Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 117.971 | EURUSD 1.2474 | EURJPY 147.154 | AUDUSD 0.85639 | NZDUSD 0.78018 | USDCAD 1.12582 | EURCHF 1.20267 | USDCHF 0.96413 | GBPUSD 1.57074 | EURGBP 0.7941 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               117.98 | 117.66

EUR/USD             1.2485 | 1.2466

EUR/JPY               147.15 | 146.875

AUD/USD            0.8563 | 0.8525

NZD/USD             0.7835 | 0.7806

USD/CAD             1.1271 | 1.1250

EUR/CHF              1.2027 | 1.2024

USD/CHF             0.9646 | 0.96315

GBP/USD             1.5721 | 1.5691

EUR/GBP             0.7947 | 0.7939
For today

• EUR: The Euro slipped back from the higher end of yesterday’s trading however, the session was particularly quiet with very little in the market in front of today’s list of data in the US, and while the market was turned on consumer confidence the GDP numbers remain bullish for the USD and should help to keep the market on course. The market moved from the 1.2475 levels to touch into the mid 1.2480’s before drifting back to hold around the 1.2470-75 level in quiet trading. Topside offers from the highs through the 1.2500 and onwards only a clear break above the 1.2560 will see light stops triggered with the market showing plenty congestion from the past couple of weeks in the area. A move through those levels see’s 1.2600 possibly a key level to regain the 1.27-1.28 levels. The QE is being continually talked about but for the moment the market is perhaps a little sceptical with no fresh funds likely to do anything and further recycling of debt there likely avenue, this leaves the EU with ever increasing risk parameters while protecting private investors, yesterday’s announcement of a €315bn new deal has been dismissed for the most part as a subprime gimmick and not likely to do anything other than increase risk, with that in mind though the commentary particularly from Draghi has become more intense and the downside calls from the summer are still open to be tested. The 1.2400 level now holds limited bidding and through there the market see’s strong buying likely into the 1.2350 levels and again into 1.2300 so it’s not all easy going and relies on if’s and but’s from the ECB. Warnings of doom appear from the German CB with Junk bonds now at lows not seen since the financial crises kicked off as the move for yields is driving the market lower, of course if anything were to happen Corporate sellers would be faced with nothing only large servicing debt and no real worth.
• GBP: Cable moved from the opening just above the 1.5700 to the 1.5720 levels with light cross buying and limited ideas in which direction it should move next, with the market believing Carney’s scenario against a back drop of him erring in the first month gives the impression that he has it wrong however, his comments on lower inflation, dropping to below 1% still remains likely, especially given early indications that OPEC has failed to agree anything in pre-meetings a lowering of energy costs could well see the inflation of 1% in the coming weeks/months. The market drifted from the highs over the course of the session and only once the market moved towards the grey hours did it recover its meagre losses moving from the mid 1.5690’s and back to the opening levels. The market to the topside has seen sufficient sellers to hold the market below the 1.5750 levels however, a move through that levels will give limited room to push through and again test the 1.5900 areas, Downside bids into the 1.5600 levels have seen a couple of attempts over the past couple of weeks to no avail however, a push through the level only leaves sentimental areas on the downside for the most part and a move to the 1.5300 areas is possible if unlikely without a strong rally of the USD.
• JPY: A quiet session with the LDP presenting the voters with a brief look at how both economic and fiscal growth will be however, it is missing just the specifics and anything solid to base its assumptions on. The market moved from the opening levels just short of the 118.00 and traded steadily lower and into the 117.70’s before ranging around the 117.80 levels once the limited damage was done. Limited offerings into the 118.00 level before giving way to strong offers to the 118.30 areas, a break through this level will probably see the market able to rise to the 118.50 level before meeting further resistance, even through the 118.60 levels the market will be strongly offered into the next handle and is likely to struggle with expectations of verbal intervention by the BoJ/MoF. Downside bids in the current areas, a push below the 117.40 area exposes the 117.00 levels and although that is likely to be reasonably strong the stronger areas are still a bit below around the 116.00 level.
• AUD: The Oz has meandered quietly along with early buying as Gamma players moved in however the early rises to the 0.8560’s was tempered by light Carry trade selling as retail Japan takes out some of their long positions going into a busy data day for the US. With plenty of peripheral items out through the day nothing stirred the Oz itself and the market moved around the 0.8540 levels having dipped only briefly to the opening lows. Topside offers likely into the 0.8570 areas before freeing up for a move to 86 cents, 0.8620 areas is likely to see offerings before giving way to likely stops on a break through the 0.8630 areas with the market well traversed above the 0.8650 levels a return to the 87 cent level would be open. Downside see’s the likelihood of strong support into the 85 cent levels however, technically the market now looks open to the 83 cent levels.

Overnight News

EUR:

EU unveils details on Juncker’s investment plan

Bundesbank warns corporate debt becoming over priced

CNY:

Fitch stated that Benchmark rate cut will not help Chinese homebuilders

AUD:

Bureau of Resources and Energy Economics values Australian Mining and Energy projects A$228B

Cost pressures starting to abate in mining, energy: BREE

Sees investment in Australian resources, energy moderating BREE

Value covers total of 44 mining, energy projects BREE

Today’s data

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

07:00     CHF        UBS Consumption Indicator Oct P 1.41

09:30     GBP       GDP Q/Q Q3 (P) C 0.70% | P 0.70%

09:30     GBP       Index of Services 3M/3M Sep C 0.70% | P 0.80%

11:00     GBP       CBI Reported Sales Nov C 29 | P 31

13:30     USD       Durable Goods Orders Oct C -0.60% | P -1.30%

13:30     USD       Durables Ex Transportation Oct C 0.50% | P -0.20%

13:30     USD       Initial Jobless Claims (NOV 22) C 287K | P 291K

13:30     USD       Personal Income Oct C 0.40% | P 0.20%

13:30     USD       Personal Spending Oct C 0.30% | P -0.20%

13:30     USD       PCE Deflator M/M Oct C 0.00% | P 0.10%

13:30     USD       PCE Deflator Y/Y Oct C 1.40% | P 1.40%

13:30     USD       PCE Core M/M Oct C 0.20% | P 0.10%

13:30     USD       PCE Core Y/Y Oct C 1.50% | P 1.50%

14:45     USD       Chicago PMI Nov C 63 | P 66.2

14:55     USD       U. of Michigan Confidence Nov (F) C 90 | P 89.4

15:00     USD       Pending Home Sales M/M Oct C 1.00% | P 0.30%

15:00     USD       New Home Sales Oct C 470K | P 467K

15:30     USD       Crude Oil Inventories P 2.6M

Harry Hindsight              

• EUR: Early trading was light and drifting ever lower moving from the opening 1.2440 levels as the previous days short term buyers cut light position taking the market to the 1.2420 levels and into the London session. London held the lows before moving only slightly higher on the German GDP number unchanged and in line with expectations. OECD cut GDP forecasts for the Eurozone GDP to 1.1% from 1.7% for 2015 and the Euro tested lower and into the NYK session. Better GDP numbers in the US was countered by a very weak consumer confidence number an hour later and the market moved away from the 1.2400 levels to trigger weak stops above the 1.2440 areas and a push to above 1.2460. the market continued pushing and managed to push into the mid 1.2480’s before coming to a stop and drifting for the remainder of the session holding in the mid 1.2470’s in quiet trading to the end of the day.
• GBP: Cable was contained for a great part of the day with only the US numbers stirring the market, opening around the 1.5705 levels the market drifted with the Euro in Asia pushing down into the mid 1.5670’s before recovering into the grey hours, early London players set the market quickly lower to push through the 1.5700 levels and to the 1.5650 area before bouncing back and holding in the 1.5670-80 and into the NYK session. US numbers let the USD down a little and the recovery was more of GBP tagging along on the move of the Euro, not quiet keeping pace and falling behind as the EURGBP cross moved slightly higher. Cable hit just short of the 1.5740 levels before slipping back to the opening areas for the close in a very uneventful for Cable with only limited data available and pulled by the Euro.
• JPY: BoJ Minutes put paid to a quick rally before the opening of Tokyo moving from the opening 118.20’s to above the 118.55 level before collapsing back as comments by Kuroda spooked the market, not unware of damage to small firms and households by a weak Yen was sufficient to send the market quickly through to the 117.80 areas before finding support. From that point on it was a tight range and even with the US numbers the market was only able to rise once to the opening levels just prior to the US release before heading back lower and testing below the 117.80 levels for the second time of the day and then a quiet finish holding just below the 118.00, while the movement suggests weak trading it couldn’t have been further from the truth as the markets held different lines throughout the day.
• AUD: The carry trade dominated the market to some extent with China’s rate cut over the weekend weakening the Oz sufficiently to set the movement from the 0.8615 opening and down to the 0.8570 areas. The market recovered a little as the Carry trade stabilized with the JPY reversal however, the move into London saw strong selling with RBA’s Lowe speaking and causing further weakness taking out stops through the 0.8550 levels before holding for the remainder of the session trading around the 0.8530 areas with brief sojourns below the 0.8520 levels.

Yesterday’s premiership results

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

JPY         Corporate Service Price Y/Y Oct A 3.60% | C 3.60% | P 3.50%

CNY        Conference Board Leading Index Oct A 0.90% | P 0.90% | R 1.00%

NZD       RBNZ 2-Year Inflation Expectation Q4 A 2.10% | P 2.23% | R 2.20%

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

GBP       BBA Mortgage Approvals Oct A 37.1K | C38.5K | P 39.3K | R 39.1K

CAD       Retail Sales M/M Sep A 0.80% | C 0.50% | P -0.30%

CAD       Retail Sales Less Autos M/M Sep A 0.00% | C 0.30% | P -0.30%

USD       GDP (Annualized) Q3 (S) A 3.90% | C 3.30% | P 3.50%

USD       GDP Price Index Q3 (S) A 1.40% | C 1.30% | P 1.30%

USD       House Price Index M/M Sep A 0.00% | C 0.40% | P 0.50%

USD       S&P/Case-Shiller Composite-20 Y/Y Sep A 4.90% | C 4.60% | P 5.60%

USD       Consumer Confidence Nov A 88.7 | C 96 | P 94.5

Good Luck,

Andy