Daily FX Market Commentary

Andy Harrison

Good morning,

 

LMAX Close

USDJPY 106.20 | EURUSD 1.29382 | EURJPY 137.406 | AUDUSD 0.92033 | NZDUSD 0.82265 | USDCAD 1.0983 | EURCHF 1.20696 | USDCHF 0.93285 | GBPUSD 1.61064 | EURGBP 0.80331 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               106.525 | 106.04

EUR/USD             1.29515 | 1.29225

EUR/JPY               137.65 | 137.33

AUD/USD            0.9218 | 0.9157

NZD/USD             0.8267 | 0.8231

USD/CAD             1.0985 | 1.0958

EUR/CHF              1.2076 | 1.20665

USD/CHF             0.9343 | 0.93195

GBP/USD             1.6139 | 1.6100

EUR/GBP             0.8037 | 0.8019

 

For today

  • EUR: The Euro opened around the 1.2940 areas and moved quietly into the Tokyo session before seeing a slight rise and another test above the 1.2950 levels with a similar reaction to the previous attempt in late NYK, with insufficient impetus to push ahead the market again fell off for the level and extended down through the opening levels and into the mid 1.2920’s through to the grey hours with early trading to the topside being fairly brisk in matching flows. For the moment offers above the highs hold in place and there are not likely to be much in the way of stops until through the 1.2980 levels however, sentimental levels are likely to hold offers and limit topside movement. Downside the market will likely to see light bids to the 1.2920 area and through with better bids from leveraged types around the lows 1.2870-60, with patchy bids from then on. Crosses are likely to be a dominant factor in any moves.
  • GBP: Cable opened around the 1.6110 level and after minor selling during the Sydney session the market eventually started to move higher pushing steadily through the early Tokyo session to just short of the 1.6140 levels before EURGBP selling and GBPJPY buying slowed to a trickle, from that point the market has slowly drifted back to the opening levels and has moved into the grey hours little changed on the day considering a better than average range for Cable. Topside light offers just above the highs and into the 1.6150 level with very little in the way of stops showing on the 1.6100 handle, better offers around the 1.6200 level with suspected stops likely above 1.6220-30 and a move into the gap created from Sunday/Monday opening. The downside sees light bids in the 1.6100 levels with slightly better around 1.6090 and thereafter similar every 10 pips or so to the 1.6070 levels were better bids are likely, through the 1.6050 area the market is likely to see only limited downside pressure, unless the Scots invade England with banners and pipes going forth, of course joking aside the least bit of news is likely to open the downside up like a can as the market runs for cover as we saw on the opening for the week.  EURGBP drifted away from the 0.8035 level and the 100DMA as profit taking continued into the Tokyo session and drove some of the movement particularly in the Euro leg.
  • JPY: After opening around the 106.20 level the market cautiously slipped back to test support around the 106.00-10 levels however, with AUDJPY selling moving into the market two ways flow was strong and the downside was eventually rejected as the AUD gave way and JPY selling could continue with a steady push through the 106.30 level a brief pause before further buying to take the pair above 106.50 as yield flows continue to take the market to fresh highs. EURJPY buying into the later part of the session also added to the pressure higher as the market pushed through the 137.50 levels that had limited the market in late NYK. Topside offers remain fairly strong all the way to the 107.00 levels now with little in the way of stops clearly defined. Downside has limited bids from the 106.10 areas and through to the 105.80 areas, weak stops are likely through this level however, as with previous moves to the downside JPY selling quickly materializes to limit the moves. The art of double talk reappeared today as Deputy Minister stated a weaker Yen was good for the Economy.
  • AUD: The Oz held its own in the early part of the session with the market opening just above the 92 cent level and making an initial if slow move towards the 0.9220 levels however, once the Consumer confidence number was released the market quickly moved lower trading to the 0.9270 levels and then slowly pushing through to rest on the 0.9260 areas into the grey hours. With the market through the 92 cent level the downside potential increases with the range opened to the 90 cent levels if the USD continues its move higher. Topside is now limited by the 0.9220 likely offers with weak stops behind the area with better offers into the 0.9280 areas and to 93 cent.

Overnight News

JPY:

BOJ’s Iwata: Current Japan Inflation Not Just Due to Weaker Yen

Weakening Yen Good for Japan Economy: Deputy Minister Nishimura

GPIF Should Put 10% of Portfolio in High-Risk Assets: Masuzoe

Japan Management-Investor Forum to Start in Autumn, Ito Says

Former Japan PM Mori Arranging a Meeting With Putin, Suga Says

Japan TPP Ambassador Says Limited Progress Made in Talks With US

Ota: Japan Should Raise Sales Tax, Barring Extreme Circumstances

Benefits of Further Yen Weakness to Be Limited, S&P’s Ogawa Says

Japan July Core Machine Orders Rise 3.5% M/M, Est. +4%

JPY/USD:

Ajinomoto to Buy U.S. Frozen Food Co. Windsor Quality for $800m

About 10 Japan Banks May Bid for Citi Japan’s Retail Ops: Asahi

JPY/IDR:

Mitsubishi May Invest $1b in Indonesian Auto Business: Post

CNY:

Yuan Rises to Strongest Since March on PBOC Fixing, Trade Excess

China Economic Data in Reasonable Range, IMF’s Zhu Min Says

China Trade Surplus May Keep Rising in Short Term: Sec. Journal

China to Enhance Check on Trade Financing: Securities News

SGD:

Singapore Economy May Expand 3.2% Y/y in 3Q, MAS Survey Shows

AUD:

Australia Sept. Consumer Sentiment Falls 4.6% to 94

 

Today’s data

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

JPY         Machine Orders M/M Jul A 3.50% | C 4.00% | P 8.80%

AUD       Westpac Consumer Confidence Sep A -4.60% | P 3.80%

12:30     CAD       Capacity Utilization Rate Q2 C 82.50% | P 82.50%

14:00     USD       Wholesale Inventories Jul C 0.50% | P 0.30%

14:30     USD       Crude Oil Inventories P -0.9M

 

Harry Hindsight

  • EUR: Euro’s opened quietly and traded deep into the Tokyo session before moving to the downside from just below the 1.2900 levels. Early Mid-East and Europeans began the selling pushing the market through the 1.2870 in a couple of moves, with weak stops triggered the market again started to slowly rise into the London opening. EURGBP selling from the opening in London from profit takers driving the cross from above the 0.8010 to below 0.7980 in the first hour or so with the majority of the pressure on the Euro saw the pair dip to the 1.2860 levels to make the low not seen since Jul 2013. UK numbers while decent in most areas the focus seems to have been on the Visible trade balance and GBP again lost ground to the Euro and the cross was back to the 0.80 levels and Euro was the beneficiary of the move, A lack of European and US data left the market to the vagaries of investors and the market started to see profit taking from some of the unsure shorts as the prospect of a sharp move higher had distinct possibilities with the downside movement having cleared the market of orders very quickly. Having broken through the 1.2900 level the market moved steadily higher triggering weak stops through the figure pushing slowly through 1.2920 and then hitting the next level of stops and to the 1.2950 levels before running into sufficient resistance to stop the rise and into a quiet close just off the highs.
  • GBP: A fairly choppy day overall however, contained to a certain degree. Opening around the 1.6100 areas the market dropped back from just above the levels to press below 1.6070 holding in quiet trading in Asia the market began to rise again only into the grey hours as EURGBP selling moved into the market. Cable began to rally steadily from this point pushing steadily into the London session and the addition of some reasonably decent numbers helped the market to the 1.6130 level, and the push through the level saw a small spike to just below 1.6160 as liquidity disappeared in an open market. The move back was just the same pushing back through the 1.6100 levels triggering the ubiquitous weak stops from the early buyers, the market moved down through to touch the 1.6060 levels to set an over extended range for the day. The market then spent the remainder of the session moving steadily back to above the 1.6110 into the close with GBP losing ground against the Euro.
  • JPY: USDJPY made only minor gains across the day with the market testing the topside however, verbal intervention from with both FinMin Aso and EconMin Amari hitting the wires to limit further rises in the USDJPY for the moment. Several attempts through the 106.30 levels met strong offers and willing sellers, the move into London again pushed through the level of 106.30 but failed at 106.40 area and the market started to slowly drift to the 106.10 areas. Fresh impetus from the NYK market again saw the market rise moving above the 106.40’s before failing again and holding the area until late in the session when buyers lost interest in the move and with pressure building in other pairs saw the USD coming under pressure.
  • AUD: The Oz traded quietly through the Asian session and for almost the whole of the London session, opening around the 0.9280 levels the market dropped to below the 0.9260 before slowly rising as buyers moved in, London saw the limited rally from the opening however, once the NYK session kicked off the market quickly dropped as futures sellers moved in taking the market down to below the 92 cent level with less difficulty than one would have imagined. Having reached the levels the markets held in the area for the rest of the day with very little movement considering the general USD weakness seen in the rest of the pairs.
  • CHF: With the EURCHF now pressing back under 1.2100 the market is becoming cautious about the possibility of a push to the 1.2000 and possible quick move through to trigger large stops from those already going long and those already long, on previous periods around that level in 2011 the market saw a few moves through that level triggering large stops before being countered by the out of line Swiss banks, this caused some discontent in the market and in particular the interbank space as several banks called lows beyond the levels that the Swiss agent banks for the SNB were supposed to be protecting, 1.2000. How can this occur, simple the Swiss banks were only visible in amounts insufficient to hold the level, either because the SNB had not authorised the amounts needed or they themselves were lax in holding the level. Whichever those caught by the run on stops felt aggrieved about being caught and several heated discussions about market practice ensued across the market, needless to say the bottom line in situations and a trusted measure is that the banks very rarely back down from a position they’ve been given and the market remains split on the highs and lows, unfortunately there is no arbitration committee within the interbank and the market agrees to disagree.

Yesterday’s premiership results

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

GBP       BRC Sales Monitor Y/Y Aug A 1.30% | C 0.30% | P -0.30%

JPY         Tertiary Industry Index M/M Jul A 0.00% | C 0.30% | P -0.10% | R 0.00%

JPY         Japan Money Stock M2+CD Y/Y Aug A 3.00% | C 2.90% | P 3.00%

AUD       NAB Business Confidence Aug A 8 | C 11 | P 10

AUD       Home Loans Jul A 0.30% | C 1.00% | P 0.20% | R 0.10%

JPY         Consumer Confidence Aug A 41.2 | C 42 | P 41.5

JPY         Machine Tool Orders Y/Y Aug (P) A 35.60% | P 37.70%

GBP       Visible Trade Balance (GBP) Jul A -10.2B | C -9.1B | P -9.4B

GBP       Industrial Production M/M Jul A 0.50% | C 0.20% | P 0.30%

GBP       Industrial Production Y/Y Jul A 1.70% | C 1.30% | P 1.20%

GBP       Manufacturing Production M/M Jul A 0.30% | C 0.30% | P 0.30%

GBP       Manufacturing Production Y/Y Jul A 2.20% | C 2.20% | P 1.90%

CAD       Housing Starts Aug A 192K | C 195.0K | P 200.1K

GBP       NIESR GDP Estimate Aug A 0.60% | C 0.60% | P 0.50%

 

Good Luck,

Andy

LMAX Exchange Market Commentary   AUDUSD   Andy Harrison  

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