Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 107.809 | EURUSD 1.26988 | EURJPY 136.90 | AUDUSD 0.88022 | NZDUSD 0.78942 | USDCAD 1.12475 | EURCHF 1.20576 | USDCHF 0.94952 | GBPUSD 1.6120 | EURGBP 0.78778 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               108.00 | 107.77

EUR/USD             1.27155 | 1.2696

EUR/JPY               137.21 | 136.89

AUD/USD            0.8829 | 0.8796

NZD/USD             0.7909 | 0.7884

USD/CAD             1.1253 | 1.1242

EUR/CHF              1.20635 | 1.20555

USD/CHF             0.9500 | 0.9484

GBP/USD             1.6131 | 1.6112

EUR/GBP             0.7885 | 0.78755

For today

• EUR: Another quiet session with the market edging higher from the opening just below 1.2700 levels pushing again to the 1.2715 levels and again running into offers and stalling on light volumes. Light selling moved in once we’d been to the highs and the market moved back to the 1.2700 levels holding quietly with only the FOMC later in the week to focus on, while we wait for that day, we have Durable goods and consumer confidence. Topside offers remain in place with a move through 1.2720 struggles into waiting offers and impetus through 1.2740 even through there the next 50 pips are likely to see plenty of two way with a bias to offers and into the next tough area with the offers continuing deep into the 1.2800 handle, a push through the 1.2850 level is likely to open up a larger move higher negating the 3^rd quarters move down. Downside bids finds the first set of bids through the 1.2650 level with limited depth to those bids to the 1.2620 levels, a move through the 1.2600 levels the market is likely to struggle only slightly before the 1.2580 level gives way to weak stops, and an opening to the 1.2500 lows of the year.
• GBP: A steady push higher found limited offers in the 1.6130 area to eventually turn the market lower however, the move seemed more cross driven than straight GBP however, the range has been limited with the market opening in the 1.6115 areas so another quiet Asian session. The topside has limited offers running to the 1.6150 levels with a push through the level likely to see stops and a run to the better offered 1.6180-1.6200 areas, as with the Euro, a push through the next level of 1.6250 opens up the topside for a larger move and a step into the 1.6300-1.6500 range from late last month. Downside has been well traversed over the month with light bids around the 1.6050 levels and 1.6000 the latter being weak and opening up a deeper move.
• JPY: With the Japanese government it further troubles the market seems reminded of the last time PM Abe was in power that one saw 4 resignations and a dwindling popularity however, the government scandals keep a coming, with 2 already gone and 3 in waiting however, to be fair one of those finds himself attached to activists spending political funds on a less than politically correct establishment and no direct involvement. A large retail sales number leads to the previous with this number indicative of less impact on the economy of the consumption tax that was introduced in April however; early plans to again increase this tax may come under pressure as being unpopular and coming straight on top of 2 resignations and rather salubrious goings on with in the government. The net effect today was the market was able to make headways in the early part of the session after the numbers with the market seeing limited implications from the tax, moving from the opening 107.85 levels the market touched to the 108.00 level before the next story came out reversing the gains and sending the market to below the 107.80 level before holding quietly for the balance of the session.  Topside offers remain intact and although we keep trading through the 108.20 levels the range players keep offering into any rises above that area with weak stops behind the expected stronger offers to the 108.40 levels, above will likely see better stops however, the run to 109.00 is not paved in gold with offers likely to appear from the 108.70 levels and likely to run deep to above the 109.20 level before opening up a further test of 110.00. Downside has a different picture what could have been termed a reverse head and shoulders from the middle of the month has run its course in its limited way and the market is open to the downside with the yield players seemingly more quiet as the month end rolls towards us, bids into 107.80 has pinned the market over the past 24hrs however, a move through that level is likely to see light bids appearing from the 107.30 levels and through to the 106.80 areas before giving way to likely medium term stops and while the BoJ, MoF have been active on the moves early in the month to 110.00 they will likely appear again if the move lower is sharp especially as the internal market and smaller exporters are benefitting at the moment from the weak Yen.
• AUD: With no data the market in the Oz has been dominated by the carry trade for most of the session moving with the USDJPY to flatten out the AUDJPY carry. Dipping in early trading from the opening just above the 88 cent level the downside was limited before the change of fortunes and a strengthening JPY, the reversal sent the market higher in Oz however, the topside offers in the 0.8830-40 area are heavy with range plays adding to the natural offers and a move through the level would likely see a combination of weak stops, the stronger offers are likely to be more concentrated towards the 89 cent level where the market moved to earlier in the month with the likelihood of some short term option interest in that area, a break here though would see breakout plays appearing in the market and the market opening up to the 0.9050 areas at least. Downside is still pinned there is enough room to head back into the low 87 cent level with some light stops possible through 0.8750 levels however, the market would then run into strong bids from around the 0.8720 area onwards building in size into the 0.8660-50 areas as a key level in the market, a break here opens up a move to the 0.8300 areas and happy days for the RBA.

Overnight News

JPY:

BOJ’s Kuroda warns against delaying second sales tax hike

BOJ’s Kuroda: No pre-set deadline for QQE

BOJ’s Iwata: Uncertainty exists on timing for meeting price goal

BOJ Expected to Cut FY 2014 Real Growth Forecast to 0.6%: Nikkei

Japan LDP Finance Head Adds to Calls for Delay in Sales-Tax Rise

Japan FinMin: to consider stimulus steps after examining Q3 data

Japan Sep Overall Retail Sales +2.3% on Year

Abenomics Failing to Turn around Japan Economy: IMF’s Shinohara

Man Tested Negative for Ebola in Japan, Health Ministry Says

JPY/INR:

Softbank Group to Invest $627m in Snapdeal

CNY:

China May Approve 3 More Free-Trade Zones This Year: Reuters

AUD:

Australia ANZ Weekly Consumer Sentiment Rises 2.7% to 114.6

RBA Researchers Say GDP Volatility Is Mostly Measurement Error

NZD:

N.Z. Tourism Contribution to Economy Falls to 7.1% in 2013-14

Today’s data

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

JPY         Retail Trade Y/Y Sep A 2.30% | C 1.00% | P 1.20%

07:00     EUR        German Import Price Index M/M Sep C -0.10% | P -0.10%

12:30     USD       Durable Goods Orders Sep C 0.30% | P -18.20%

12:30     USD       Durables Ex Transportation Sep C 0.50% | P 0.70%

13:00     USD       S&P/CS Composite-20 Y/Y Aug C 5.70% | P 6.80%

14:00     USD       Consumer Confidence Oct C 87 | P 86

Harry Hindsight              

• EUR: Most of the day has been dominated by the paring back of USD longs mostly through the USDJPY, moving from an opening 1.2675 levels the market moved steadily higher in the Asian session to press above the 1.2710 levels before running into the offers from the 1.2720 areas which held the market. The move into the London session saw a cooling off of the Euro as the IFO German numbers came in weaker than expected leaving the market moving down to hold around the 1.2690 levels before giving ground and dropping back to Fridays close around the 1.2670 levels. A drop in the pending home sales seemed be the catalyst for USD selling moving the market smartly off the 1.2680 levels as USD sellers moved into the market in NYK and pushed the market back to the highs with a brief spike through the 1.2720 levels, the market held around the 1.2710 levels for a good portion of the NYK session before slowly starting to give ground as the London session finished and the range players cut there longs sending the market back to the 1.2700 and unable to push through that topside resistance.
• GBP: A steady rise throughout the day until the final couple of hours as the only headline pieces today was the CBI numbers less than expected and the tantrums over the £1.7b payment expected by the EU on 1^st December, I suppose that’s what you get when you oppose the nomination of a person who gets the EU presidency anyway. Moving from an opening in line with Fridays close around the 1.6085 areas the market moved steadily to above the 1.6100 levels through the Asian session with little volume to speak of the market stalled on a wider range through the London session peaking just above the 1.6120 levels in early trading and holding between there and just below the 1.6100 level for the move into NYK. US numbers had a similar effect on the Cable with the market pushing quickly back to the 1.6120 level and triggering weak stops on the move through the level to trade quickly to the 1.6140 level, there was a further push through the level as the market focused on the level but having pushed through and triggered light stops the profit takers turned the market back below 1.6140 and the market spent the rest of the session drifting back to close some 15 pips adrift of the highs. After weak gains in the EURGBP for the Euro as the market ignored the bank stress test either through the idea that the measure showed a better level of risk management across the EU banks or in the case of some an irrelevance as the measure is less than useful. In the end the EURGBP only managed to push to the 0.7890’s from the opening 0.7875 before the limited movement was pared back into the London session as Cable held onto its gains and continued to rise through the session and Euro gave ground after at best meagre IFO numbers. The market moved back through the opening levels and eventually dipped through the 0.7865 level to set the lows before finishing the day almost unchanged from Friday.
• JPY: A steady decline from a higher opening however, the markets pre-market period saw the market driven from an unchanged opening to the official 108.30 levels on opening. The market saw continual selling coming in from corp and longer term players giving the market some semblance of volume during the Asian session before dipping on the Tokyo opening to push quickly to the 108.10 levels. The market continued moving lower as USD longs in the retail market started to cut some of their shorts rather than wait for the usual rush in the lead up to the FOMC. A little bit of support through the 108.00 level then held the market into early London with light buying from the end of Tokyo helped the market to move back above the 108.00 levels if only briefly before strong selling moved into the market. London held the market around the 107.80 levels for much of the session with only the weak US data left for the day and this took the market to just above the 107.60 level. Light profit taking from the range play sellers above the 108.20 levels saw the ending few hours with USDJPY slowly creeping back to the 107.80 levels but the end was a quiet affair.
• AUD: The Oz was contained in a fairly tight range over the course of the day. The market opened around the 0.8800 level before heading steadily higher to above the 0.8820 levels and holding around those levels into the London session as the AUDJPY cross holding around the 95.00 levels and back into the stable areas from the beginning of the month. As a favourite of the range players the market was sold into the London session taking the market down to the 0.8790 level for the first time and repeated in 3 further moves having pushed to the 0.8815 areas over the course of the day, this defined the range for the day and close was little different than the opening. No real news out to affect the market per sae however, more and more are questioning the Chinese export figures specifically export and import numbers to and from Hong Kong, this is likely to read in the GDP figures and looks more like movements of funds rather than real material movements, whether this inflation of numbers is likely to impact of the Oz fundamentals remains to be seen.

Yesterday’s premiership results

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

JPY         Corporate Service Price Y/Y Sep A 3.50% | C 3.50% | P 3.50%

EUR        German IFO – Business Climate Oct A 103.2 | C 104.8 | P 104.7

EUR        German IFO – Current Assessment Oct A 108.4 | C 110 | P 110.5

EUR        German IFO – Expectations Oct A 98.3 | C 98.9 | P 99.3

EUR        Eurozone M3 Y/Y Sep A 2.50% | C 2.20% | P 2.00%

GBP       CBI Reported Sales Oct A 31 | C 35 | P 31

USD       Pending Home Sales M/M Sep A 0.30% | C 1.00% | P -1.00%

Good Luck,

Andy