Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 117.819 | EURUSD 1.2438 | EURJPY 146.529 | AUDUSD 0.82121 | NZDUSD 0.77302 | USDCAD 1.16695 | EURCHF 1.20096 | USDCHF 0.96557 | GBPUSD 1.56382 | EURGBP 0.79533 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               118.015 | 117.125

EUR/USD             1.24645 | 1.24345

EUR/JPY               146.71 | 146.00

AUD/USD            0.8238 | 0.8200

NZD/USD             0.7753 | 0.7722

USD/CAD             1.1673 | 1.1635

EUR/CHF              1.20115 | 1.2009

USD/CHF             0.9658 | 0.9634

GBP/USD             1.5659 | 1.5635

EUR/GBP             0.7957 | 0.79525
For today

• EUR: Euro’s moved steadily higher from an early dip in the Tokyo session moving off the 1.2435 levels back through the opening 1.2440 and then a push in a tight channel to the 1.2465 areas before finding the going tough and pulling back to the 1.2550’s with the general movement of the USDJPY and USD dominating the early trading. Topside offers through 1.2480 and into the 1.2500 areas likely to slow the market with the market likely to see similar offers through 1.2550 and into the better resistance around the 1.2600 levels, stops through the level are likely to run into further offers around the 1.2650 areas but the whole area is fairly congested from there. Downside is well tested and light bids appear from the 1.2430 levels onwards building in size to the 1.2410 areas a push through the 1.2400 area is likely to see weak stops and opens up a test of the downside once 1.2350 opens the lows become more vulnerable.
• GBP: Cable was reasonably quiet in an active market opening around the 1.5640 levels and trading quietly around that level until starting a steady rise deep into the session in a run to the 1.5660 levels, GBP lost slightly against the Euro but the GBP seems to be a side issue. Topside offers from the 1.5770 levels are likely to be closely followed with weak stops and a push through will test the 1.5800 areas however, stronger offers await the topside and a move through the level is likely to be a struggle but opens up a test through the 1.5900 levels and possibly 1.5850. Downside the same strong bids into the 1.5600 and until this breaks the lows are likely to be unthreatened, given the general concerns of Energy price drops affecting inflationary numbers today is a possibility and those lows could be under threat however, this will bring into effect any offers above 0.8000-50 in the EURGBP which might limit the movements.
• JPY: After maintaining its levels and pushing slightly higher from the opening in Asia to the 118.00 level the market traded for much of the session around the 117.80 opening level before slowly dipping away as the end of year position covering seems to be biting into the market, the push through the 117.60 level triggered some weak stops and the 117.40 took over for an hour before that too broke, cross selling seemed to be part of the whole and the market edged down into the grey hours pushing through the 117.20 where the market holds into London. For the moment 117.20-00 seems to be the strongest point with the likelihood of stops and or margin calls hitting the markets, and a push to the 116.50 areas. Topside how sees the 118.00 as a light resistance level with light offers around the area and into the 118.20 areas a push through sees plenty of congestion over the next 50 pips or so and then the 119.00 level as a stronger offering area.
• AUD:  The Oz has been fairly stable with the downward movement of the USDJPY limiting the impact of the AUDJPY carry trade selling and apart from an initial stab at the 82 cent level has generally risen over the session even if it has been a limited movement with the market opening just above the 0.8210 areas and trading to just below the 0.8240 level the market has been dominated by the movements of USDJPY apart from the spike lower which was the weak CNY PMI number. The 82 cent level dominates the downside and a break through the 0.8180 level is likely to see breakout sellers appearing and the market is then open to 0.8110 areas one would suspect and that is not likely to be as strong as the current levels, through there and 79 handle is open for a test. Topside light offers into the 0.8240 levels then the market is mixed to the topside until the 0.8270-0.8300 area where offers start to dominate the market with weak stops likely behind before further offerings again dominate into the 0.8350 areas.
• RUB: After yesterday’s surprise 650bp rise in interest rates by the CBR the market has seen a steady mark down of the pricing, the other issue was rumours of selling in the market as light intervention in yesterday’s session whether this is factual remains to be seen however, there USD reserves are definitely finite.

Overnight News

RUB:

Russia Increases Key Rate Most Since 1998 to Stem RUB Rout

JPY:

Abe, Japan Companies, Labour Unions Agree to Work to Raise Wages

BOJ tankan: Japan firms expect CPI to rise 1.4% a year from now

Moody’s: Japan Election Result Gives Abe Opportunity for Reform

CNY:

China Has No Intention of Manipulating Exchange Rate: MOFCOM

HSBC China Dec. Flash Manufacturing PMI 49.5; Est. 49.8

China’s Nov. FDI Rises 22.2% Y/y vs 1.3% in Oct.

AUD:

Suspicious Package Found at DFAT in Canberra: Federal Police

RBA Repeats Most Prudent Course Is Period of Rates Stability

Australia ANZ Weekly Consumer Sentiment Falls 0.2% to 110.2

EUR:

Troika Says Greece Must Deliver Reforms before Next Outlay: Bild

NZD:

N.Z. Treasury Says Government Won’t Deliver Promised Surplus

Today’s data

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

CNY        HSBC Manufacturing PMI Dec (P) A 49.5 | C 49.7 | P 50

08:00     EUR        France Manufacturing PMI Dec (P) C 48.7 | P 48.4

08:00     EUR        France Services PMI Dec (P) C 48.6 | P 47.9

08:30     EUR        Germany Manufacturing PMI Dec (P) C 50.4 | P 49.5

08:30     EUR        Germany Services PMI Dec (P) C 52.6 | P 52.1

09:00     EUR        Eurozone Manufacturing PMI Dec (P) C 50.5 | P 50.1

09:00     EUR        Eurozone Services PMI Dec (P) C 51.6 | P 51.1

09:30     GBP       CPI M/M Nov C 0.10% | P 0.10%

09:30     GBP       CPI Y/Y Nov C 1.30% | P 1.30%

09:30     GBP       Core CPI Y/Y Nov C 1.50% | P 1.50%

09:30     GBP       RPI M/M Nov C 0.10% | P 0.00%

09:30     GBP       RPI Y/Y Nov C 2.30% | P 2.30%

09:30     GBP       PPI Input M/M Nov C -1.60% | P -1.50%

09:30     GBP       PPI Input Y/Y Nov C -8.30% | P -8.40%

09:30     GBP       PPI Output M/M Nov C -2% | P -0.30%

09:30     GBP       PPI Output Y/Y Nov C -2% | P -0.50%

09:30     GBP       PPI Output Core M/M Nov C 0.00% | P 0.10%

09:30     GBP       PPI Output Core Y/Y Nov C 0.80% | P 0.90%

09:30     GBP       DCLG UK House Prices Y/Y Oct C 13.20% | P 12.10%

10:00     EUR        German ZEW (Economic Sentiment) Dec C 20 | P 11.5

10:00    EUR      German ZEW (Current Situation) Dec C 5 | P 3.3

10:00     EUR        Eurozone ZEW (Economic Sentiment) Dec C 19.8 | P 11

10:00     EUR        Eurozone Trade Balance (EUR) Oct C 18.2B | P 17.7B

13:30     CAD       International Securities Transactions (CAD) Oct C 5.21B | P 4.37B

13:30     CAD       Manufacturing Shipments M/M Oct C -0.40% | P 2.10%

13:30     USD       Housing Starts Nov C 1.04M | P 1.01M

13:30    USD       Building Permits Nov C 1.06M | P 1.08M

Harry Hindsight              

• EUR: Weekend news in Japan dominated the market from the opening, with cross JPY selling dominating from the opening and taking the Euro’s from the 1.2475’s down steadily to the 1.2435 level with the cross pushing initially and then the USDJPY reversing with the pressure to trade lower continuing for the Euro. The market eventually held around the 1.2440 areas moving into the grey hours looking for direction, will they won’t they still generating plenty of interest in the market if slightly mooted in movement, the market rose in the grey hours to push back to above the 1.2470 levels on a minor short squeeze before dropping again but this time testing the 1.2420 levels again and holding in a tight range for several hours deep into the NYK session. NYK option cut seemed to attract attention for the Euro with the market moving quickly higher from the cut moving from below the 1.2420 levels to break the highs of the night and almost reaching the 1.2480 in a very short period of time. Once the initial buying was done with the market dropped back almost as quickly before basing on the 1.2430 levels and trading quietly into the close.
• GBP: During early Asia the market pushed to the 1.5740 areas however, the market was unable to break to the topside as the market moved into the London session, the drop in the Euro and the lack of movement on the topside saw the market start to sell the GBP aggressively through the opening and down to the 1.5660 levels before holding quietly into the NYK session, strong industrial production numbers sent the market lower again and the market closed on the 1.5600 levels before the market hit the NYK option cut and was dragged along by the Euro reversing only a portion of the losses and touching close to 1.5680 levels, the run to the close was a quiet affair with the market trading around the 1.5640 areas.
• JPY: USDJPY opened lower from the start after a landslide victory for Abe in the lower house. Trading in pre Tokyo from the 118.40 level to touch the 117.80 areas into the Tokyo opening, early risers took the opportunity to buy from the lows and a small short squeeze took the market to make the highs of the day above 119.00 levels before settling back to a comfortable range around the 118.60 levels. The move into the London session saw the market dip back to the 118.20 levels. A steady rise from London’s official opening saw the market moving steadily back to the 119.00 areas that is before the release of the Empire state numbers in the US sent the USD back on it heels and again the market saw plenty of cross JPY selling entering the market and the market traded in a tight channel to move below the 117.80 previous lows and based of the 117.60 levels into a close around 117.80.
• AUD:  Cross JPY selling pushed the Oz lower from the opening around 0.8250 and down into the 0.8205 levels, the bounce was weak when the Tokyo session began and the market tested the downside 3 times before rejecting the level and moving higher eventually as the USDJPY began to rise off the lows, the move into the London session saw the market touch close to the 0.8270 and then strong selling of both the carry and Oz taking the market down into the London session again testing just beyond the previous lows but unable to move through the 82 cent areas. The afternoon session was limited in movement with the US numbers doing very little for the Oz and the market was unable to do more than a slight move through the 0.8230 area before settling into a 0.8210-20 level range.

Yesterday’s premiership results

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 14 | P 13

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

CHF        Producer & Import Prices M/M Nov A -0.70% | C 0.20% | P -0.10%

CHF        Producer & Import Prices Y/Y Nov A -1.60% | P -1.10%

GBP       CBI Trends Total Orders Dec A 5 | C 3 | P 3

USD       Empire State Manufacturing Dec A -3.6 | C 12 | P 10.16

USD       Industrial Production Nov A 1.30% | C 0.60% | P -0.10%

USD       Capacity Utilization Nov A 80.10% | C 79.40% | P 78.90%

USD       NAHB Housing Market Index Dec A 57 | C 58 | P 58

USD       Net Long-term TIC Flows Oct A -$1.4B | C $72.8B | P $164.3B

Good Luck,

Andy