Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 112.336 112.42-45 | EURUSD 1.25232 1.2515-20 | EURJPY 140.684 140.30-81 | AUDUSD 0.87969 0.8740-45 | NZDUSD 0.77934 0.7756-60 | USDCAD 1.12661 1.1256-1.1274 | EURCHF 1.20559 1.2055-63 | USDCHF 0.96262 0.9602-48 | GBPUSD 1.59945 1.5970-1.6000 | EURGBP 0.78283 0.7820-44 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               112.985 | 112.42

EUR/USD             1.2517 | 1.2439

EUR/JPY               141.40 | 140.00

AUD/USD            0.8767 | 0.8703

NZD/USD             0.7785 | 0.7738

USD/CAD             1.1311 | 1.1274

EUR/CHF              1.2067 | 1.2055

USD/CHF             0.96945 | 0.9639

GBP/USD             1.5990 | 1.5928

EUR/GBP             0.7835 | 0.7811

For today

• EUR: The pre-market opening was in line with Fridays close around the 1.2520’s however; once the official market opened the market was on the 1.2510 areas. It held in the area for the move into Tokyo before dropping through the support and into waiting stops and a quick move to just below the 1.2440 levels as the selling ran through all the available bids, the market bounced as you would expect off the lows as the selling ran out on the first run moving back to the 1.2470’s dropping again as the levels reached an area where the market makers felt comfortable clearing their risk pushing back into the 1.2450’s. The market again started to rally and managed to ease slowly back above the 1.2480 levels as the market moves towards the grey hours. Topside sees limited offers into the 1.2500 levels possibly positions left over from the move down, with likelihood of stops through the 1.2540 area. Further offers then run from that point to the 1.2580 levels and then mixed into 1.2600. Downside bids from the lows 1.2440 likely to run to 1.2400 with likelihood of stops through that level on a move to open up the downside even further with 1.2330-50 likely to be a further supportive area.
• GBP: Cable opened around the 1.5980 levels after a wide pre-market start to the day, moving into the Tokyo session and the market dropping quickly through to 1.5930 levels before bouncing and moving higher again into the 1.5970’s area and holding around that level for several hours. The EURGBP cross was forced from the 0.7835 levels in early Tokyo to trade just above the 0.7810 levels in a quick move and although the market has moved off the lows its been limited and the cross remains under pressure. Unlike the Euro the territory we find the market is the shoulder of the move up through the year having rested in the 1.5850-1.6200 range towards the end of 2013. Downside bids appear around the 1.5940-00 levels with bids likely to appear in depth even through that level the market is likely to have bids falling through into the 1.5850 areas before stops are likely to be building for a deeper move and opening and a new low for the year. Topside has light offers through the 1.6000 levels the levels well traversed there onwards, 1.6050 levels, and into the 1.6100 levels with some likely better offers into the area.
• JPY: Fed cuts its programme of easing and the BoJ expands its own, in which it looks to be filling the gap that GPIF will leave in the JGB market. Saying that the markets have acted strongly and having seen the run on the market on Friday the market looked to be steady on the pre-market opening until the official opening that is and the market opened clear above the 112.50 areas where it stopped Friday. The market although it attempted to in early trading was unable to break the 113.00 areas, Tokyo opening saw the market sold quickly back as profit taking moved into the market pushing it to 112.70 before one final push at the level. Once the market failed the market has held in the 112.70 and the market has remained in the area for several hours with the Tokyo market now unwilling to push and with the split vote being that close the market is now worried about the consequences and possible concerns about the weakness in the JPY. Option barriers suspected at this 113 handle with offers possibly moving through until likely stops above 113.20-30 areas, of course there is nothing to say they would be able to stand up to the type of movements we’ve seen in the past couple of trading sessions a push through those levels opens up further upside potential with the 120.00 areas now exposed. Downside is likely to have a life of its own if any momentum were to begin, with likely bids around sentimental areas until closer to the 110.00. What has been lacking is the commentary we saw on the moves through 104.00-107.00 of FX movements to fast and comments along those lines, so everyone is reading the same book today.
• AUD: Weekend PMI figures from China showed a fall to 50.8 from 51.1 in September and this caused the Oz to open weaker on the opening. The market opened around the 0.8760 levels before the market started to trade lower with AUDJPY carry selling from just below the 99.00 levels, USDJPY remained fairly bid so the Oz was the weak side with the market pushed down through the 0.8710 levels before coming to a halt and slowly rose to the 0.8745 areas as the market moves towards the London session. Downside bids into the 0.8700 levels and even through those levels the market is likely to be bid into the 0.8660-50 key level, a push through this level is likely to open up a deeper move through to the 83 cent areas. Topside for the moment is now limited and a move towards the 89 cent sees range players standing in the way and a push through there would possibly need the AUDJPY heading strongly lower.

Overnight News

CNY:

HSBC China Oct. Manufacturing PMI 50.4; Est. 50.4

China’s Non-Manufacturing PMI Falls to 53.8 in Oct.

PBOC Lets Non-Financial Institutions Invest in Interbank Market

CNH:

HKMA Says Intra-Day Yuan Repos to Start Nov. 10 in Hong Kong

JPY:

Japan EconMin calls for fiscal stimulus if Q3 GDP data weak

Japan Latest Easing Credit Positive for Sovereign, Moody’s Says

Japan Considers Options to Pay for Corp. Income Tax Cut: NHK

Japan Economy May Contract From 2040s: Govt Panel Says: Yomiuri

Japan’s Kagoshima to Give Reactor Restart Go Ahead: Nikkei

AUD:

Australia Sept. Building Approvals Fall 11% M/M; Est 1.0% Fall

Australia inflation gauge picks up modestly in October -TDMI

Australia job advertisements at 20-month high in Oct-ANZ

KRW/CNY:

S. Korea Appoints 12 Banks as Market Makers for Won-Yuan Trading

NZD:

New Zealand Oct Residential Property Listings Rise 32% vs Sept

Today’s data

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

AUD       TD Securities Inflation M/M Oct A 0.20% | P 0.10%

AUD       Building Approvals M/M Sep A -11.00% | C -0.90% | P 3.00% | R 3.40%

CNY        Non-manufacturing PMI Oct A 53.8 | P 54

CNY        HSBC China Manufacturing PMI Oct (F) A 50.4 | C 50.4 | P 50.4

08:30     CHF        SVME PMI Oct C 51.3 | P 50.4

08:45     EUR        Italy Manufacturing PMI Oct C 50.6 | P 50.7

09:00     EUR        Eurozone Manufacturing PMI Oct (F) C 50.7 | P 50.7

09:30     GBP       PMI Manufacturing Oct C 51.5 | P 51.6

15:00     USD       ISM Manufacturing Oct C 56.5 | P 56.6

15:00     USD       ISM Prices Paid Oct C 58.3 | P 59.5

15:00     USD       Construction Spending M/M Sep C 0.60% | P -0.80%

Weekend News

CNY:

China October Manufacturing Slows as Growth Pressures Deepen
JPY/KRW:

Kuroda’s easing in Japan Seen Adding to Pressure on Korea’s Lee
JPY:

Japan Considers Up To 5t yen in Fiscal Stimulus: Sankei
Too Weak Yen, Sudden FX Moves Are Bad, LDP’s Tanigaki Says: Kyodo
Japan 3 Biggest Banks May Report 10% Current Profit Fall: Nikkei
JPY/USD:

2nd Bidding Round for Citi Japan Retail Ops on Nov. 7: Mainichi
EUR:

Rajoy Files Suit to Block Catalonia’s Revised Secession Vote
Catalonia May Not Pay Debt Unless Spain Negotiates: Junqueras
Paschi Plans Rights Offering, Asset Sales, Repubblica Reports
USD/EUR:

KKR, Cerberus May Consider Investing in Monte Paschi: Messaggero
CHF:

Swiss Finma Says Its Stress Tests More Severe than ECB’s: Temps

Harry Hindsight

• EUR: With the Fed moving one way and Japan going the other the day was set up for some wild moves over the day, although the Euro was more stable than most during the Asian session. Opening around the 1.2610 areas the market moved steadily lower through the first part of the Asian session before USDJPY quick rise forcing the crosses higher and pressurising the opposite currencies lower. Moving from the 1.2600 levels the market quickly moved to the 1.2580 levels before steadily moving down through the level and trading into the London session pushing into the 1.2540’s. The market found limited support from buyers who bought in front of the lows from earlier in the month. The market moved into towards the opening in NYK holding the 1.2580 after a limited rally back. NYK sold from the opening with USD buying across the board taking the Euro to push below the 1.2500 levels on a couple of occasions but unable to push through the protection built around the area. The day improved a little pushing back to above the 1.2540 before holding into the 1.2530 area and a quiet close. Mixed US numbers did little to persuade the market one way or the other however a lift in rates in Russia by 150bp surprised the market. Macro accounts were seen as large sellers over the session.
• GBP: Cable was a little more resilient to the moves over the course of the day. Opening around the 1.6010 levels the market was set back to the 1.5990 levels in early trading before holding the levels into the opening of Tokyo, the market continued around this level for several hours before the JPY monetary policy statement late into the session the market moved down however, it was a more gradual move down and more to do with the Euro weakness than the general USD tone to the day. The market dipped through the 1.5960’s but held and bounced into the London open and pushing back above the 1.5990. The market remained around the 1.5980-1.6000 levels for several hours before moving into the NYK session and a quick and constant move lower down through the previous lows and touched below 1.5950 after the releases. The market eventually recovered the losses moving back to the 1.6000 levels and a quiet close in the area.
• JPY: A combination of new items threw the market into a spin with the USDJPY initially opening around the 109.40 levels, the market held the levels for a good part of the session not giving ground. GPIF were given the ability to decrease their holdings of JGB’s below 30% from the current above 50% and the ability to hold a greater amount of equities both on shore and offshore increasing both from the 12% to 25%, add this to the monetary statement later in the session where the BoJ increased easing by the tune of 10T JPY the market jumped quickly in USDJPY moving quickly to above the 110.50 level and it didn’t stop taking only slightly less time to move to 111.50 levels. The move into the London session saw some early selling but the move was limited before the buyers again took the market higher and through the session the market moved gradually higher pushing through the 112.00 levels triggering some weak stops and to the 112.50 levels before slipping back and touching the 112.00 areas, the market slowly rallied back higher and finished the day only just short of the highs.
• AUD: The Oz was the least affected over the course of the session moving from the 0.8840 levels and dipping to 0.8820 in early trading holding that level into the Tokyo session through to the BoJ announcement before dropping back to 0.8790 levels quickly as the USDJPY moved higher and into waiting offers in the AUDJPY, the move into London saw the move reversed and the market trading steadily back through the 0.8800 level triggering some weak stops before rising into the NYK session pushing towards the highs. US numbers chased the market quickly lower as the USD moved, dropping back through the lows to eventually trade below the 0.8770, the market recovered into the close moving back to trade around the 0.8800 levels.

Friday’s premiership results

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

NZD       Building Permits M/M Sep A -12.20% | P 0.00% | R -0.80%

JPY         Unemployment Rate Sep A 3.60% | C 3.60% | P 3.50%

JPY         Household Spending Y/Y Sep A -5.60% | C -4.20% | P -4.70%

JPY         National CPI Core Y/Y Sep A 3.00% | C 3.00% | P 3.10%

JPY         Tokyo CPI Core Y/Y Oct A 2.50% | C 2.50% | P 2.60%

GBP       GfK Consumer Sentiment Oct A -2 | C -1 | P -1

AUD       PPI Q/Q Q3 A 0.20% | C 0.20% | P -0.10%

AUD       PPI Y/Y Q3 A 1.20% | P 2.30%

JPY         Housing Starts Y/Y Sep A -14.30% | C -17.10% | P -12.50%

EUR        Eurozone Unemployment Rate Sep A 11.50% | C 11.50% | P 11.50%

EUR        Eurozone CPI Estimate Y/Y Oct A 0.40% | C 0.40% | P 0.30%

EUR        Eurozone CPI – Core Y/Y Oct A 0.70% | C 0.80% | P 0.80%

CAD       GDP M/M Aug A -0.10% | C 0.00% | P 0.00%

USD       Employment Cost Index Q3 A 0.70% | C 0.50% | P 0.70%

USD       Personal Income Sep A 0.20% | C 0.30% | P 0.30%

USD       Personal Spending Sep A -0.20% | C 0.10% | P 0.50%

USD       PCE Deflator M/M Sep A 0.10% | C 0.00% | P 0.00%

USD       PCE Deflator Y/Y Sep A 1.40% | P 1.50%

USD       PCE Core M/M Sep A 0.10% | C 0.10% | P 0.10%

USD       PCE Core Y/Y Sep A 1.50% | P 1.50%

USD       Chicago PMI Oct A 66.2 | C 61 | P 60.5

USD       U. of Michigan Confidence Oct (F) A 86.9 | C 86.2 | P 86.4

Stay lucky

Andy