Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 116.854 | EURUSD 1.25356 | EURJPY 146.471 | AUDUSD 0.87205 | NZDUSD 0.79389 | USDCAD 1.2971 | EURCHF 1.20127 | USDCHF 0.95836 | GBPUSD 1.56329 | EURGBP 0.80185 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               117.42 | 116.81

EUR/USD             1.2537 | 1.2513

EUR/JPY               146.95 | 146.39

AUD/USD            0.8721 | 0.8655

NZD/USD             0.7924 | 0.7861

USD/CAD             1.1338 | 1.1295

EUR/CHF              1.2014 | 1.2012

USD/CHF             0.9600 | 0.9584

GBP/USD             1.5633 | 1.5599

EUR/GBP             0.8023 | 0.8017
For today

• EUR: The Euro has held its own for the most part over the Asian session, this is aside from S&P’s warning on the subject of stimulus with indications that the implementation of said €1trln stimulus is fraught with risk if there is any dithering. The market drifted off the opening 1.2535 levels to the 1.2515 areas before holding quietly around the 1.2520’s for the most part, topside offers from 1.2540 still put a lid on rises for the moment however, and how strong that is may be tested by the Current account details later. Through the level the market still remains offered with offers from the 1.2580 and into the 1.2600 levels, a push through the 1.2620 will likely to see further offering into the 1.2650’s. Downside bids light to the 1.2480 areas and into the 1.2450 area before light mixture kicks in, further bidding becomes stronger into the 1.2400 levels and below.
• GBP: Cable remains on the weak side irrelevant of the mixed results yesterday on the CPI numbers, the market opened around the 1.5630 levels and slowly tested the downside around the 1.5600 levels, the movement was probably a little exaggerated by the markets attempt to push the 1.5600 downside support however, for the moment that support holds however, a move through the 1.5590 areas are likely to see stops triggered with very little buying likely until close to the 1.5550 level a sentimental level at best with better support around the 1.5535 areas, but given this is coming to the bottom of the congested areas dating back to 2010 opens up the 1.5310 and even further declines to 1.5200 and ultimately 1.5100. Topside light offers into the 1.5630 levels before likelihood of weak stops and the market opening to the 1.5680 levels and stronger offers into the 1.5700 area. A push through the 1.5720 will likely to see an opening to the 1.5750.
• JPY: Weak movement in the pre-Tokyo session saw the market move into Tokyo with a quick move higher as retail buying kicked in after the fact. Moving to the 117.20 levels the market eventually made its way steadily higher having dipped from the 117.20 down to 116.90 lows, heading to above the 117.40 levels. The topside is now open to the 119.80 areas with only sentimental levels and possibly option plays however, at this point the market has moved towards the BoJ’s window and we may start to see verbal intervention entering the market, I doubt it will be affective. Downside has light bids down around the 117.00 levels before the market opens up to stronger bids below 116.40, the downside risk is a move to deep will trigger margin calls on retail buyers and there have been plenty of those on the rise, a move through that 116.40 areas will see fresh tests through the 116.00 levels and the 115.40-60 areas. Abe stated during the session that if the coalition failed to gain a majority holding after the elections he would step down however, for the moment that is seen as being only slight.
• AUD: With the Oz auction for 15yr 3.25% bonds well and truly subscribed to with a cover ratio of 4.53% the solid demand for the Oz yesterday is explained or one can assume, the market moved from the 0.8720 levels in a tight channel to the 0.8680 level before finding some limited support through the carry trade after that pair dropped away from the 102 levels and into the 101.50 areas in early Tokyo, the market eventually found support on the old and tired 0.8660 levels and for the moment looks to be heading into London holding tenuously to the line. A move through the 0.8650 level will likely see light stops and then a mixture to the 0.8600 level before better support appears however, 0.8550 will then become a target for the break out and the market is vulnerable to a deeper move. The topside flirted with a higher move this week and the market is open for the most part to the 0.8750 levels before the likelihood of any meaningful stops however, that would be short lived into the 0.8800 areas with the likelihood of very strong offers.

Overnight News

JPY: BOJ stands pat on policy but board member Kiuchi dissents

Abe: Should Change Mind-set That Working Long Hours Is a Virtue

Japan Lawmakers Seek to Pass Bill Legalizing Casinos Next Year

Guide to Japan’s Lower-House Election (DJ)

Foreign Visitors to Japan Rose 37% Y/y in Oct. on Weak Yen

USD/CAD:

Senate Rejects Keystone Pipeline Legislation

AUD/CNY:

Robb Says China FTA a Transformative Agreement for Australia

CNY:

China Has Room to Cut Interest Rates: Securities Journal

China to Push Insurance Funds to Invest Abroad: Sec. Journal

SGD/CNY:

Singapore 2nd After HK for Chinese Property Investors: Times

Today’s data

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

AUD       Westpac Leading Index M/M Oct A 0.00% | C 0.00% | P -0.10%

JPY         All Industry Activity Index M/M Sep A 1.00% | C 1.20% | P -0.10%

9:00        EUR        Eurozone Current Account (EUR) Sep C 21.3B | P 18.9B

9:30        GBP       BoE Minutes

9:30        GBP       MPC Official Bank Rate Votes C 2–0—7 | P 2–0–7

9:30        GBP       MPC Asset Purchase Facility Votes C 0–0—9 | P 0–0–9

10:00     CHF        ZEW (Expectations) Nov P -30.7

13:30     USD       Housing Starts Oct C 1.03M | P 1.02M

13:30     USD       Building Permits Oct C 1.04M | P 1.02M

15:30     USD       Crude Oil Inventories P -1.7M

19:00     USD       FOMC Minutes

Harry Hindsight              

• EUR: The Euro’s spent the day hedging higher, moving from the opening 1.2450 levels moving in early Tokyo to above the 1.2470 levels and holding for the next several hours into London. The market stalled as it awaited the announcements from Abe. The move into London saw modest gains as the market moved to the 1.2490 levels reports in Le Figaro suggest that a bill scheduled to be presented in Mid-December was now in their possession which proposes that certain sectors will be allowed to operate on Sunday’s and caps on bonuses for state companies are to be put forward there are probably more details but suffice it to say that these have been muted before and rejected by the Government. Abe’s speech saw the market in EURJPY move quickly higher and the Euro was pushed to the 1.2500 levels and the run to the ZEW numbers, this was unexpectedly strong and the market triggered some weak stops and ran quickly to the 1.2540 levels the next offering area before dropping back a little to the 1.2520 areas. US numbers were also better than expected and although the market was choppy over the next few hours it was capped around the 1.2540 areas and was unable to move to far in either direction holding the 1.2500 downside, the market eventually settled into a tighter range between the 1.2530/44 areas for the rest of the session before closing off the highs but only just.
• GBP: Early trading was in line with the Euro move with Cable moving off the opening 1.5640’s and rising to trade in a very tight 1.5650/55 level for several hours until both the Abe comments and the release of the PPI numbers. While the PPI numbers showed a surprising robustness considering last week’s comments about the inflation rate hitting 1% next year. The market was particularly choppy with both pieces of news hitting and the market hit a below 1.5635 and moved into NYK pushing to the 1.5680 as the market bounced around on some reasonable volume before the US numbers began to kick in taking the market to the lows again and trading slowly through to 1.5630 in slow evening trading.
• JPY: The market traded very quietly through the Asian session, dipping from the 116.70 levels to just below 116.50 as the market lacked any conviction. The market moved steadily off its lows back to the opening levels into the London session, London were buyers from the opening taking the market back to the 117.00 however, the rumours of any further stimulus was quickly put to bed as Abe committed to a delay in the Sales Tax and announcing the election. The market dropped back to the 116.40 levels before bouncing and holding only into the NYK session before testing the lows and then a steady rise. The market ended the day just off the 117.00 levels.
• AUD: Same page different day as the RBA rolled out the same reasoning’s. The Oz has started the day around the 0.8710-0.8700 areas before moving quickly higher to the 0.8720 levels and trading for the rest of the session around those levels. The move into the London session saw the market pressing to the 0.8740 levels before dropping quickly as Abe spoke and the AUDJPY broke quickly lower, Moving off the 0.8685 levels the market gradually moved back to above 87 cents never quiet making the highs and trading for a good period around the 0.8730 levels before dipping into the close.

Yesterday’s premiership results

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

AUD       Conference Board Leading Index Sep A -0.30% | C -0.20% | P -0.10%

GBP       CPI M/M Oct A 0.10% | C 0.10% | P 0.00%

GBP       CPI Y/Y Oct A 1.30% | C 1.30% | P 1.20%

GBP       Core CPI Y/Y Oct A 1.50% | C 1.60% | P 1.50%

GBP       RPI M/M Oct A 0.00% | C 0.10% | P 0.20%

GBP       RPI Y/Y Oct A 2.30% | C 2.30% | P 2.30%

GBP       PPI Input M/M Oct A -1.50% | C -1.60% | P -0.60%

GBP       PPI Input Y/Y Oct A -8.40% | C -8.30% | P -7.40%

GBP       PPI Output M/M Oct A -0.30% | C -0.20% | P -0.10% | R -0.20%

GBP       PPI Output Y/Y Oct A -0.50% | C -0.20% | P -0.40% | R -0.50%

GBP       PPI Output Core M/M Oct A 0.10% | C 0.00% | P -0.10%

GBP       PPI Output Core Y/Y Oct  A 0.90% | C 0.80% | P 0.80%

GBP       DCLG UK House Prices Y/Y Sep A 12.10% | C 12.10% | P 11.70%

EUR        German ZEW (Economic Sentiment) Nov A 11.5 | C 0.5 | P -3.6

EUR        German ZEW (Current Situation) Nov A 3.3 | C 1.8 | P 3.2

EUR        Eurozone ZEW (Economic Sentiment) Nov A 11 | C 4.3 | P 4.1

USD       PPI M/M Oct A 0.20% | C -0.10% | P -0.10%

USD       PPI Y/Y Oct A 1.50% | C 1.20% | P 1.60%

USD       PPI Core M/M Oct A 0.40% | C 0.10% | P 0.00%

USD       PPI Core Y/Y Oct A 1.80% | C 1.50% | P 1.60%

USD       NAHB Housing Market Index Nov A 58 | C 55 | P 54

USD       Net Long-term TIC Flows Sep A -$55.6B | C $41.3B | P $52.1B | R $44.8B

Good Luck,

Andy