Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 119.633 | EURUSD 1.1933 | EURJPY 142.759 | AUDUSD 0.80842 | NZDUSD 0.76978 | USDCAD 1.17603 | EURCHF 1.20155 | USDCHF 1.00691 | GBPUSD 1.52503 | EURGBP 0.78248 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               119.64 | 118.865

EUR/USD             1.19595 | 1.1927

EUR/JPY               142.71 | 142.14

AUD/USD            0.8152 | 0.8081

NZD/USD             0.7747 | 0.7682

USD/CAD             1.1765 | 1.1730

EUR/CHF              1.2019 | 1.2014

USD/CHF             1.0073 | 1.0047

GBP/USD             1.5274 | 1.5247

EUR/GBP             0.78355 | 0.78205
For today

• EUR: Today we look at two words Imminent and oxymoron, the definition of Imminent is “about to happen” and when used with the term ECB becomes an oxymoron, the definition of oxymoron is being “a figure of speech in which apparently contradictory terms appear in conjunction” and example being “falsely true”. So whether you believe that the QE by the ECB is imminent or not the market has today decided to sit and wait for the next piece of news to be thrown out like a bone for the dog, personally that is what I believe is happening as they wait for the situation to improve without doing anything, and just maybe they may get it right however, yesterday’s CPI figures suggest not for the moment and again that does away with the word imminent. The market opened today around the 1.1935 area and has quietly risen over the course of the session steadily towards the 1.1950 area and while the flow has been quieter than yesterday its been steady and nothing to complain about overall. Technically the market is looking for a retest of the downside however, fundamentally while the market is in decline further downward pressure will be more reliant on PMI numbers today and the various numbers throughout the week as it will possible set the tone for the coming weeks. That in mind I would suspect bids on any move towards the 1.1900-1.1890 area and only a strong break through to the 1.1860 triggering any likely stops and a test of the 1.1800 area and a likely weaker barrier than the 1.2000 we saw on Friday. Topside offers into the 1.1980-1.2000 area are possibly left over from the rout however, those offers and the additional range play offers in the area may be a little weak and a decent number will quickly move through the level however, the real test will be pushing back through the 1.2010-30 areas where the market struggled on Friday, a push through there is likely to see light and patchy selling all the way to the 1.2080 levels and probably the stronger offers.
• GBP: A very quiet session for the Cable with the market maintaining the 1.5260 area broadly speaking throughout the session having risen from the 1.5250 opening areas and pushing briefly above 1.5270. Downside is still a little weak until the market moves towards the 1.5200 level and through to the 1.5185 levels however, now the market has had time to refresh itself the bids are likely to be a little stiffer with a possibility of multiple types attempting to reset positions closed for the end of year looking at the favourable levels, a push through the 1.5170 level is likely to see stops appearing however, the Cable likes the sentimental levels more than most other pairs and likely bids will show around the 1.5150 level and again into 1.5100 however, European news would have to be poor to send it in that direction, and even USD news/releases would not have the impact at this point to do as much damage. Topside offers through the 1.5300 level have limited the movement higher and that is likely to remain in play unless Euro’s pushes higher or the USD weakens today to allow a break through the 1.5320 areas and into likely weak stops for a push to the 1.5400 levels.
• JPY: The movement in the USDJPY has continued through the session even if slowly with the market pushing from the opening 119.80 areas to drop quickly through to the 119.30 level in the Sydney session, light buying moved in from the early Japanese risers but the market into the Tokyo session saw further pressure as the equity markets came under pressure and retail sellers lightened positions generally, the market moved in 4 waves with the lows getting steadily lower until late in the session and a push through the 119.00 level triggered some light stops as the market moved towards the grey hours. A strong push through the 118.80 levels will open  the market for a push into possibly stronger bids into the 118.00, a push through to the 117.80 level will see the pattern repeated with this time the 117.50 being the important levels if the market is not to make its way to test the end of year lows around 115.50. Topside has light offers into the 119.20 areas and through to the 119.50 area before opening up for another push towards the 120.00 levels however through that level one would suspect stronger offers having failed the area over the past week.
• AUD: The demise of the USDJPY has allowed the Oz to rise, with better than expected trade balance the market has continued to rally through the session to push from the 0.8090 opening levels to touch briefly above the 0.8150 area and surpassing the previous day. With the better news the Oz has had a tone for itself and been fairly active through the session with stops triggered through the 0.8110 level and again on the push through 0.8120 before settling back a little and trading into the grey hours around the 0.8140 levels. Topside 0.8180-0.8200 is the offer areas and a push through the 0.8220 opens up the 83 cent level however, the movement is likely to be linked more with the carry trade and a strengthening Yen could see the Oz move steadily through the offers. Downside sees 81 cent as a lightly supported area however, the better bids rest down towards the lows and the threat of a move through 80 cent is still present if the 0.8040 level is breached quickly.

Overnight News

EUR:

Greece continues to dominate some of the media with upcoming election a concern.

Russia sanctions should end if Ukraine situation improves Hollande

AUD:

Trade data better than expected with energy products surging 21% providing an unexpected A$500M to the total

CNY:

China HSBC composite PMI improved 51.4 vs. 51.1

Iron ore imports into China fell to the lowest levels in 11 months

China said to accelerate $1T in 2015 project to boost growth

JPY:

Japanese market/JMMA composite PMI improved in Dec to 51.9 vs. 51.2

The services PMI number improved to 51.7 vs. 50.6

Today’s data

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

JPY         Monetary Base Y/Y Dec A 38.20% | C 34.30% | P 36.70%

AUD       Trade Balance (AUD) Nov A -0.93B | C -1.59B | P -1.32B | R -0.88B

CNY        HSBC PMI Services Dec A 53.4 | P 53

8:45        EUR        Italian PMI Services Dec C 51.7 | P 51.8

9:00        EUR        Eurozone PMI Services Dec (F) C 51.9 | P 51.9

9:30        GBP       PMI Services Dec C 58.5 | P 58.6

13:30     CAD       Industrial Product Price M/M Nov C -0.70% | P -0.50%

13:30     CAD       Raw Materials Price Index M/M Nov C -4.70% | P -4.30%

15:00     USD       Factory Orders Nov C -0.40% | P -0.70%

15:00     USD      ISM Non-Manufacturing Composite Dec C 58 | P 59.3

Harry Hindsight              

• EUR: Happy New Year, for some maybe, the market opened in line with Friday’s close and promptly collapsed as selling appeared in the market pushing it through the 1.2000 level and the bids and into waiting stops. The market dropped quickly to 1.1860 areas before bouncing quickly as those to slow to put orders into the market bought the market quickly back to the 1.1940-60 levels. Weekend rumours and news items on proposed QE, the affect it would likely have and Greece, all this was in the first 5 minutes and from that point onwards the market settled into a steady market. The market could not move back through the 1.1980 level and was held in early trading in Tokyo to trade around the 1.1960 levels touching a few times through the 1.1970 levels. As the market moved on in Tokyo EURJPY selling around the 144.00 and USDJPY pushing higher, needless to say the Euro dipped down into the 1.1920 area under this pressure and moved into the grey hours. The move towards London saw more buying as the sceptical ignored the imminent QE signals from the ECB however, the move higher was again limited by the 1.1980 area and the move into the London session saw strong sellers from the failure and the market moved in a tight channel lower and into the NYK session just above the 1.1880 levels, NYK struggled with any ideas and the downside for the moment seemed to have some new positioning flowing into the market after the festive break. The market recovered to the 1.1940 levels basing off the 1.1920 level and the market ran out quietly.
• GBP: As with the Euro on the opening however, the market in Cable is a lot thinner and the initial selling from the opening 1.5320-30 area in a straight line to 1.5185 as the drag of the Euro and successive stop areas crumbled under the onslaught and Cable moved quickly deeper, the market bounce to the 1.5250-60 levels was followed by a slow move back to the 1.5320 areas before settling back slowly to the 1.5280 areas in a steady run to London. London again briefly flirted with the opening levels but was unable to push through the 1.5320 levels and the steady slide to the NYK opening saw the market again slip back towards the lows, in this case though the market was unable to push through the 1.5200 levels after a number attempts the market recovered to the areas where it had bounced too after the initial selling and settled in the area.
• JPY: The market opened in line with Friday’s close trading comfortably in the 120.40-60 area until the other majors started to recover some of their losses the ability of the JPY crosses to push back higher was limited by sellers in the cross attempting to cut their losses and thus pushing the USDJPY lower into Tokyo as the market caught up with the earlier moves, USDJPY slipped back to the 120.00 levels for the first time before bouncing off the level and pushing again to opening levels and touching through the 120.60 levels to set the highs. The move towards the London session saw the market steadily drifting back towards the 120.20 areas and this time when the Euro started to drop back the EURJPY was taken with it and consequently the USDJPY moved a little bit fast to the downside. The move saw the market pushing down to the 119.40 into the NYK session before ranging around the 119.60 areas over the balance of the day.
• AUD: The Oz was bounced around by the movement initially of the Euro and GBP and then by the JPY as interest in the Oz was limited. Initially dropping some 20 pips on the opening in line with the drag of the majors and then recovering as AUDJPY buying helped the Oz higher and though the opening levels and a steady push through the 81 cent from the lows below 0.8060. The session remained fairly choppy with the market again dropping back as cross JPY becoming unattractive in the general melee and pushing into the grey hours around the 0.8040 level, while the range was contained between those areas the market continued to bounce along in a general upward motion to again push above the 81 cent level before holding just below the area and trading around the 0.8090 for the balance of NYK and into the close.

Yesterday’s premiership results

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

CHF        SVME-PMI Dec A 54 | C 52.8 | P 52.1

EUR        Eurozone Sentix Investor Confidence Jan A 0.9 | C -1 | P -2.5

GBP       PMI Construction Dec A 57.6 | C 59.2 | P 59.4

EUR        German CPI M/M Dec (P) A 0.00% | C 0.10% | P 0.00%

EUR       German CPI Y/Y Dec (P) A 0.20% | C 0.30% | P 0.60%

Good Luck,

Andy