Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 118.807 118.80-119.00 | EURUSD 1.24608 1.2460-65 | EURJPY 148.057 148.025-334 | AUDUSD 0.82436 0.8240-53 | NZDUSD 0.77762 0.7755-79 | USDCAD 1.1580 1.1576-83 | EURCHF 1.20105 1.2010-13 | USDCHF 0.96372 0.9630-44 | GBPUSD 1.57115 1.5705-25 | EURGBP 0.79322 0.7862-0.7948 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               119.13 | 117.78

EUR/USD             1.2485 | 1.2434

EUR/JPY               148.445 | 146.86

AUD/USD            0.8254 | 0.8204

NZD/USD             0.7792 | 0.7731

USD/CAD             1.1606 | 1.1549

EUR/CHF              1.20135 | 1.2010

USD/CHF             0.9682 | 0.9610

GBP/USD             1.5742 | 1.5705

EUR/GBP             0.79365 | 0.79175

 

For today

• EUR: The Euro opened higher around the 1.2470’s as the USD suffered selling pressure with the Japanese election triggering Yen strength, it failed to push above the 1.2480 levels and as the USDJPY turned the JPY cross domination of the market limited the upside Euro and eventually sent it trading steadily lower pushing back through the 1.2450 levels and light weak stops and touching briefly below the 1.2440 as the market heads towards London. The downside 1.2400 holds limited bids and weakness below the 1.2370 levels, talk and rumours of QE continue however, the market is now inured to the idea as another ECB member talks off the book, or speaks to the media off the records. Topside offers into the 1.2480 levels continuing into the 1.2500 levels, possibly strong stops through the levels however, last attempt up there proved too much with large offers from the mid 1.2490’s. A push through the level is still likely to see offers through for 30 pips and the 1.2550 levels opens and so the topside continues with offers every 20 pips or so into the 1.2600 level and expected strong resistance.
• GBP: Cable initially made gains moving from an inline opening around the 1.5715 areas to move in early Tokyo into the mid 1.5735 levels before slowly slipping back as the market drifted from the highs and back to hold the 1.5710 levels for a quiet session. Congested to the downside from this level down through light bids around the 1.5700 level and strengthening somewhat as the market approaches the 1.5640 levels, weak stops are likely through the level before the 1.5600 level strengthens and remains the near term support running to the lows below the 1.5560 levels. Topside offers around the 1.5760 levels have been tested a couple of times this month but remains intact with either the Euro or USD dominating each time the market approached the level, a move through only really opens a test of 1.5800 level which is likely to be a more formidable level before opening up the next range.
• JPY: USDJPY led the market with a lower opening after a landslide victory in the lower house for Abe giving the JPY early strength. Opening around the 118.40 levels, the move lower was tempered by the Tankan with the weakness in the JPY level showing through on the reading with large index coming in less than expected while non-manufacturing benefited from the weakness of the Yen. The market bounced from the 117.80 levels and the USD strengthened across the board with the early JPY strength less exaggerated in the crosses than early in the session but still playing a factor in the movements of the Euro and GBP. The move higher quickly filled the gap on the charts as the USDJPY moved to trade above the 119.00 levels before settling into a narrow range more in line with Fridays close. Light offers above the 119.00 level, these running back to the 119.50 levels before the market opens a little however, even so the market sees more offers in the 120.00 areas and although those are likely to be weaker than the 119.50 levels and a move through that level opens up the 121.00 and 122.00 levels again. Downside sees light bids through the 118.00 level and although we’ve traded through the level in early trading the 117.80 level still remains broadly intact and a break through there will likely see weak stops and then further bids protecting the 117.50 areas before the market opens for a test of the 117.00 levels and stronger downside pressure.
• AUD: The Oz was dragged lower from the opening moving from the opening 0.8250 levels to below 0.8210 areas as the carry trade dropped quickly with the USDJPY selling. Having run into the 0.8210 levels and reasonable support the market based on the level for several hours before beginning to move slowly higher and back towards the opening levels as the market moved towards the London session. Topside offers are likely to be strong above the 0.8270 levels and into the 83 cent levels, a break through the level opens another 50 pips before running into further offers. Further movement is possible through the levels however, it’s likely that the market is going to be driven by USDJPY or carry trade movement more than anything else. Downside the market looks likely to be well bid into the 0.8190 levels a push through will see likely weak stops and an opening to further weakness and nothing special to the 80 cent and just below.

Overnight News

AUD:

Hostages Taken in Sydney Cafe, Islamic Flag Reportedly Flown

Australia Sees ‘14-‘15 Deficit A$40.4b Vs May Est. A$29.8b Gap

ASX Says Market Operating Normally, Closely Monitoring Situation

RBA Staff Evacuated From Office, Critical Operations Continue

JPY:

Abe: Received Message from Voters to Push on With Abenomics

BOJ survey shows Japan business mood fragile, makes Abe’s task harder

Japan Post Bank Says JGBs to Remain Main Part of Portfolio

CNY:

China Sets Yuan Reference Rate at Strongest Since Feb. 20

PBOC’s Ma Sees Limited Ruble Impact on Yuan: Securities News

NZD:

RBNZ adds yuan to NZ dollar index, slashes US dollar weighting

N.Z. Economists Lower Outlook for March 2015 Inflation to 1.2%

N.Z. Services Industry Grows at Slowest Pace in Six Months

GBP:

U.K. December House Prices Fall 3.3% M/m, Rightmove Says

 

Today’s data

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

JPY         Tankan Large Manufacturers Index Q4 A 12 | C 13 | P 13

JPY         Tankan Non-Manufacturing Index Q4 A 16 | C 12 | P 13

GBP       Rightmove House Prices M/M Dec A -0.60% | P -1.70% | R -1.80%

08:15     CHF        Producer & Import Prices M/M Nov C 0.20% | P -0.10%

08:15     CHF        Producer & Import Prices Y/Y Nov P -1.10%

11:00     GBP       CBI Trends Total Orders Dec C 3 | P 3

13:30     USD       Empire State Manufacturing Dec C 12 | P 10.16

14:15     USD       Industrial Production Nov C 0.60% | P -0.10%

14:15     USD       Capacity Utilization Nov C 79.40% | P 78.90%

15:00     USD       NAHB Housing Market Index Dec C 58 | P 58

21:00     USD       Net Long-term TIC Flows Oct C 72.8B | P $164.3B

Weekend News

JPY:

Abe Set to Boost Majority, Opening Way for Abenomics Advance
Japan’s Pre-Election Day Votes Increase 10% From Last Election
Japan to Add Anti-Dumping Tariff Against China: Yomiuri
Japan Govt. Considers Cutting Beer Tax to 55 Yen, Sankei Says
7 Regional Japan Banks to Tie Up on Overseas Branches: Nikkei
USD:

Senate Passes U.S. Funding Bill After Cruz Challenge Rejected
EUR:

France’s Credit Rating Cut by Fitch to ‘AA’; Outlook Stable
Weidmann Says QE Advantages Not Greater Than Costs: Repubblica
Padoan, Doesn’t See Risk of Contagion From Greece: Sueddeutsche
Greek Syriza Opposition’s Lead Narrows in Two Opinion Polls
Greece Close to Exiting Bailout Program: Samaras in Real News
AUD:

Australia Sees $60 Iron Ore as Commodity Slump Hits Budget
CNY:

China PBOC Economist Says 2015 GDP Growth to Slow to 7.1 Percent
Xi Asks People Not to Forget as China Marks Nanjing Massacre
China Trust Protection Fund May Start With 40b Yuan: Securities
CNY/TWD:

China, Taiwan to Hold Goods Trade Deal Talks Dec. 15: Times

Harry Hindsight

• EUR: A very quiet Asian session with the market holding around the 1.2400 for most of the session before early buying as the London market sat down at their desks. The market lifted from just below the 1.2390 levels and climbed steadily into the official opening and pushed to above the 1.2450 levels. The move into NYK again saw risk off buying as the Euro’s made its way steadily higher in a reasonably choppy NYK session to above the 1.2480 levels before meeting sufficient resistance to hold the market, as with strong days the market ran out of interest as the London market closed for the day and the market dipped back to hold in the mid 1.2450’s as profit taking and light sellers sold for the close.
• GBP: Cable held a reasonable tight range over the whole session trading around the 1.5720 levels for the most part with weak trading during the early part of the Asian moving between 1.5720-30 levels before widening a little  into the London market, GBP lost ground a little against the Euro before extending the range to 1.5700-30 levels and trading through to NYK and a brief move higher to just short of the 1.5750 levels the high of the day to then turn and move down to just below the 1.5700 levels, the market continued in the same measure before settling some 30 pips below the opening around 1.5705 areas.
• JPY: A choppy and untidy day with the market generally trading lower with the market initially heading higher from the 118.60 levels and touching above the 119.20 levels, as the market quietened through the session good Industrial production numbers sent the market quickly to to below the opening levels. The market rose a little into the London opening before the USD began to be sold strongly over the next couple of hours and a push into the supportive 118.20 levels. London did nothing until the NYK session opened with PPI numbers doing very little for the USD’s however, the Michigan number did turn the market a little when it was released sending the market back to the lows and then a steady move towards the opening levels.
• AUD: Opening around the 0.8270 areas the market dipped lower as the USDJPY moved higher in early trading only to reverse the move once the market had traded close to the 0.8240 areas and then a steady climbs in steps to make highs in early London to just below the 83 cent levels, the market traded steadily over the session into the NYK and the release of the US numbers. With the Oz moved around and the Carry trade held in a reasonably tight range into the NYK session trading below the 98 levels. Oz dipped to below the 0.8230 before quickly bouncing back to above 0.8280 and as with the other pairs slowly drifted off as the USD’s found some strength to settle the Oz around the 0.8250.

Friday’s premiership results

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

NZD       Business NZ Manufacturing Index Nov A 55.2 | P 59.3 | R 58.9

JPY         Industrial Production M/M Oct (F) A 0.40% | C 0.20% | P 0.20%

CNY        Fixed Assets Ex Rural (YTD) Y/Y Nov A 15.80% | C 15.80% | P 15.90%

CNY        Retail Sales Y/Y Nov A 11.70% | C 11.50% | P 11.50%

CNY        Industrial Production Y/Y Nov A 7.20% | C 7.50% | P 7.70%

EUR        Eurozone Industrial Production M/M Oct A 0.10% | C 0.20% | P 0.60% | R 0.50%

EUR        Eurozone Employment Q/Q Q3 A 0.20% | C 0.20% | P 0.20% | R 0.30%

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

USD       PPI Y/Y Nov A 1.40% | C 1.40% | P 1.50%

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

USD       PPI Core Y/Y Nov A 1.80% | C 1.80% | P 1.80%

USD       U. of Michigan Confidence Dec (P) A 93.8 | C 89.7 | P 88.8

Stay lucky

Andy