level and was unable to continue the rally into the NYK session where light profit taking and those weighing the numbers a little more carefully suppressed the Cable back to the 1.6740 levels. The FOMC as above caused the market to rally pushing through the 1.6800 level for the first time in a couple of months before holding steady around the 1.6790 levels into the close. EURGBP made up for yesterday’s losses to some extent however, the strength of GBP still holding the day somewhat with only meagre gains by the Euro.
• JPY: Technically the USDJPY market looks weak and after 5 days of gains we see 4 days of losses, but that is generalising and today probably proves a point as it has refused to step in any direction, moving through the Asian session slowly higher with reasonable two way flows going through to the grey hours and a high in the 102.16/18 areas, before slowly drifting back to the 102.00 line it spent so long grinding through. As with the other pairs in the NYK session the market seemed to have more sellers of USD’s in front of the numbers to slowly push it lower and USDJPY was no exception to the rule in a thin market and we tested to the mid 101.70’s before the number. The market recovered into the number somewhat before dropping on the release to the low 101.70’s and this time failing to push through on three separate occasions before bouncing back to 102.00 on what has become a very tight session for the pair.
• AUD: The Oz market was slightly weak from the opening moving from the 0.9360 levels and dipping into to Tokyo to 0.9350, the consumer number pleased as this was the first positive number in the last 4 and although the market failed to react we did start to see carry trade buyers buying into the lows causing a minor short squeeze in the pair. The Oz eventually broke higher again helped by a better than expected home loans number and continuing carry trade buying with USDJPY stuck around the 102.00 levels taking the Oz quickly to above the 0.9380 level however, the market stalled and with a 20 pip range from that point into London the market became a little stagnant. NYK were early sellers with the IMM leading the way with mostly leveraged types seen selling however, the market was unable to push through the 0.9350 levels and bounced of that level several times in the run to the FOMC, as with the other pairs the Oz was no different as the USD dropped quickly and the Oz was allowed to rise to just short of the 94 cent level triggering weak stops from early sellers, the market once the FOMC was out drifted somewhat with all the action behind and early Sydney guys moving in and selling lightly to finish the day around the 0.9390 levels.

Yesterday’s premiership results

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

GBP       BRC Shop Price Index Y/Y Mar A -1.70% | C -1.50% | P -1.40%

AUD       Westpac Consumer Confidence Apr A 0.30% | P -0.70%

AUD       Home Loans M/M Feb A 2.30% | C 1.50% | P 0.00%

EUR        German Trade Balance (EUR) Feb A 15.7B | C 17.5B | P 15.0B

GBP       Visible Trade Balance (GBP) Feb A -9.1B | C -9.3B | P -9.8B | R -9.5B

USD       Wholesale Inventories Feb A 0.50% | C 0.50% | P 0.60% | R 0.80%

USD       Crude Oil Inventories A 4.0M | C 1.0M | P -2.4M

Good Luck,

Andy