Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 118.228 | EURUSD 1.25394 | EURJPY 148.25 | AUDUSD 0.86211 | NZDUSD 0.78582 | USDCAD 1.13049 | EURCHF 1.20186 | USDCHF 0.95846 | GBPUSD 1.56928 | EURGBP 0.79905 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               118.37 | 117.355

EUR/USD             1.2569 | 1.2534

EUR/JPY               148.43 | 147.49

AUD/USD            0.8651 | 0.8612

NZD/USD             0.7899 | 0.7856

USD/CAD             1.1314 | 1.1296

EUR/CHF              1.2024 | 1.2018

USD/CHF             0.9587 | 0.9564

GBP/USD             1.5714 | 1.5679

EUR/GBP             0.8000 | 0.7991
For today

• EUR: Comments from Aso on the rise of USDJPY dominated the Euro movements with an early dip below 1.2540 from the opening was quickly reversed as the market pushed through towards the 1.2570 levels into the Tokyo session, the market continued to move in the 1.2550-70’s for a few hours as the market moved to the grey hours. From yesterday’s action the  1.2570 is roughly a neck line for the completion of a reverse head shoulders which the Technical traders will be avidly watching for a breakout, this would suggest that the next levels of 1.2650 will likely be tested which should provide a stiffer resistance to the move higher however, 1.2750 areas are now open to a possible short squeeze if there is sufficient impetus however, for the moment 1.2570 has been the resistance over the past 24hrs and counter traders are likely to be fading the attempt and the longer it holds the less likely anything will happen given there is no direct data for the Euro today. Downside, the opposite may apply if the market fails to push ahead then any longs buying into this pattern could find themselves long and wrong as the saying goes however, 1.2510 through to the 1.2480 level is likely to see reasonable bids that may be able to soak up any downward pressure, through those levels though weak stops are likely to show and an opening for further tests of the 1.2400 level.
• GBP: With only the PBSR on the cards for the day Cable is likely to be trapped without peripheral movement in the Euro or the market in general. Having followed the route of the Euro in early trading the drop in USDJPY allowed the Cable to rise from the 1.5680 lows and back through the 1.5693 area opening to touch above the 1.5710 level into the Tokyo session, the market from there has been reasonably static with the USDJPY dominating the market and GBP losing ground against a stronger Euro. The topside is likely to see light offerings into the 1.5750 levels which have stalled the market this week, however a push through there does open up the topside a little and into a stronger area around the 1.5850 levels, with that in mind its likely there are weak stops behind the 1.5750 level and given the potential for a Technical move in the Euro the Cable may not lag to far behind. However, the downside has seen the market stuck in the 1.56-1.57 range for the week with only brief attempts higher with buying likely in any move below the 1.5650 areas at the moment building in size as you trade towards the 1.5600 levels with a break below the 1.5590 levels likely to see stops appearing and an opening into a new 1.5600-1.5400 range possible.
• JPY: The USDJPY opened around the 118.20 areas and early buyers slowly drove the market towards the 118.35-40 levels before Aso the Japanese FinMin spoke up, and while he took his comments from the first page of how to influence the market it is rather disconcerting to see the market moving lower before the comments were made dropping from the highs and back to the 118 levels before he spoke, once the press release hit the market dropped very quickly to push below the 117.40 level however, for anyone that seen this before the buying after the comments is nothing new and these comments then get repeated to the extent that they become less convincing and become ignored. Although the market extended below the 117.50 areas this is the weak support area and likely again to see buyers in different shapes and forms with the usual retail buyers and the profit taking shorter term players who are likely to be fading any moves higher for the immediate future just on the back of the Aso comments. Fair warning though as with Mr Soros and his selling of Cable against the BoE, it’s not unknown for people to go against a Central Bank particularly when it’s backs against a wall. Beyond the 117.00 level there is likely to be weak stops and a possible deeper move available to the 116.50 areas however, at that point one would suspect it likely to have run out of steam unless there is something official about the movement, again though USDJPY at the current levels probably suits their purpose. Topside as we’ve seen has good offers into the 119.00 levels however, short term sellers may be tempted to sell in front of the 118.80 levels and a move through the 119.00 could trigger a small short squeeze and given the nervousness of the market around that level could again see a quick spike before the steady grind towards the 120.00 levels which for most of the banks out there is what they believe is a resting point only. The downside to all this is the weaker the Yen gets the worse the trade deficit is likely to become because having spent more than 20yrs trying to dig themselves out the bigger exporters have all worked out that it is better to have the bulk of their manufacturing concerns abroad and less affected by the Yens movement. So the importers pay a larger amount for raw materials which theoretically would be inflationary, that’s only if people buy the end product though.
• AUD: The Oz has been more dominated than the other currencies by the movement of the USDJPY. Opening around the 0.8620 areas the market dipped a little as with the others before moving to the 0.8630 levels on the opening in Tokyo and then lifting on the Aso comments to push briefly above 0.8650, the market then stayed in the 0.8630-50 range with little news and only USDJPY movements to go with, other than reiterating the low levels of Iron ore and finances in some areas built on a now none existent $120 a tonne against the current $70. For the moment the 0.8560-40 provides strong support and has been tested twice this month, obviously the RBA is less concerned with that level than a move back towards the 88 cent levels. A push through opens up a deeper prospect to the 0.8375-50 levels. Topside offers into the 0.8650-60 areas are likely, with weak stops through the levels and opening for a further test into the 0.8720-40 areas, even above here the offers are likely to be thick into the 88 cent areas and with no real data all eyes will be on any movement in the USDJPY.

Overnight News

JPY:

Japan’s Aso: Speed of Yen Weakening Has Been Too Fast

Abe Listening to Krugman after Tokyo Limo Ride on Abenomics Fate

Japan Govt. Finds Funds to Cover 2.5 Point Corp. Tax Cut: NHK

Stagflation Possible If BOJ Exit Coincides With Tax Rise: Ito

Japan Lower House Dissolved for General Election

Japan PM’s support at lowest ever as nation heads for election

Yonezawa Says GPIF Portfolio Review Premised on BOJ Easing: Asahi

AUD:

Australian Mining Investment Drop to Drag on Growth: RBA’s Heath

CNY:

China Should Increase Targeted Easing Policies: Sec. Journal

China Encourages Yuan Reform Trial in National Economic Zones

China’s PBOC to Auction 60b Yuan of MOF Deposits at Banks

USD:

Obama Says Deportation Reprieve Helps Fix ‘a Broken System’

Unconventional Policies Supported U.S., Says Fed’s Williams

Gold:

Ukraine Cuts Gold Reserves to Lowest Since Feb. 2008: IMF

EUR:

Germany Will Meet EU6.5 Billion Borrowing Target, Ministry Says

NZD:

N.Z. Visitor Spending Rises 10% to NZ$7.24b in Year Ended Sept

Today’s data

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

09:30     GBP       Public Sector Net Borrowing (GBP) Oct C 6.9B | P 11.1B

13:30     CAD       CPI M/M Oct C -0.20% | P 0.10%

13:30     CAD       CPI Y/Y Oct C 2.00% | P 2.00%

13:30     CAD       BoC CPI Core M/M Oct C 0.20% | P 0.20%

13:30     CAD       BoC CPI Core Y/Y Oct C 2.20% | P 2.10%

Harry Hindsight              

• EUR: Euro remained range bound through the day, with only a minor test to the downside. Opening around the 1.2550 levels the market was pushed steadily lower as the USDJPY continued its steady climb higher with EURJPY offering some minor resistance to the move, in the end the Euro was pushed steadily lower to the 1.2530 levels before the cross pushed through and released the pressure. The Euro from that point could never quite make its way to the opening levels during Asia and the market dropped off the 1.2550 in the move into the grey hours ahead of PPI numbers in Germany and the raft of PMI numbers across Europe. The dip was minor only pushing into the 1.2520’s before the German numbers showing little change or move from consensus sent the market to above the 1.2570 level to make the highs for the day. The PMI numbers disappointed and the market found itself quickly lower and testing the 1.2510 levels and that defined the range for the day, although the US numbers did initially test the lows for a second attempt it was quickly reversed and the high was tested, so two moves and then a declining range to the close with very little difference for the day.
• GBP: Cable was quiet in the Asian session, moving for the most part in a 1.5670-80 range until the grey hours and selling moved into the market pre-retail sales numbers sending the Cable to just above the 1.5630 levels. What the market believed was a surprising improvement in the numbers sent the market moving back to its previous range with a minor period of choppy trading before starting a steady climb higher through into the NYK session pushing steadily through the 1.5730’s to make the highs before the US numbers, and a return to the opening 1.5680-85 levels for a quiet run to the close on fairly good volume.
• JPY: The USDJPY began the day quietly and I believe failed to push in early trading because the EURJPY cross held it back however, once it got started there was no stopping it and the market moved off the 118.00 levels to push steadily higher, the move into the grey hours saw a final flurry of activity to fail just short of the 119.00 levels, the failure saw a lot of long’s now cutting there positions into the late Tokyo session and into the London opening before trading lower in successive waves over the course of the day. Weak European numbers saw strong EURJPY selling from the highs around the 149.00 to begin with then having pushed the USDJPY to the 118 levels the market looked to stabilize into the NYK session only to see straight USDJPY selling move in as the US numbers failed to impress the market in USDJPY in particular, dropping back to the 117.80 levels the market then continued to trade off this level into a close around the 118.20 levels with volumes dropping off the close to the end of the day. The day saw plenty of hedges been taken back in from those that had removed themselves from the equity markets and RM and models continued as the market awaited the dawn and the likely commentary by either members of the BoJ and/or MoF.
• AUD: The Oz pushed lower in response to the rising USDJPY through the Asian session and setting the lows into the grey hours with early Pre-London reversing the move from the 0.8566 areas as support moved in ahead of the previous lows of the year/month. The market held in early trading in line with the movements in USDJPY to start a deepening sell off with concerns initially triggered by Chinese PMI and previous comments from the RBA over the week. Early London saw most of the losses recouped and the AUD was back to the opening 0.8620 levels as the NYK session kicked in, the market while rising steadily saw some chopping around as profit taking and resetting of positions by day traders continued to move the market in 20-30 pip moves however, the general trend continued throughout the session and NYK took over to take the market to above the 0.8640 from the NYK option cut, having hit the highs the market slipped slowly back as the interest disappeared from the market to finish broadly unchanged on the day.

Yesterday’s premiership results

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

NZD       PPI Inputs Q/Q Q3 A -1.50% | C 0.30% | P -1.00%

NZD       PPI Outputs Q/Q Q3 A -1.10% | C 0.20% | P -0.50%

JPY         Trade Balance (JPY) Oct A -0.98T | C -1.02T | P -1.07T

CNY        HSBC Manufacturing PMI Nov (P) A 50 | C 50.2 | P 50.4

CHF        Trade Balance (CHF) Oct A 3.26B | C 2.57B | P 2.45B | R 2.49B

EUR        German PPI M/M Oct A -0.20% | C -0.20% | P 0.00%

EUR        German PPI Y/Y Oct A -1.00% | C -0.90% | P -1.00%

EUR        France Manufacturing PMI Nov (P) A 47.6 | C 48.9 | P 48.5

EUR        France Services PMI Nov (P) A 48.8 | C 48.6 | P 48.3

EUR        Germany Manufacturing PMI Nov (P) A 50.0 | C 51.5 | P 51.4

EUR        Germany Services PMI Nov (P) A 52.1 | C 54.5 | P 54.4

EUR        Eurozone Manufacturing PMI Nov (P) A 50.4 | C 50.9 | P 50.6

EUR        Eurozone Services PMI Nov (P) A 51.3 | C 52.3 | P 52.3

GBP       Retail Sales M/M Oct A 0.80% | C 0.40% | P -0.30% | R -0.40%

GBP       CBI Trends Total Orders Nov A 3 | C -3 | P -6

CAD       Wholesale Sales M/M Sep A 1.80% | C 0.70% | P 0.20%

USD       CPI M/M Oct A 0.00% | C -0.10% | P 0.10%

USD       CPI Y/Y Oct A 1.70% | C 1.60% | P 1.70%

USD       CPI Core M/M Oct A 0.20% | C 0.20% | P 0.10%

USD       CPI Core Y/Y Oct A 1.80% | C 1.80% | P 1.70%

USD       Initial Jobless Claims (NOV 15) A 291K | C 286K | P 290K | R 293K

USD       Philly Fed Survey Nov A 40.8 | C 18.5 | P 20.7

USD       Existing Home Sales Oct                A 5.26M | C 5.15M | P 5.17M | R 5.18M

USD       Leading Indicators Oct A 0.90% | C 0.50% | P 0.80% | R 0.70%

EUR        Eurozone Consumer Confidence Nov (A) A -12 | C -11.1 | P -11.1

Good Luck,

Andy