Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 120.491 120.40-50 | EURUSD 1.20018 1.2000-03 | EURJPY 144.601 143.87-144.02 | AUDUSD 0.80912 0.8072-78 | NZDUSD 0.7700 0.7690-0.7705 | USDCAD 1.17837 1.1785-95 | EURCHF 1.20214 1.2022-25 | USDCHF 1.00162 1.0012-18 | GBPUSD 1.53284 1.5330-35 | EURGBP 0.78297 0.7818-20 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               120.68 | 119.98

EUR/USD             1.20065 | 1.18605

EUR/JPY               144.43 | 143.36

AUD/USD            0.8107 | 0.8053

NZD/USD             0.7695 | 0.7619

USD/CAD             1.1843 | 1.1767

EUR/CHF              1.2033 | 1.20155

USD/CHF             1.1020 | 1.0015

GBP/USD             1.5355 | 1.5185

EUR/GBP             0.7850 | 0.7809

 

For today

  • EUR: A combination of factors and a lack of liquidity from the opening saw the market drop once the market opened the news of and economist poll which predicts that QE intervention is not going to solve anything according to the poll. The Greek situation which is ongoing and a lack of liquidity, tripping into large stops through the 1.2000 areas. The market moved from 1.2006 area in a straight line to trade to the lows and as the LMAX market opened the bounce off the lows was underway. The market did recover a little over the course of the session heading into the 1.1970’s before holding for a period into the 1.1960 before dipping back to the 1.1940 levels where the initial bounce recovered too. Downside is likely to see some buying into dips through the 1.1900 level however, the market has been through the levels already and that support is likely to be thin at best, this break lower opens up a fresh range between the 1.1900 level and the mid 1.16 handle with support more technical than fundamental however, bids are likely to thicken as the market moves towards each sentimental level. Topside will likely see some reasonable offers into the 1.2000 level if there were to be a recovery however, chances are that the market is now focused more to the downside and only a major upset is likely to free the market for a rise higher, through the 1.2000 level light offers into the 1.2020 levels opens up a test towards the 1.2100 levels but this is likely to take time to develop.
  • GBP: The volatile opening was even more pronounced in the Cable dropping from the 1.5355 area to the 1.5185 levels before recovering and the recovery almost reaching the closing levels on Friday, before holding around the 1.5280-90 level for the bulk of the session with very little movement after the act. Unlike the Euro the Cable last saw these lows in 2013 so just over a year ago, with congestion in this 1.5200 levels the market has the potential to push below the level and did so today in the pre-market period however, discounting that move the market is likely to attract profit taking and light bids into that area on any further weakness and the sentimental levels continue to dominate the downside with directionality to be taken more from the Euro at the moment as the EURGBP remains stubbornly above the 78 cent level or around to be more accurate. Through 1.5200 stops through the 1.5180 level is likely to be short lived before finding further bids and a strong support level around the 1.51000 areas. Topside is a little more open and a concerted push in Cable could quickly see the market recapturing the 1.5500 areas with very little likely to stop a strong movement however, the market is focused more on the Euro and you would have to balance the Euro against any USD movement.
  • JPY: USDJPY opened around the 120.50 areas and while the crosses caused some choppy trading between the 120.30’s and 120.60’s in the pre Tokyo period the market was trading around the 120.40 and little changed for the move into Tokyo and a quick move lower as retail Japan awoke to the move in the Euro’s and in particular USD across the board, this sent the USDJPY quickly lower from the opening and trading just through the 120.00 level before starting a steady climb higher over the course of the session moving from the lows to 120.30 and then the opening levels to test briefly above the 120.60 level and into the resistance. The market held  and drifted back into the 1.2040 areas matching the closing areas on Friday. Topside offers from 120.80 remain in play and a push through to the 121.20 areas is likely to see stops appearing as the market gears itself for another attempt to push through the 122.00 levels which is likely to see option barriers starting to operate from the 121.80 levels into that level. Downside bids are likely to be light into the 120.00 level and through to 119.80 before stops make a real appearance, then a push to the 119.00 could see retail selling entering especially if equity markets are in trouble and a break to the better supported 118.00-30 levels.
  • AUD: The Oz was a little more steady having surrendered  the 81 cent level late on Friday, the market opened around the 0.8090 levels and quickly fell with the other currencies however, there was sufficient liquidity in the pair to stop the type of drop we saw in the Euro and Cable and the market held around 0.8070 before rising back to the opening levels, weakness during the pre-Tokyo opening put the market under pressure again and slipped to 0.8055 areas before Tokyo entered the market and pushed it back through the 81 cent level as carry trade buying helped the market. As with most rallies in the cross once the retail market was sated the Oz drifted from above the 81 cent level and triggered weak stops through 0.8080 to trade to the 0.8060 area and late in the session tested the 0.8040 levels before moving into a quiet grey hour. A push through the 80cent level opens up further downside potential however, the level is likely to be defended and will struggles from the 0.8020 level and into the 0.7980 area before opening up that downside. Topside offers are light to the 0.8070 areas and then we are likely to see light offers again into the 0.8100-20 level with weak stops through there to push into the mid 81 cent levels.

 

Overnight News

EUR:

Greek news wires suggested that the Spiegel article was provocative however, Govt. official remained quiet.

Euro hits new lows not seen since 2006

CNY:

China sets stage for opening commodity futures to Foreign investors

JPY:

Japan Dec final manufacturing PMI shows sustained growth PM Abe

 

Today’s data

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

08:30     CHF        SVME-PMI Dec C 52.8 | P 52.1

09:30     EUR        Eurozone Sentix Investor Confidence Jan C -1 | P -2.5

09:30     GBP       PMI Construction Dec C 59 | P 59.4

13:00     EUR        German CPI Y/Y Dec (P) C 0.30% | P 0.60%

13:00     EUR        German CPI M/M Dec (P) C 0.10% | P 0.00%

 

Weekend News

USD:

Rosengren urges Patience on Fed raising rates amid low inflation

Mester states pace of tightening more important than lift off

EUR:

Germany sees Greek Euro exit as manageable Der Spiegal

A poll of 32 senior economists across Europe doubting the impact QE would have FT

 

 

Harry Hindsight

  • EUR: The market having opened around the 1.2100 level slowly slipped lower over the course of the day, nothing strong going through but the momentum eventually pushed towards the 1.2000 level and reasonable sized option barriers which held into the close. Protection held through the London session around the 1.2040 areas and then slipping to the 1.2020 level before the steady selling pushed it into the close.
  • GBP: The early drag of the Euro pulled the Cable with it however, for a good proportion of Asia and London the market held around the 1.5550 levels, the London market saw a few numbers however, the drop in PMI manufacturing combined with a lack of liquidity saw the market drop away steadily but in a deep move through to the 1.5350 level and a 2 big figure move into late London and deep into the NYK session. The market drifted to the close losing a few more pips but the move was over for the day.
  • JPY: The USD rallied broadly after the opening in Tokyo with the USDJPY pushing quickly through the 120.00 levels and triggering weak stops to push to the 120.40 areas and holding into the London session. As the market moved towards the NYK session USD’s become even more dominant pushing through the 120.50 level and steadily rising to above the 120.70 areas, a poor set of US numbers set the market back quickly falling over the next hour back through the 120.00 level and triggering weak stops to set the lows just off the 119.80 area before the bounce and steady recovery into the close.
  • AUD: The market moved into Asia around the 0.8175 levels  pushing briefly above the 0.8180 levels before the market squeezed lower as the USDJPY moved higher dropping back to the 0.8130 level and holding quietly from there into the London session. The market drifted over the next few hours as it played a peripheral roll on the session as the strong USD took the Oz to the 0.8105 levels and holding until the final couple of hours and the market tripped through the option protection and q quick move to the 0.8080 level followed with stops being triggered.

 

Friday’s premiership results

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

EUR        Italy Manufacturing PMI Dec A 48.4 | C 49.6 | P 49

EUR        Eurozone Manufacturing PMI Dec (F) A 50.6 | C 50.8 | P 50.8

GBP       Mortgage Approvals Nov A 59K | C 59.5K | P 59.4K

GBP       M4 Money Supply M/M Nov A 0.00% | C 0.20% | P -0.10%

GBP       PMI Manufacturing Dec A 52.5 | C 53.7 | P 53.5 | R 53.3

USD       Construction Spending M/M Nov A -0.30% | C 0.40% | P 1.10%

USD       ISM Manufacturing Dec A 55.5 | C 57.6 | P 58.7

USD       ISM Prices Paid Dec A 38.5 | C 43.1 | P 44.5

 

Stay lucky

Andy

LMAX Exchange Market Commentary   AUDUSD   Andy Harrison  

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