Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 115.473 | EURUSD 1.2438 | EURJPY 143.627 | AUDUSD 0.87185 | NZDUSD 0.78837 | USDCAD 1.13185 | EURCHF 1.20213 | USDCHF 0.96647 | GBPUSD 1.57789 | EURGBP 0.78828 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               115.885 | 115.425

EUR/USD             1.24515 | 1.24265

EUR/JPY               144.12 | 143.575

AUD/USD            0.8735 | 0.8670

NZD/USD             0.7884 | 0.7842

USD/CAD             1.1325 | 1.1309

EUR/CHF              1.2025 | 1.2020

USD/CHF             0.9674 | 0.96565

GBP/USD             1.5780 | 1.5760

EUR/GBP             0.7894 | 0.7881
For today

• EUR: A quieter day with more concrete comments and less of the individual comments left the Euro pushing off the lows around the 1.2430 levels and steadily back to the opening 1.2440, limited cross buying saw the market move above the 1.2450 level before giving up the gains in a fairly quick move only to gradually regain most of the day. Congestion from the 1.2460 level with expected decent supply from the 1.2490 onwards and likely getting stronger towards the 1.2510-20 areas, a push through the 1.2550 areas will likely see some stops triggered and a stronger move to the 1.2600 level, 1.2650 will probably provide a strong test of will. Downside sees strong buying likely through the 1.2400 levels and only a push through 1.2350 will free the downside for a deeper move, German CPI numbers and the ECB bulletin are the ones to watch for the moment whether there is any surprise the numbers will lead into Initial jobless numbers and the US budget statement. With the market stuck for the moment in consolidation mode everyone is now looking for the next breakout in either direction.
• GBP: Cable has been quieter holding around the 1.5770 levels after early declines in Sydney, today is likely to be little different with very little in the way of news and is likely to be driven by other peripheral releases in Europe and the US. The market to the downside sees bids into the 1.5750 levels with dated congestion likely to slow the market however; a push to the 1.5700 level opens up the next downside move into the 1.5600 levels. Topside is a struggle, with a combination of offers through the 1.5800 levels and then further supply interest likely above the 1.5840 area the market is not likely to find it easy going unless something dramatic occurs. The further you go the more offers appear at different levels not that strong but plenty of levels to now move through add to which the general belief that the current situation is likely to undercut current levels. With some quarters now talking about a move through 1.5722 (61.8 Fibo support), and then extending to the 1.54 handle in the longer term.
• JPY: With the strong rumour of a Dec election the USDJPY has slowly moved higher moving from the opening around the 115.55 levels to push towards the 115.90 levels, this probably has little real impact as the snap election is a quick move while popularity remains in favour and Abenomics remain on target. Having made its way higher the market now sits just of those highs as we head towards the London session, 116.00-20 now provides limited resistance having cleared most of the offers on the previous move higher, and once through the next levels are no different with reasonable offers available all the way through but looking more like a rear guard actions with levels not seen since 2007, question is if they hit the 120-125 area will they then attempt to call a halt to the rise with verbal intervention increasing. Downside see’s light bids into the 115.00 level and possible weak stops, below there 114 provides better support now having had time to catch up with the moves over the past couple of weeks. Through there will likely see yield buyers appearing as they’ve missed the move to some extent and the potential is still available.
• AUD: The market moved higher into the Tokyo session with AUDJPY buyers pushing to take the carry trade through the 101.00 level only to run out of time and the election news giving mixed signals to some, the market dropped in the Oz as the sellers of the carry ran into the USDJPY buyers and the Oz moved quickly to the downside, Kent’s comments signalled some interesting points particularly as talk of intervention remains on the board in recent meetings, but then why you would intervene at current levels and not months back above 1.000 doesn’t make much sense anyway. The market moved off the 0.8730 highs in a straight line to below 0.8680 before stabilizing and taking the Q&A for what they were and nothing that wasn’t known or suspected, the market slowly moved back to the 87 cent level into the grey hours as early players started to buy for the day. Topside offers into the 0.8750 level and through to 0.8765 are likely to slow things down but again one suspects that the Yield play of the carry trade will come back into focus for the retail market without some smart comments to dampen the enthusiasm. Downside still remains a viable option with most of the major banks still talking of a move to the 82/83 cent areas and with a worsening commodity price feed through into the Oz economy for the long term it seems justifiable however, the best laid plans of men and mice. 0.8660-40 provide weak support now having been through and back with stronger sentiment likely on a break through 0.8600 and building into the 0.8550 levels from there though a push strongly through the 85 cent level does open the market for a deeper move and maybe the men or mice have planned well.

Overnight News

AUD:

RBA’s Kent Says RBA Has not ruled Out FX Intervention if Needed

RBA’s Kent Says A$ May Depreciate Once Fed Starts Raising Rates

JPY:

Delaying Japan Sales-Tax Bump Could Add Stimulus, LDP Paper Says

LDP Oshima Says It Seems Abe Has Decided to Call Election: Jiji

Japanese Bought Net 1123.9 Billion Yen Overseas Debt Last Week

Japan Sep Core Machinery Orders +2.9% on Month; Expected -1.2%

USD:

Lew Says Critical That Nations Live Up to G-20 Forex Commitments

CNY:

PBOC Said to Invite Smaller Banks to Apply for Cash Injections

China Industrial Output, Investment Growth Weakens Amid Slowdown

China’s Leaders Said to Discuss Lowering 2015 Growth Target

Li: South China Sea Disputes Should Be Resolved Via Direct Talks

China’s Zhu Says Divergent Global Monetary Policies Create Risks

NZD:

N.Z. Consumer Confidence Gauge Falls to 14-Month Low, ANZ Says

NZD:

N.Z. October House Price Index Rises 3.9% Y/Y, REINZ Says

TWD/CNY:

Taiwan Central Bank Seeks Lifting of Daily Yuan-Conversion Limit

GBP:

Broadbent: Market Rate Expectations Consistent With BOE Target

U.K. Oct. RICS House Price Index at 20 vs Est. 25

Today’s data

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

NZD       Business NZ Manufacturing Index Oct A 59.3 | P 58.1 | R 58.5

JPY         Machine Orders M/M Sep A 2.90% | C -1.20% | P 4.70%

AUD       Consumer Inflation Expectation Nov A 4.10% | P 3.40%

GBP       RICS House Price Balance Oct A 20% | C 25% | P 30%

JPY         Industrial Production M/M Sep (F) A 2.90% | C 2.70% | P 2.70%

CNY        Fixed Assets Ex Rural YTD Y/Y Oct A 15.90% | C 16.00% | P 16.10%

CNY        Retail Sales Y/Y Oct A 11.50% | C 11.60% | P 11.60%

CNY        Industrial Production Y/Y Oct A 7.70% | C 8.00% | P 8.00%

7:00        EUR        German CPI M/M Oct (F) C -0.20% | P -0.30%

7:00        EUR        German CPI Y/Y Oct (F) C 0.80% | P 0.80%

8:15        CHF        Producer & Import Prices M/M Oct C -0.30% | P -0.10%

8:15        CHF        Producer & Import Prices Y/Y Oct C -1.30% | P -1.40%

9:00        EUR        ECB Monthly Bulletin

13:30     CAD       New Housing Price Index M/M Sep C 0.10% | P 0.30%

13:30     USD       Initial Jobless Claims (NOV 8) C 280K | P 278K

16:00     USD       Crude Oil Inventories P 0.5M

19:00     USD       Monthly Budget Statement Oct C -111.5B | P 105.8B

Harry Hindsight              

• EUR: Early gains by the USD dominated the market with pressure from cross Yen selling helping to keep the other currencies under pressure, dipping through the 1.2460 levels from the opening 1.2475 area, the market held for a while before the market gradually moved higher and rallying quickly to above the 1.2490 in the final hours into the grey market, early London failed on an attempt to push through the 1.2500 levels and the market quickly dropped back into the main session. The decline was deeper than we’d seen all day and moving from the highs to the 1.2430 levels as UK numbers dragged on the market. Euro’s recovered and the market became very choppy with only IP numbers to drive the Euro, and while it was weaker than expected was a better by far on the previous months numbers so the market is showing a little recovery helped by the weaker currency. The market rose again towards the 1.2490 and from there it was particularly messy as the range moved in a 1.2450-90 range over the session before the market gave up on the attempts higher falling back to make new lows basing off the 1.2420 levels for a quiet run to the end of the session.
• GBP: The market during Asia was contained in a limited range moving around the 1.5920 areas for most of the Asian session. The market moved steadily to the 1.5940 level as a consequence of the fall in USDJPY and the impending UK numbers. The release saw the market quickly drop back with reasonable employment numbers but a poor BoE qtr inflation report indicating that the inflation rate is likely to fall back towards 1% before improving, and GDP numbers are revised slightly lower as the European situation continues to weight on the UK, now that’s a common market. The market broke quickly lower falling to the 1.5880 levels before triggering weak stops through the levels and forcing it to the 1.5860 and a secondary level of stops to leave the market parked on the 1.5820 levels, while the market dragged the Euro lower the move in EURGBP took the market quickly to the 0.7880 levels and a test to 0.7890 for the first time since the end of last month, needless to say selling appeared and helped to stabilize Cables fall for a period before London wrapped up for the day allowing Cable to start a steady decline through the 1.5800 levels to finish the day into the congested areas from the beginning of 2013 and for the moment the nearest supportive levels. Needless to say interest rates are not likely to be going up in the short term and the market will have to see some movement above the 2% mark for the talk to resurface, of course the downside to this is whether declining energy prices and a possibility of stagnation in Europe will continue to pressure the UK economy further.
• JPY: Will we, won’t me with one minister saying one thing, another saying another before the ministry stating unequivocally definitely maybe the market was tossed around, moving from the opening areas around the 116.00 areas  in the belief that the sales tax was going to be postponed, the market then drifted into Tokyo with a good Tertiary industry leading the market to the 115.60 areas before steadying and trading in the 115.70-90 levels. Then another media blitz that no there is no delay and no change hit the media and down we go pushing quickly to 115.30, the move back was a little more sedate but again pushing back to above 115.80 before the release of a definite maybe and the collapse started as the market moved towards the grey hours pushing this time into the 115.10 levels. London took it in its stride and the market limped along around the 115.30 touching to the 115.10 levels and not too far above the 115.40. The market eventually triggered stops into the NYK session with and Futures buying of JPY pushing the market briefly through the 115.00 levels as early players there offloaded there JPY shorts and reading too much into the early reports possibly. After a couple of hours of not following through the market again saw the market run strongly into the London close and beyond to chase the market to the 115.70 levels and a quiet lose around the 115.50.
• AUD: The Oz remained fairly steady throughout a choppy session being driven mostly by the JPY movements but resisting the excesses of that currency as the AUDJPY remained above the 100.00 level although the range was around 70 pips in the carry. The Oz opened around the 0.8680 area and struggled above 87 cents in early trading, Tokyo sold the market off to the 0.8670 levels over the course of the first few hours before USDJPY breaking lower allowed the market to move back to above the 87cent level. London sold lightly into the session with range players picking the direction but never quiet breaking the opening levels before the revision of ideas sent the market moving back through the highs. NYK session eventually broke the 0.8720 levels to push the market to above the 0.8740 levels before running into some half decent selling and leaving the market drifting to the close around the 0.8710 levels.

Yesterday’s premiership results

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%

GBP       Claimant Count Change Oct A -20.4K | C -20.0K | P -18.6K | R -18.4K

GBP       Claimant Count Rate Oct A 2.80% | C 2.70% | P 2.80%

GBP       ILO Unemployment Rate 3M Sep A 6.00% | C 5.90% | P 6.00%

EUR        Eurozone Industrial Production M/M Sep A 0.60% | C 0.70% | P -1.80%

GBP       BoE Quarterly Inflation Report

USD       Wholesale Inventories Sep A 0.30% | C 0.20% | P 0.70%

Good Luck,

Andy