Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 117.813 | EURUSD 1.24476 | EURJPY 146.66 | AUDUSD 0.83189 | NZDUSD 0.77084 | USDCAD 1.14821 | EURCHF 1.20299 | USDCHF 0.96638 | GBPUSD 1.57152 | EURGBP 0.79208 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               118.34 | 117.445

EUR/USD             1.2496 | 1.2431

EUR/JPY               147.33 | 146.45

AUD/USD            0.8378 | 0.8310

NZD/USD             0.7872 | 0.7792

USD/CAD             1.1485 | 1.1448

EUR/CHF              1.2037 | 1.2029

USD/CHF             0.9679 | 0.9628

GBP/USD             1.5757 | 1.5705

EUR/GBP             0.79345 | 0.79105
For today

• EUR: A combination of factors however the market having opened around the 1.2445 levels held quietly until just before the Tokyo opening, a good employment number in AUD had already seen a quick move in the Oz triggering weak stops and it would seem it was only a matter of time before the Euro did the same, breaking the 1.2450 level and quickly rising to just short of the 1.2500 levels as option barriers stood in the way with a good spread of buyers lining up initially, the market continued to push at the levels for awhile before the impetus was completely lost and a more steady decline back to the 1.2450 level ensued. The market over the course of the session found itself basing on the levels until just before the grey hours when the level broke and while there were some weak stops it was not as significant as the move up hitting the low 1.2430’s before holding. Obviously the topside near offers are centred around the 1.2495/00 area with talk of a decent amount protecting the breakthrough of the 1.2500 levels given that if and when it breaks the market is likely to see weak stops before running into some light profit taking as the market moves to the 1.2550 levels and further congestion, a push through there opens the 1.2600 level for a possible stronger test if the momentum can be established. Downside bids are a little thin however, light bids run to the 1.2400 levels and then thicken below there into the 1.2370 before the likelihood of decent stops appear and a potential test of the 1.2300 opens up.
• GBP: Cable was reasonably quiet with the same movement around the Tokyo opening leading the Euro slightly in the move higher and trading through the 1.5750 levels before the reversal kicked in and Cable dropping back to the starting 1.5710 areas as quickly as it moved up, the selling continued lightly into the later part and the market runs into the grey hours just holding above the 1.5700 levels. Downside sees only minor support around the 1.5700 levels with likely weak stops below the 1.5680 areas and a run towards the 1.5650 level which is probably a little stronger before the market again opens up below 1.5640 for another test of the 1.5600 levels and the years lows around the 1.5540 areas. Topside saw the market stop around the 1.5760 levels and for the moment this remains the target area and a strong push through only leads to further selling around the 1.5820 areas however, a push through the 1.5850 area will opening up further gains and a recovery to last month’s 1.6000 levels.
• JPY: USDJPY opened around the 117.95 levels and drifted into the Tokyo session moving down to the 117.50 levels, the move triggered a broad based USD weakness which then fed into stops in Euro’s, Cable, and the Oz and although all three met resistance after a quick move the USDJPY started to recover and kill off any chance of those currencies breaking any other levels. The move was a steady affair initially however a push to the opening levels triggered some weak stops and the market quickly pushed into the 118.30’s and has held the 118.00/30 levels since. Topside offers show just above the highs although they are likely to be light and the market will need to push through the 118.80 levels to start a meaningful recovery of the past couple of days losses however, regional concerns with EM are likely to continue to weight on the market and buying JPY as a safe haven for the moment is likely to satisfy the market and the BoJ/MoF. The opposite direction is open to the 117.50 areas having cleared the area yesterday, a push through that level will likely open up deeper moves initially to the 117.00 area and then opening up each sentimental level for testing.
• AUD: Strong employment data stirred the market and the Oz moved away from the opening 0.8320 levels to push again to above the 0.8370 levels before beginning a steady drift lower as the market failed to push through the offers from the 0.8380-0.8400 areas, having spent the best part of the session drifting back the market eventually steadied in the 0.8330 area and drifted into London barely changed on the day. Topside offers as mentioned seem to be congregated in front of the 0.8400 levels with very little to indicate a possibility of stops however, there are always likely to be day traders shorting towards the top and placing weak stops behind those levels, even so the market is likely to struggle over the next 50 pips and a push through the 0.8450 level is likely to see more active buying and only weak protection for the 85 cent area. Downside is well and truly been traversed with light bids into the 0.8300 levels and then deeper protection of the 0.8250 levels, a solid push through 0.8230-10 areas opens up the new range but for the moment that seems to be on hold unless there is a major surprise in the Initial Jobs and advance retail sales numbers.

Overnight News

NZD:

Wheeler Says Message Is Clear That RBNZ on Hold for Long Time

RBNZ Mulls Tighter Risk Profile for N.Z. Property Investors

AUD:

Australian Nov. Employment Rises 42,700 M/M; Est. 15,000 Gain

JPY:

Japan Likely to Select Prime Minister Dec. 24, Kyodo Says

Japanese Sold Net 852.2 Billion Yen Overseas Debt Last Week

Japan Oct. Core Machine Orders Fall 6.4% M/m; Est. -1.7%

S&P to Watch Japan Commitment to Fiscal Reconstruction: Reuters

CNY:

China Sets Yuan Reference Rate at Strongest Since Feb. 20

Today’s data

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

NZD       RBNZ Rate Decision A 3.50% | C 3.50% | P 3.50%

JPY         Tertiary Industry Index M/M Oct A -0.20% | C -0.20% | P 1.00% | R 1.30%

JPY         Machine Orders M/M Oct A -6.40% | C -1.90% | P 2.90%

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

GBP       RICS House Price Balance Nov A 13% | C 15% | P 20%

AUD       Employment Change Nov A 42.7K | C 15.0K | P 24.1K | R 13.7K

AUD       Unemployment Rate Nov A 6.30% | C 6.30% | P 6.20%

07:00     EUR        German CPI M/M Nov (F) C 0.00% | P 0.00%

07:00     EUR        German CPI Y/Y Nov (F) C 0.60% | P 0.60%

08:30     CHF        SNB Rate Decision C 0.00% | P 0.00%

09:00     EUR        ECB Monthly Bulletin

13:30     CAD       Capacity Utilization Rate Q3 C 82.90% | P 82.70%

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

13:30     USD       Advance Retail Sales Nov C 0.40% | P 0.30%

13:30     USD       Retail Sales Less Autos Nov C 0.10% | P 0.30%

13:30     USD       Import Price Index M/M Nov C -1.80% | P -1.30%

13:30     USD       Initial Jobless Claims (DEC 6) C 295K | P 297K

15:00    USD       Business Inventories Oct C 0.20% | P 0.30%

Harry Hindsight              

• EUR: A steady Asian session with the market opening around the 1.2370 areas and trading higher in the initial phase of the market to above the 1.2390 levels however, this was quickly reversed as the Tokyo market came in as sellers of Yen across the board, lower energy products fed through to lower equities with energy companies being the common denominator then turned the market lower for the USDJPY in particular and the Euro again rose towards the 1.2400 levels. The move into London saw little change with the lows being tested and the highs unable to push that little bit to break the pattern. With no real strong data the NYK market was the one that eventually broke through the 1.2400 levels rising quickly from the opening to peak through to the 1.2430 and holding that area until the London market closed. The market did rise a little higher however; it was a steady progress over the balance of the session holding just below the 1.2450 areas into the close.
• GBP: Cable eventually made steady gains over the course of the day however, it was hard going with early pushes from the 1.5660 level towards 1.5690 quickly sent back to the opening as the Tokyo session opened, as with the Euro the Cable eased higher over the course of Asia before moving into the grey hours around the 1.5690 levels and an extended period at the level, early London then pushed it through to the 1.5705 levels before the market having made the move dropped back after the visible trade balance numbers to push below the 1.5650 levels and the cross EURGBP moving higher and above the 0.7910 levels. With the opening in NYK Cable started to recover its losses as the USD slumped but was never able to keep pace with the rise in the Euro and the cross pushed above the 0.7920 levels as Cable managed to break through the 1.5700 levels and towards 1.5720 before finding sufficient offers in Cable to hold the levels into the close.
• JPY: USDJPY opened in the Asian session and saw quick selling leading into the Tokyo market as perceptions sent the market to the 119.20 supportive levels. The market moved back higher as the Tokyo session opened and the early buyers and fix buying led the market to a push above the 119.80 levels then a combination of equity markets and bond markets spooked the FX markets and the rout began, there was nothing savage about it however, from those highs of 119.80 the selling was quiet relentless as margins were hit and the retail market was caught holding a lot of USD’s, the market moved to the 118.80 supportive levels in late session and was briefly held up in the London session with plenty of two way flow entering the market. The move into the NYK session saw a general weakness in the USD increasing and the USDJPY traded in a tight channel pushing down through the 118.80 levels and triggering some light stops to the 118.40 before continuing over the rest of the session to hit the 117.80 levels into the close and holding.
• AUD: While the carry trade AUDJPY did lose ground over the course of the day the Oz only benefitted into the Asian session initially dropping as the USDJPY moved to its highs before regaining it losses and more on top as the Carry held around the 99.00 into the London session, Oz had opened around the 0.8290 levels and slumped in early Tokyo to below the 0.8270 however, by the time the market reached the grey hours the broad based JPY strength had driven the Oz to above the 0.8330 levels and close to the near term resistance levels. London did very little and although the Oz pushed again towards the 0.8350 levels it was unable to break the level in early NYK. Futures selling in the carry trade in the US triggered the selling as the USDJPY now triggered more margin calls and the knock of effect saw the Oz dropping back unlike the Euro and GBP trading steadily down to the opening levels, Early Sydney were not afraid to buy as soon as they walked into the door and as the market moved towards the closing couple of hours Oz found itself quickly rising to the 0.8330 level and then a quiet hour to the close.

Yesterday’s premiership results

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

AUD       Westpac Consumer Confidence M/M Dec A -5.70% | P 1.90%

JPY         Domestic CGPI Y/Y Nov A 2.70% | C 2.70% | P 2.90%

JPY         BSI Large Manufacturing Q/Q Q4 A 8.1 | C 13.1 | P 12.7

AUD       Home Loans M/M Oct A 0.30% | C 0.20% | P -0.70% | R -0.40%

CNY        CPI Y/Y Nov A 1.40% | C 1.60% | P 1.60%

CNY        PPI Y/Y Nov A -2.70% | C -2.40% | P -2.20%

JPY         Consumer Confidence Nov A 37.7 | P 38.9

GBP       Visible Trade Balance (GBP) Oct A -9.6B | C -9.5B | P -9.8B | R -10.5B

USD       Crude Oil Inventories A 1.5M | C -2.6M | P -3.7M

USD       Monthly Budget Statement Nov A -79.6B | P -121.7B

Good Luck,

Andy