Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 115.79 | EURUSD 1.24746 | EURJPY 144.456 | AUDUSD 0.86851 | NZDUSD 0.77989 | USDCAD 1.13358 | EURCHF 1.20329 | USDCHF 0.9647 | GBPUSD 1.59184 | EURGBP 0.78361 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               116.015 | 115.25

EUR/USD             1.2478 | 1.2454

EUR/JPY               144.73 | 143.78

AUD/USD            0.8708 | 0.8664

NZD/USD             0.7844 | 0.7800

USD/CAD             1.1359 | 1.1333

EUR/CHF              1.2039 | 1.2031

USD/CHF             0.96625 | 0.9646

GBP/USD             1.5925 | 1.5905

EUR/GBP             0.7838 | 0.7830
For today

• EUR: Several in the market have already drawn similarities with the Eurozone and Japan 20yrs ago and the limited ability or inclination to drive Europe away from stagnation, so today we will see IP numbers which may show some insight to what a lower Euro has done. For today the market has been driven by the JPY again, with early holding pattern in USDJPY and EURJPY cross selling moving into the market pushing the Euro from the 1.2475 areas to 20 pips lower and into the 1.2455 levels, as the USDJPY gyrated so did the Euro in a limited fashion driving some reasonable flows across the FX markets. The Euro moved from there between the 1.2460-70 areas before breaking higher late into the session to push towards the 1.2480 level for the first time and holds just short of there as we head into the grey hours. Offers from the 1.2500 levels likely back into the 1.2520 levels before the market becomes more mixed over the next 50-60 pips and into stronger offers in front of the 1.2600. Downside is weak with the areas we traversed over the past couple of weeks and 1.2400 through to the lows of the year building strongly.
• GBP: The move yesterday seemed to be limited until the NYK cut when the market moved strongly, since the highs the market traded quietly into the Sydney session 1.5920 before hedging a little higher into the Tokyo session before dipping back to below the 1.5910 in light trading. The market recovered but to be fair its done very little compared to the Euro and seems more indicative of cross JPY plays dominating. To the topside 1.5950 sees the first sentimental level which curtailed yesterday’s action and likely to cause only limited resistance to any concerted effort, the real level for a breakout will in all likelihood come on an attempt at the 1.6000 level and a talked about level in the market after last week’s weak data. Downside is open to the 1.5850 levels and again more sentimental than anything else however, a move down through there will likely see stronger support coming into the market as we approach the 1.5800 level.
• JPY: To delay or not to delay that is the question as Shakespeare would have put it, me being less poetic, wonders in this day and age whether there is some point to the different spokespeople denying it in one breath then the next saying the govt. favours it, whether it’s a slight of hand or a tool for the moment to slow interest remains to be seen however, it provided a choppy session for the USDJPY moving from the opening 115.80 levels to touch above 116.00 before drifting lower into the Tokyo opening and just below that 115.80 level. The denial hit and the market dropped quickly to below the 115.30 before a steady recovery as the next one rolled out with the govt. favouring the market to take the market back to the starting areas, as we moved towards the grey hours the on off issue kicked in with Kuroda stating that the implemented latest easing was based on a scenario of sales tax rises indicating that nothing has changed apart from a possible election next month. Downside is likely to see bids disappearing through the 115.00 area as the market becomes choppy with to and fro information, I’m not overly inclined to believe that the on off isn’t deliberate to contain further movements higher without chasing the market lower. Through the 114.80 levels opens the market possibly for a test of 114.00 and then 113.50, given the limited data today the market is likely to remain choppy. Topside offers into the 116.00 level seem to have contained the market as a short term view however, the topside pressure in the cross markets has probably had a lot to do with the containment for the moment and this is limited in the extreme, while some have shortened there calls for 120.00 before year end the 119.00 level is likely to be a strong level.
• AUD: The Oz has for the moment run out of steam having pushed back above the 0.8660 fairly firmly, early buying took the market back higher from the opening 0.8690 areas, it was short lived and although the market moved in a tight range to some extent the market moved in the same fashion as the USDJPY and the market was driven more by the AUDJPY limited ability to move higher. 0.8720 holds the first set of offers in all likelihood with not much room until the 0.8750 stronger area through that level and it becomes very congested and likely to struggle higher. Downside levels are limited to the 86 cent level with movement below there likely to meet strong support into the 0.8550 areas, through that level though the market is likely to see some longer term selling and a far deeper move opening up.

Overnight News

JPY:

BOJ’s Miyao Says Talks on Stimulus Exit Could Start in 2H FY2015

BOJ Miyao says voted for more easing as his CPI forecasts tilted to downside

LDP, Komeito Officials Met to Discuss Possible Elections: Jiji

Japan’s Suga: Up to PM Abe to decide whether to call election

Japan to meet 2015/16 fiscal target even if tax hike delayed govt. sources

Japan vice EconMin says no new bonds to fund stimulus

Abe Adviser: Tax Hike Out of Question If 3Q GDP Less Than 3.8%

Abe to Dissolve Parliament This Month, Delay Tax Hike: Sankei

CNY/USD:

Xi Says China Is Ready to Work With U.S. After Obama Meeting

CHF:

Jordan Tells 20 Minuten SNB Won’t Quit Cap in Foreseeable Future

NZD:

RBNZ’s Wheeler Says Low Interest Rates Still Stimulating Economy

Fonterra Says N.Z. Milk Production May Slow on Tight Cash: Radio

AUD:

Australia Nov. Consumer Sentiment Rises 1.9% to 96.6

Australia 3Q Mining Industry Wages Rise Smallest on Record

CNH:

HKMA Lifts Yuan Conversion Limit for H.K. Residents

IDR/USD/JPY/EUR:

Indonesia Hopes to Sell USD, JPY and EUR Bonds in 1Q Next Year

Today’s data

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

AUD       Westpac Consumer Confidence Nov A 1.90% | P 0.90%

JPY         Tertiary Industry Index M/M Sep A 1.00% | C 0.80% | P -0.10%

JPY         Japan Money Stock M2+CD Y/Y Oct A 3.20% | C 3.00% | P 3.00% | R 3.10%

AUD       Wage Cost Index Q/Q Q3 A 0.60% | C 0.60% | P 0.60%

09:30     GBP       Claimant Count Change Oct C -20.0K | P -18.6K

09:30     GBP       Claimant Count Rate Oct C 2.70% | P 2.80%

09:30     GBP       ILO Unemployment Rate 3M Sep C 5.90% | P 6.00%

10:00     EUR        Eurozone Industrial Production M/M Sep C 0.70% | P -1.80%

10:30     GBP       BoE Quarterly Inflation Report

15:00     USD       Wholesale Inventories Sep C 0.20% | P 0.70%

Harry Hindsight              

• EUR: With no tier 1 data for the day across Europe and the US in recognition of Veterans/Remembrance day the markets moved in a limited fashion, early Asia saw the Euro pressured lower as the USDJPY again went to the upside with limited selling below the 143.00 levels keeping a lid during the early part on the EURJPY cross. With the Euro unable to move cleanly through the 1.2440 highs and limited resistance. The move into London saw the market testing the 1.2400 levels with comments from ECB’s Coeure the only newsworthy item and that was nothing new with weak German data the major point of his comments. This did have the effect of moving the Euro off its lows and a steady climb into the mid-NYK session to test the light resistance around the 1.2440-50 levels, EURJPY again contained the market for a short period but once the 144.00 levels broke the Euro had more room to move and triggered weak stops through the 1.2450 levels to peak just below the 1.2500 levels into the late part of the session and a close around the 1.2475 level on reasonable volumes.
• GBP: The Asian session was well contained and the market moved off the 1.5840 levels several times through into the London session without pushing too far beyond the 1.5855 levels. The jump in the Euro dragged the Cable with it as the movements in JPY continued to dominate the whole of the market, with topside cross levels giving way and allowing GBP to rise pushing to the 184.00 levels. The steady rise in Cable pushed into the previous day’s highs and broke through with weak stops triggered in a fairly rapid move to above 1.5940 added to by a possible option expiry and gamma buyers. The market eventually settled down to the 1.5920 levels for a quiet finish to the day, with the EURGBP staying in a tight range over the day to finish only a little lower.
• JPY: After a quiet start moving from the opening 114.80 levels to trade to just above the 115.00 level before slipping under the opening into the 114.60’s. A strong rally in the Nikkei as rumours of an early election drove both markets higher with the USDJPY pushing into the London session through the 115.40 and quickly to 115.80. The next 20 pips or so were painful and drawn out as strong profit taking, option interest and exporters sold in front to the 116.00 level but through it went eventually pushing to the 116.10 levels and holding for an hour before slipping back a little into the NYK session and slowly moving back to 115.60, a quick dip through the 115.50 level triggered weak stops and the market was suddenly at the 115.10 area however, there was support for the pair and the circulation of the possible delay to the sales tax which is seen as deferring the move to after the election in a double swipe at easing and popularity for the upcoming election. The market moved back towards the 116.00 level hitting 115.80 before running out of time.
• AUD: The Oz after initial gains from the 0.8620 levels struggled up against the 0.8650 and the carry trade of AUDJPY stalling in the 99.60 the Oz was forced back through the opening and into the 86 cent levels and just beyond. However, that was the low and the AUDJPY pushed higher and the Oz started to move strongly with the pressure removed on the topside in the carry. The market again stalled briefly around the 0.8650 levels before moving another leg higher and this time only brief pauses on the way through the 87 cent levels with a brief push to 0.8710 as the carry trade broke through the 100.00 levels for the first time this year, and with the release of more funds from the GPIF to overseas markets the Oz remains very attractive. Oz drifted a little into the close to just below the 87 cents levels as the carry held above 100.60.

Yesterday’s premiership results

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

JPY         Current Account (JPY) Sep A 0.41T | C 0.03T | P 0.13T

GBP       BRC Retail Sales Monitor Y/Y Oct A 0.00% | C -0.50% | P -2.10%

AUD       NAB Business Confidence Oct A 4 | P 5

AUD       House Price Index Q/Q Q3 A 1.50% | C 1.50% | P 1.80% | R 1.90%

JPY         Consumer Confidence Oct A 38.9 | C 40.5 | P 39.9

JPY         Eco Watchers Survey: Current Oct A 44 | C 47.2 | P 47.4

JPY         Machine Tool Orders Y/Y Oct (P) A 31.20% | P 34.70%

Good Luck,

Andy