Daily FX Market Commentary

Andy Harrison

Good morning,

 

LMAX Close

USDJPY 105.923 | EURUSD 1.28373 | EURJPY 135.982 | AUDUSD 0.8829 | NZDUSD 0.79412 | USDCAD 1.12529 | EURCHF 1.20675 | USDCHF 0.94011 | GBPUSD 1.60199 | EURGBP 0.80137 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               106.09 | 105.755

EUR/USD             1.2845 | 1.2810

EUR/JPY               136.235 | 135.675

AUD/USD            0.8831 | 0.8778

NZD/USD             0.7997 | 0.7958

USD/CAD             1.1274 | 1.1241

EUR/CHF              1.2078 | 1.20675

USD/CHF             0.9419 | 0.9398

GBP/USD             1.6022 | 1.5975

EUR/GBP             0.80275 | 0.8007

 

For today

  • EUR: The market opened around the 1.2840 levels and drifted lower from the opening and into the Tokyo session holding into the 1.2815 areas as cross Euro seemed to cause some early selling, the supply diminished as Tokyo moved in and Euro’s moved steadily to above the opening. One suspects the market is now unsure of which direction to move in and I suppose we wait for the next set of numbers. Has the market fundamentally changed not really and one can assume that the US will still be raising rates before the ECB. The dip in the World economy? While this may have a greater impact on the US it’s still balanced with the European economy, a falling commodity complex is a consequence of a strengthening USD to some extent so a weaker set of inflationary numbers could well be expected across all economies. The moves yesterday cleared the market to the 1.2900 levels and that now sets up the strongest resistance areas from the 1.2880 and through 1.2900 with stops likely beyond the 1.2930 levels and from there a likelihood of stronger offers building to the 1.3000 levels. Downside has limited interest into the 1.2800 levels and through that level until better bids around the 1.2750 levels. Further dips to 1.2700 will find a stronger area although the market has been well through but has roughly been the sticking point for the past month and likely to be a bit better defended. Dragi is expected to hit the wires again today and probably prompted by some of the usual countries bemoaning the strong Euro.
  • GBP: The Cable has steadily drifted from the opening around 1.6020 with the market less impressed with the GBP than say the Euro moving into the grey hours holding the 1.5980 areas and EURGBP still pushing smalls to the topside however, the economy in the UK has not really changed, there are some glimmers like yesterday’s employment figures. The real story apart from the USD move yesterday is the Abbvie/Shire bid with an expected bid of £32B becoming less likely so the market has lost the support this interest was likely to generate. Current levels see light support but with no tier 1 numbers for the day the market is likely to be at the mercy of the Eurozone CPI/Trade balance numbers and then the US figures later in the day. Better bids are not likely until the market moves to the 1.5920-00 levels with light bids moving into stronger ones through to yesterday’s lows around the 1.5880 levels. Weak stops are likely below there as the market enters new territory and an opening to the 1.5400 levels from last year.
  • JPY: USDJPY yesterday was a wakeup call for some of those Yield players that are in position as the extra % points they were looking for have just disappeared on the move as a day to day measure goes, however, the retail market was probably sorely unhappy with both equities and some of their favourite plays taking a hit which would explain the AUDJPY selling late into yesterday’s session and the quick reversal. Today has been a more steady affair with volume being reasonable given the ranges and a steady dip to the 105.80 levels reversed late into the session and a steady rise to 106.20 as the markets retail clients re-entered positions as margins were cut and calls answered. A push through the 106.40 area is likely to trigger some weak stops with offers to the level however, to the 107.00 levels is open with very little in the way from that point onwards though the market has probably attracted some topside sellers and 30 or 40 pips is likely to be a struggle without any fundamental change. Downside was opened up quickly yesterday and while there are likely to be bids into the 105.60 area the real support appears to be from the 105.20 levels and through onto the 104 handle with little in the way of stops likely for the moment.
  • AUD: The Oz maintains broadly speaking the 88cent level having stabilized after the USD drop yesterday and the selling in AUDJPY late into the NYK session, drifting from the 0.8835 areas back to a low of 0.8780 in early trading the market has continued to stay in touch with the 88 cent level as the day continued. How long before they start telling us that its overvalued again. A strong push through the 0.8840 level will see weak stops in all likelihood with better offers making an appearance probably from the 0.8860 level onwards and chatter hitting the markets probably just after that, 89 cent will be the ultimate target one supposes however, the offers are likely to be strong into that level. Downside has a light mixture all the way down into the 0.8720 areas were the bids will begin to stiffen providing more support through to the 0.8680 levels before real bids appear onwards, only a break through below the 0.8650 level will have any consequence for the Oz as the next step is cleared to open up 0.8300 and lower not seen for a few years.

 

Overnight News

USD:

Yellen voiced confidence in the durability of the US economic expansion

US budget deficit shrinks to $483B – treasury

CHF:

Swiss Govt. expects slower economic growth for this year and next at 1.8 vs. 2 and 2.4 vs. 2.6

CNY:

Foreign direct investments dipped YoY by 1.4% to $87.4 B

EUR:

Fitch places EU rescue fund on rating watch negative over French worries

France tests EU rules with 2015 budget, Italy also falls short.

Spain told by EU to recover corporate tax breaks

 

Today’s data

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

NZD       Business NZ Manufacturing Index Sep A 58.1 | P 56.5 | R 57

AUD       Consumer Inflation Expectation Oct A 3.40% | P 3.50%

05:45     CHF        SECO Economic Forecasts

09:00     EUR        Eurozone Trade Balance (EUR) Aug C 13.3B | P 12.2B

09:00     EUR        Eurozone CPI M/M Sep (F) C 0.40% | P 0.10%

09:00     EUR        Eurozone CPI Y/Y Sep (F) P 0.30%

09:00     EUR        Eurozone CPI – Core Y/Y Sep (F) C 0.70% | P 0.70%

12:30     CAD       International Securities Transactions (CAD) Aug C 4.31B | P 5.30B

12:30     USD       Initial Jobless Claims (OCT 11) C 285K | P 287K

12:30     CAD       Manufacturing Shipments M/M Aug C -1.80% | P 2.50%

13:15     USD       Industrial Production Sep C 0.40% | P -0.10%

13:15     USD       Capacity Utilization Sep C 79.00% | P 78.80%

14:00     USD       Philly Fed Survey Oct C 20 | P 22.5

14:00     USD       NAHB Housing Market Index Oct C 59 | P 59

15:00     USD       Crude Oil Inventories C 2.5M | P 5.015M

20:00     USD       Net Long-term TIC Flows Aug P -$18.6B

 

Harry Hindsight              

  • EUR: A day at the races and maybe the weekend commentary at the IMF/World bank conference was a forewarning of what was to come. Opening around the 1.2660 level the market gave ground slowly over the session selling over the course of the Asian period to the 1.2630 areas dipping just below before holding around the 1.2640 level deep into the London session. German CPI was a non-event unchanged and in line with expectations as the advanced numbers were released. The market eventually ticked a little higher and through the opening levels before the release of the US numbers. Retail sales and the PPI numbers blew the market away with nothing hitting its consensus and while not a major concern at this point, does suggest that the chances of an early rise in interest rates for the US are put further back however, given the strength in the USD and the movement of energy products and like the UK, inflationary pressure is likely to be on the weak side. The market reacted very quickly and violently, with the equity markets doing a considerable about of work and the EUR/USD was no different as the Euro pushed through the 1.2680 levels triggering minor stops and pushing steadily to 1.2780 for another round of bigger stops spiking the market with liquidity running out to just short of the 1.2900, with the topside cleared the market was now open to the move lower trading just as quickly back to the 1.2760 levels. Support then moved in to hold the market and a steady move higher to the 1.2780-1.2800 levels. The close of the London market left the market again vulnerable to liquidity problems and the market tested the 1.2840 levels before closing.
  • GBP: Cable had a mixed tone in early trading, moving from the opening 1.5900 levels before dipping through to the 1.5880 levels and a weak push through the technical levels of 1.5895 however, it was weak and the market moved off the lows trading back to hold above the 1.5900 areas. The move into London saw a steady push to the 1.5890 levels again however; the bids were in place the second time around and the market pushed a little higher as employment numbers again surprised for the better. The market traded quietly around the 1.5920 levels into the NYK session and the US releases. The move was strong pushing quickly to the 1.5980 level and through a limited resistance point to spike higher with stops being triggered all the way to the 1.6060 levels. The move back to 1.5980 was as quick as the rise, with the market talking of record volumes for the day in most of the USD pairings. The lack of anything from the 1.5920 level to 1.6060 left the market vulnerable to further declines weak stops through the 1.5940 saw the market collapse down through the 1.5880 levels and the waiting break out sellers in a false move created by a thin market the move back was steady and in line with what was happening elsewhere trading steadily from the London close to the 1.6020 areas.
  • JPY: USDJPY traded around the 107.20 levels for the Asian session with the market peaking in early trading to above the 107.40 levels from the opening areas around the 107.10. Strong end of weak USD buying was the main focus however, the market ran out of steam early in the session and reversed the gains and drifted through the open but only just. The move to London was again a gradual run higher pushing through the previous 107.40’s. London saw reasonable selling it to the opening levels holding and then starting a steady push through and to the 107.00 levels. While the market reacted sharply moving quickly through to the 105.20 before snapping back to the 106.40 levels once the run was finished with. The market then centred on the 106.00 levels for the rest of the session drifting in an ever tightening range as the volatility bled off.
  • AUD: The Oz was the less volatile of the pairs we talk about, moving quietly lower as USD rose in Asia to dip to the 0.8680 levels and close to the key support areas, the market pushed quietly off the lows and back to the 0.8720 area opening. Move into the grey hours saw light buying to take the market towards the 0.8750 levels but the market was not overly eager to push through and drifted back to 0.8720’s. The US release spiked the market to 0.8860 before drifting back to the 88 cent areas the market held the areas for a few hours before dipping to the 0.8720 levels as the AUDJPY carry trade broke down through the 93.00 level squeezing margins and turning the weak longs out this combining with equity falls would have caused some difficulties in the leveraged market. Once the run was over the Oz steadily moved back through the 88 cents and close to the 0.8840 levels and into the close.

 

So high volatility, high volume leading to liquidity issues or so the banks claim across the USD trading day, or a more likely scenario liquidity = volatility = high volume, liquidity issues = HFT stripping the market leaving the banks unwilling to set themselves up for pain.

 

Yesterday’s premiership results

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

AUD       Westpac Consumer Confidence Oct A 0.90% | P -4.60%

CNY        CPI Y/Y Sep A 1.60% | C 1.70% | P 2.00%

CNY        PPI Y/Y Sep A -1.80% | C -1.50% | P -1.20%

JPY         Industrial Production M/M Aug (F) A -1.90% | C -1.50% | P -1.50%

EUR        German CPI M/M Sep (F) A 0.00% | C 0.00% | P 0.00%

EUR        German CPI Y/Y Sep (F) A 0.80% | C 0.80% | P 0.80%

GBP       Jobless Claims Change Sep A -18.6K | C -35.0K | P -37.2K | R -33.2K

GBP       Claimant Count Rate Sep A 2.80% | C 2.80% | P 2.90%

GBP       ILO Unemployment Rate (3M) Aug A 6.00% | C 6.10% | P 6.20%

CHF        ZEW (Expectations) Oct A -30.7 | P -7.7

USD       Empire State Manufacturing Oct A 6.17 | C 20 | P 27.54

USD       Advance Retail Sales Sep A -0.30% | C -0.10% | P 0.60%

USD       Retail Sales Less Autos Sep A -0.20% | C 0.20% | P 0.30%

USD       PPI M/M Sep A -0.10% | C 0.10% | P 0.00%

USD       PPI Y/Y Sep A 1.60% | C 1.80% | P 1.80%

USD       PPI Core M/M Sep A 0.00% | C 0.10% | P 0.10%

USD       PPI Core Y/Y Sep A 1.60% | C 1.70% | P 1.80%

USD       Business Inventories Aug A 0.20% | C 0.30% | P 0.40%

Good Luck,

Andy

LMAX Exchange Market Commentary   AUDUSD   Andy Harrison  

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