Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 116.298 116.36-40 | EURUSD 1.25245 1.2513-25 | EURJPY 145.655 145.601-791 | AUDUSD 0.87474 0.8755-57 | NZDUSD 0.79095 0.7910-20 | USDCAD 1.12898 1.1273-99 | EURCHF 1.2013 1.2013-165 | USDCHF 0.95914 0.95735-0.96195 | GBPUSD 1.56687 1.5622-1.5705 | EURGBP 0.79922 0.7976-0.8000 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               117.06 | 115.45

EUR/USD             1.2580 | 1.2514

EUR/JPY               146.53 | 144.875

AUD/USD            0.8796 | 0.8747

NZD/USD             0.7975 | 0.7914

USD/CAD             1.1294 | 1.1269

EUR/CHF              1.2019 | 1.2011

USD/CHF             0.9598 | 0.9554

GBP/USD             1.5737 | 1.5663

EUR/GBP             0.8003 | 0.79785

 

For today

• EUR: G20 meeting was as usual nothing really of note apart from odd grumbles aimed at Pres. Putin. With initiatives to improve the functioning of financing of infrastructure markets. The market opened only slightly higher than Friday moving quietly around the 1.2520 areas into the Tokyo session. EURJPY opened higher with USDJPY pushing higher and the move into the Tokyo session saw another short burst higher in USDJPY with the Euro dragged along as the cross moved quickly through the 146.00 levels. The Euro was forced a little down from the cross breaking through the 146.00 levels. Once the USDJPY broke having hit its highs the pressure on the Euro was relieved and the market started to rise steadily pushing to just short of the 1.2580 before the movement in USDJPY ended to the downside. Topside offers from 1.2580 and into the 1.2600 levels even through there the market is likely to see light offers until a push through the 1.2650 and this is likely to open up a test to the 1.2750 levels if the trade balance numbers exceed expectations. To the downside the market is well traversed however, 1.2500 provides the first level of bids and probably only lightly bid, with a more in depth bid are down to 1.2450. Through that level the market is a little mixed however, the bids reappear on a move down to the 1.2380’s with volume building around the 1.2400 levels.
• GBP: Cable opened around the 1.5670 levels and the market drifted into the Tokyo session before moving quickly to 1.5690 and slowly pushing higher through the 1.5700 levels triggering weak stops and a push to the 1.5730’s before coming to a halt, the market drifted a little however has maintained the 1.5720 since hitting the highs, the EURGBP has drifted away from the 0.7990 levels falling back a little over the session. Downside 1.5600 holds the key for the moment with highs from mid-2013 levels however, through that level the market will open up for a likely test of the 1.5400 areas. Topside offers around the 1.5800 levels are light but sufficient for the moment to hold with weak stops through that levels and congestion along the way to the 1.5900 level and 1.6000.
• JPY: The market opened slightly higher and then moved quickly to above the 116.60 levels before holding into the Tokyo opening and the GDP release, a very weak number saw the market move quickly higher pushing to above the 117.05 levels in a quick spike before collapsing just as quickly as the Nikkei dropped and the USDJPY, the move up was driven by retail and corp. buying as the market hit the highs there was very strong real money selling and models/funds kicking in with profit taking the move lower caught the buyers by surprise and the move was over and the retail players struggled to cover their longs taking USDJPY down through the 116.00 to the 115.50 levels before holding and running out of impetus. The market bounced however, the bounce was weak and the market has since tested those downsides again, the GDP number would again put pressure on the MOF and Abe to delay the sales tax until further along the line. Topside offers through 117.00 and into the 117.20’s however, a push through there opens up further gains to the topside with only patches of offers into the sentimental areas to the 120.00 which is likely to become a point of importance. Downside light bids from the 115.50 levels and into the 115.00 areas with possible stops behind the 114.80 areas before steady bids appear in the market.
• AUD: The Oz continued to rise with the USDJPY movement and once the USDJPY failed kept going, The AUDJPY carry opened around the 102.20 levels and the quick move higher saw the carry trade up to the 102.40 level before strong selling came into the market slightly ahead of the USDJPY movement, sending the cross down to 102.00 and then a steady decline as the Oz balanced a little of the JPY strength leading the carry trade close to the close on Friday. Oz pushed from the Tokyo 0.8750 back through the opening Sydney levels around 0.8770 and into the 0.8790’s and reasonable offers ahead of 88 cents before holding the 0.8790 for half the session and into the grey hours. Topside see’s this 0.8800-8820 providing offers and congestion a push through there is likely to see the market move only to the 0.8850 levels before finding fresh offers and these are likely to strengthen as the market moves towards the 89 cent levels which topped the market last month. Downside is likely to see light bids around the 0.8700 level with the bids growing towards the 0.8650 level however they are still fairly weak and the real bids are likely around 0.8600-0.8550 increasing in size the deeper the market goes.

Overnight News

JPY:

Japan’s slips into surprise recession, paves way for tax delay, snap poll

No Need to Be Pessimistic on Future of Japanese Economy: Nomura

Japan PM Adviser Hamada: Now Isn’t Best Time to Raise Sales Tax

Japan PM Abe Adviser Honda: Another Sales Tax Increase “Out Of Question”

Japan’s Sales Tax, Election Decision Are Up To Abe, Says Amari

Japan LDP Finance Chief: Convinced Abe Will Delay Sales-Tax Rise

Abe to Hold News Conference Tomorrow on Tax Hike Delay: Yomiuri

NZD:

New Zealand Retail Sales Rose Most Since 2012 in Third Qtr.

English Says Kiwi in Mid-to-High 70s Sustainable for New Zealand

NZD/KRW:

New Zealand, S.Korea strike free trade deal

AUD/CNY:

Australia-China to Sign Free Trade Deal Spurring Economic Shift

China-Australia Designate Official RMB Clearing Bank in Sydney

China, Australia Set Initial 50b Yuan of RQFII Investment Quota

CNY:

China Plans to Let Individuals Open Capital Accounts in SFTZ: FT

China 3Q Financial Institutions Net FDI $1.9b

GBP:

U.K. November House Prices Fall 1.7% M/m, Rightmove Says

Carney Says Too-Big-to-Fail Bank Reforms Need to Be Implemented

RUB:

Putin Says Russia Didn’t Breach International Law in Crimea

Today’s data

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

NZD       Retail Sales Q/Q Q3 A 1.50% | C 0.80% | P 1.20% | R 1.10%

JPY         GDP Q/Q Q3 (P) A -0.40% | C 0.50% | P -1.80%

JPY         GDP Deflator Y/Y Q3 (P) A 2.10% | C 1.90% | P 2.00%

GBP       Rightmove House Prices M/M Nov A -1.70% | P 2.60%

10:00     EUR        Eurozone Trade Balance (EUR) Sep C 16.2B | P 15.8B

13:30     CAD       International Securities Transactions (CAD) Sep C 11.32B | P 10.28B

13:30     USD       Empire State Manufacturing Nov C 10 | P 6.17

14:15     USD       Industrial Production Oct C 0.20% | P 1.00%

14:15     USD       Capacity Utilization Oct C 79.30% | P 79.30%

Weekend News

G20:

G-20 Says Growth Plans to Boost GDP by 2.1% If Implemented
JPY:

Japan’s Abe Says ‘Calm Decision’ Needed on Tax Increase: Kyodo
Aso: Told G-20 will Make Appropriate Decision on Sales-Tax Rise
Majority of Large Japanese Companies Back Tax Increase: Asahi
JPY/IMF:

IMF Hopes Japan Will Deliver on Sales Tax Rise, Says Lagarde
AUD/CNY:

Australia’s China Trade Deal Set to Boost Exports Beyond Mining
CHF:

SNB’s Jordan Says Deflation Risks Increased in Recent Months: SZ
Zurbruegg Says Franc Cap to Remain as Necessary: Corriere
USD:

Obama Vows U.S. Asia-Pacific Focus on Growth, Climate
Obamacare 2015 Sign-Up Under Way With Few Glitches, Long Lines
Doctor With Ebola ‘Extremely Critical,’ Says Nebraska Hospital
GBP:

Time to Take on Opponents of Atlantic Trade Deal: U.K.’s Cameron
CAD/RUB:

Canada’s Harper Tells Putin to ‘Get out of Ukraine’ at G-20
RUB:

Putin Leaves G-20 Early as Leaders Berate Russia on Ukraine

Harry Hindsight

• EUR: The Euro traded slowly lower through the Asian session as the USD gained dominance, helped by a steady stream of USDJPY buying this in turn forced the Euro slowly lower from just below the 1.2480 levels and into the 1.2430 areas and into the grey hours. Early Europeans bought the market quietly and the market could only reach the 1.2470 levels before running out of steam. The GDP numbers were broadly in line with expectations and what the French number showed was lost in the revision of the previous month. The market slowly drifted once the market had digested the European numbers, pushing to the 1.2400 levels and into the NYK session. Retails sales was in line with expectations and did nothing for the market and the Euro began to rise on the next numbers and while both were better than expected the market started to see buyers in Euro’s taking the market quickly to the opening levels and trigger weak stops through the 1.2480 levels and a quick move through the 1.2500 level to peak above the 1.2540 levels. The market did fall back a little however, there was a second attempt before the market ran out trading around the 1.2520 levels.
• GBP: Cable was under pressure the whole day however, it did manage to bounce of the lows late into the sessions, moving from the opening 1.5710 areas the market drifted with early GBPJPY selling on the Tokyo opening pushing it quickly to the 1.5680 levels before holding around the area for several hours. The move towards the grey hours the market moved steadily to the 1.5660 levels before rallying back towards the 1.5700 into the London session. As the market moved into the NYK session strong EURGBP buying appeared in the market taking the EURGBP from the 0.7950 levels in a push to the 0.8000 this in turn pushed the Cable to its lows below the 1.5600 levels before bouncing with some strong buying moving in and the market recovered trading back above the 1.5690 levels before drifting into the close.
• JPY: USDJPY continued its steady rise higher over the course of the day, the market opened around the 115.80 levels and quickly moved higher on the opening of the Tokyo market, the market moved to the 116.20 levels before returning to the opening levels a little slower. From that point on though it was all steady buying moving in a tight channel into the NYK session and above the 116.40 levels, the release of the US data lifted the USDJPY to above the 116.80 levels before end of week profit taking moved into the market and the market drifted back to settle around the 116.30 areas in quiet trading once the market had reduced its risk for the new week. Rumours of a definite hold to sales tax and an early election in Japan drove the market higher through the day. This was not a surprise as the market had been discussing this for several days and was one of the reasons why the market was above 115 in the first place.
• AUD: The Oz moved quietly during the early part of the session with the Oz dipping slowly from the opening 0.8715 levels and dipping into the Tokyo session for a move below 87 cents, the market eventually based of the 0.8680 levels into the grey hours before slowly rise back towards the opening levels. AUDJPY trading had reached the 101.40 levels and some strong selling moved in around the levels in early London and again the Oz was pushed lower and to the 0.8650 levels into the US numbers, a switch to yield buying and the AUDJPY jumped quickly to the 101.80 levels and the Oz with it as the USD lost ground against everything other than the JPY and the Oz quickly pushed to the 0.8770 levels before settling into quiet trading around the 0.8750 and good gains on the day. Of course this means that the yield play may make the RBA sit up a little as they would not like a repeat of the previous yield trading which helped the Oz far above parity.

Friday’s premiership results

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

EUR        French GDP Q/Q Q3 (P) A 0.30% | C 0.20% | P 0.00% | R -0.10%

EUR        German GDP Q/Q Q3 (P) A 0.10% | C 0.10% | P -0.20%

EUR        Italian GDP Q/Q Q3 (P) A -0.10% | C -0.10% | P -0.20%

EUR        Eurozone CPI M/M Oct A 0.00% | C 0.00% | P 0.40%

EUR        Eurozone CPI Y/Y Oct (F) A 0.40% | C 0.40% | P 0.40%

EUR        Eurozone CPI – Core Y/Y Oct (F) A 0.70% | C 0.70% | P 0.70%

EUR        Eurozone GDP Q/Q Q3 (A) A 0.20% | C 0.10% | P 0.00% | R 0.10%

USD       Advance Retail Sales Oct A 0.30% | C 0.30% | P -0.30%

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

USD       Import Price Index M/M Oct A -1.30% | C -1.60% | P -0.50%

CAD       Manufacturing Shipments M/M Sep A 2.10% | C 1.10% | P -3.30%

USD       U. of Michigan Confidence Nov (P) A 89.4 | C 87.5 | P 86.9

USD       Business Inventories Sep A 0.30% | C 0.20% | P 0.20%

Stay lucky

Andy