Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 102.508 | EURUSD 1.36269 | EURJPY 139.685 | AUDUSD 0.92658 | NZDUSD 0.84242 | USDCAD 1.0907 | EURCHF 1.22151 | USDCHF 0.89637 | GBPUSD 1.67489 | EURGBP 0.81361 |

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               102.80 | 102.51

EUR/USD             1.3631 | 1.3609

EUR/JPY               139.965 | 139.645

AUD/USD            0.9299 | 0.9253

NZD/USD             0.8446 | 0.8412

USD/CAD             1.0937 | 1.0907

EUR/CHF              1.22235 | 1.2214

USD/CHF             0.8980 | 0.8963

GBP/USD             1.6752 | 1.6719

EUR/GBP             0.8142 | 0.81345

For today

• EUR: The Tokyo opening saw immediate selling of the Euro as Japanese retail starts to cut EURJPY longs either for profit taking with Thursday in mind, dropping it from the 1.3630 levels to the 1.3620 in a quick move, the rest of the day has been a steady decline as two Euro area central bank officials made statements along the lines of Draghi poised to keep rate cut option even after June, so two things could happen Thurs rate cut will be a paltry 10 bps leaving a spare 15 to play with in 20yrs time. Or he’ll do the right thing and go to ZIRP. For the moment the market holds around the 1.3610/15 levels with bids into the 1.3580 levels with expected stops through the 1.3560/70 levels, topside offers around the 1.3650 and increasing in size with only minimal stops appearing, 1.3700 sees stronger resistance and then mixed and patchy thereafter.
• GBP: Cable followed the Euro lower moving from above the 1.6750 level in a steady drift lower helped in part by GBPAUD cross selling in a thin market, holding the 1.6720 levels into the back end of the session. For the moment the market is trapped between the 1.6720/80 levels with the downside for the moment looking the weakest a move through 1.6680 will see light stops before running into further congestion around 1.6650. Topside offers from 1.6780 into the 1.6800 levels as top pickers await a move to refresh shorts, with weak stops likely behind the 1.6820 areas.
• JPY: The USDJPY continued its steady rise moving up 5/10 pips each time through the session to eventually run into the resistance levels around the 102.80 area. Stops are likely to be behind the 103.20 levels with plenty of offers in between. Downside sees light bids into the 102.55 levels where the market struggled on the move up with weak stops below the level before a return to better bids in the 102.10-101.90 areas.
• AUD: The Market opened around the 0.9265 levels and drifted lower in front of the GDP numbers, dipping to below the 0.9255 level in a slow move the market quickly reacted to a better than expected figure coming in at 1.10% and above expectations, the reaction was quick with the market moving quickly to just below the 93 cent level as top pickers backed out and the quick machines jammed the market, it instantly dropped back to the 0.9285 levels as the offers quickly moved back in on the failure to move through the levels and then triggered weak stops on the move back through the 0.9280 levels an hour later to move into the grey hours little changed on the day. Offers remain around the 93 cent levels however, one would guess not as thick as they were as traders watch nervously, stops are likely through the 0.9330/40 areas but again it’s not far before the offers dominate the market again, getting stronger as the market moves towards the next big figure. Downside bids light around the 0.9250 levels before better bids appear from the 0.9220 levels and into the figure.

Overnight News

AUD:

Australia’s economy gathers pace, but confidence still lags

Mining exports drive growth

JPY/USD:

Dai-Ichi Life to buy Protective Life for $5.7B

JPY:

Japan sees trouble ahead for public pension – WSJ

EUR/USD:

France warns of consequences if the US fine BNP Paribas the suspected $10B+ for breaking sanctions

Today’s data

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

GBP       BRC Shop Price Index Y/Y May A -1.40% | C -1.30% | P -1.40%

AUD       GDP Q/Q Q1 A 1.10% | C 0.90% | P 0.80%

08:00     EUR        Eurozone Services PMI May (F) C 53.5 | P 53.5

08:30     GBP       Services PMI May C 58.2 | P 58.7

09:00     EUR        Eurozone GDP Q/Q Q1 (P) C 0.20% | P 0.20%

09:00     EUR        Eurozone PPI M/M Apr C -0.10% | P -0.20%

09:00     EUR        Eurozone PPI Y/Y Apr C -1.20% | P -1.60%

12:15     USD       ADP Employment Change May C 208K | P 220K

12:30     USD       Trade Balance Apr C -$40.6B | P -$40.4B

12:30     CAD       International Merchandise Trade (CAD) Apr C 0.10B | P 0.08B

12:30     USD       Non-Farm Productivity Q1 (F) C -2.60% | P -1.70%

12:30     USD       Unit Labour Costs Q1 (F) C 4.80% | P 4.20%

14:00     CAD       BoC Rate Decision C 1.00% | P 1.00%

14:00     USD       ISM Non-Manufacturing Composite May C 55.5 | P 55.2

14:30     USD       Crude Oil Inventories P 1.7M

18:00     USD       Federal Reserve Beige Book

Harry Hindsight

• EUR: With little data and the ECB meeting Thursday to come the market was very quiet over all with a narrow range for the day. Asia kicked off the day starting below the 1.3600 level and trading quietly to push it too the 1.3605 level in very limited action. The move into London saw an early test lower with the Eurozone Advanced CPI estimate dipping to 0.50% below the expectations, this sent the Euro to below the 1.3590 level to set the low however, the support area remains intact and a minor short squeeze ensued into the US numbers which saw a rise in factory orders but insufficient to stop the rise in the Euro to test the topside of 1.3650 in a similar range and pattern to Friday. The market eventually ran out in mid-range but away from the 1.3580 levels for the moment.
• GBP: The Cable spent a quiet Asian session moving around the 1.6745 in very quiet trading even for this pair. The grey hours saw the market start a rally running and London stepped in and the market moved steadily into the offers above the 1.6780 levels and seemed to be more cross related against the Euro, with the cross drifting back to below 0.8110 and seems real money related. Although the Construction PMI fell short of expectations it was still in the positive side of the market and had little impact on a quiet day over all. The move lower was just as quick (not) drifting over the next couple of hours back to the 1.6745 levels before drifting into the NYK session. The low was posted just before the London close as the drift moved the market to the 1.6730 areas before finding a little support and running out little changed on the day.
• JPY: USDJPY struggled during Asia having pushed higher and through the 102.00/20 offers the previous day it just never got going from the opening 102.35/40 areas and stalled each time it rose to 102.45, having made a couple of attempts early in Tokyo the market gave up and it drifted to the lows just below 102.30, London cross buying against the Yen helped the pair again to the 102.45 and only the combined work of London and NYK pushed it through the level however, it would seem that the market had similar offerings at each 5 pip level stalling at 102.50 and again 102.55 where the market close unable to push any further into the late session.
• AUD: Limited but whippy at times, the AUD opened around the 0.9245 level and spent the early part of the session drifting only slightly lower into the numbers. The release of a weaker retail sales number was then countered by a less than accommodative Q1 current account balance whipping the market to a new low of 0.9230 before running back above 0.9255 and down again, once the lashing around was over with the market steadily picked itself up and moved steadily higher and into the RBA announcement, as expected no change and a reiteration of previous months of a period of stability for interest rates, again the market moved higher to above the 0.9260 levels and then a steady rise into the London session. The market topped out above the 0.9285 levels before starting a steady dip lower over the rest of the session. The day ended with the market again pushing through the 0.9250 levels before finishing the day in a steady rise to the 0.9265 levels.

Yesterday’s premiership results

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

NZD       Terms of Trade Index Q/Q Q1 A 1.80% | C 2.00% | P 2.30% | R 2.50%

JPY         Monetary Base Y/Y May A 45.60% | C 51.20% | P 48.50%

CNY        Non-manufacturing PMI May A 55.5 | P 54.8

AUD       Retail Sales M/M Apr A 0.20% | C 0.30% | P 0.10%

AUD       Current Account Balance (AUD) Q1 A -5.7B | C -7.0B | P -10.1B | R -11.7B

JPY         Labour Cash Earnings Y/Y Apr A 0.90% | P 0.70%

CNY        HSBC China Manufacturing PMI May (F) A 49.4 | C 49.7 | P 49.7

AUD       RBA Rate Decision A 2.50% | C 2.50% | P 2.50%

GBP       Construction PMI May A 60 | C 61 | P 60.8

EUR        Eurozone CPI Estimate Y/Y May A 0.50% | C 0.60% | P 0.70%

EUR        Eurozone Unemployment Rate Apr A 11.70% | C 11.80% | P 11.80%

USD       Factory Orders Apr A 0.70% | C 0.50% | P 1.10%

Good Luck,

Andy