Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 117.928 | EURUSD 1.1772 | EURJPY 138.825 | AUDUSD 0.81654 | NZDUSD 0.77298 | USDCAD 1.19564 | EURCHF 1.20098 | USDCHF 1.02021 | GBPUSD 1.5159 | EURGBP 0.77656 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               117.95 | 116.995

EUR/USD             1.1795 | 1.1764

EUR/JPY               138.88 | 137.985

AUD/USD            0.8190 | 0.8077

NZD/USD             0.7750 | 0.7695

USD/CAD             1.1993 | 1.1948

EUR/CHF              1.2010 | 1.20095

USD/CHF             1.02075 | 1.01825

GBP/USD             1.5176 | 1.5145

EUR/GBP             0.77755 | 0.7759
For today

• EUR: A very quiet session for the Euro with a gradual push to above the 1.1780 levels into the Tokyo session and fix supply in the Tokyo session for the EURJPY sent the market to its lows into the mid 1.1760’s before steadily recovering to move to the 1.1790 and triggering weak stops through the highs. Topside see’s offers again into the 1.1800 however, they are likely to be limited and the market is really open to the 1.1860 areas before further offers begin to appear , a push through this level will see light stops and a mixture forming into the 1.1900 levels, through there the market is still likely to be a struggle until the 1.1960 level breaks. Downside bids from the 1.1760-1.1750 area and strong stops likely to appear below that level and opening to the 1.1720-00 areas and bids, a break here opens up a test to the 1.1650 areas.
• GBP: Considering the limited range the market has been reasonably choppy moving from the 1.5160 levels to post highs in the mid 1.5170’s before dipping back to the 1.5140’s and a couple of attempts through there before bouncing back in late trading as the USDJPY again pushed lower and weakened the USD’s across most of the currencies. Topside offers above the 1.5190 are reasonable light if the market finds any impetus however, a weak push will find sufficient to hold the market, a push through 1.5200 levels the level opens to 1.5250 and again at 1.5300 with light offerings at each level however, through the 1.5300 opens up a bigger move to the 1.5500 areas. Downside see’s bids into the 1.5050 areas and these are likely to be stronger than the topside and only a very strong move towards the 1.5000 level will push through the option protection expected at the level, however, this will likely open up a larger move lower with congestion limited from there to the 1.4850 areas.
• JPY: Copper selling on the LME was blamed for early USD losses with the exchange driven market limit down at -5% when trading was halted, Nikkei followed suit with 1.5% decline and so USDJPY moved steadily lower as margins were squeezed with the usual pairings coming under pressure. Moving from the opening levels in the 117.90’s the market moved into Tokyo around the 117.80 and then the market moved to the 117.60 levels the push through the level saw AUDJPY tip lower and drop quickly from 96.20 to the 95.20 areas. USDJPY pushed to the 117.40 levels before holding for a few hours and moving again this time triggering weak stops through 117.00 areas. Bids into the 117.00-116.80 give way to some light stops before the market opens to a test to below the 116.00 areas with only brief congestion in the 116.50 areas. Topside sees only weak offerings into the 118.00 areas and some congested areas however, once the market has finished there may be a possibility of a short squeeze higher into that level and stops through those levels will likely see a mixture on the way.
• AUD: The Oz opened just below 0.8170 and moved higher into the Tokyo session before the market collapsed on the back of the Copper collapse and triggering of AUDJPY selling with the cross dropping quickly to the 95.20 areas a brief pause in the Oz as bids into the 0.8110-0.8100 held the market before weak stops in the AUDJPY were triggered in a break through to below 95.00 and 81 cent in the Oz coincided to set lows around the 0.8080 before the selling subsided. Downside bids appear into the 0.8080 levels from the beginning of the month with congestion in the area forming a base line before the market opens up for a test of the 0.8040 areas and a suspect 80 cent sentimental level with possible option barriers. Topside has limited offers into the 82 cent level which for the moment look a long way off however; a push through that level still leaves the recent 0.8260 level as a stronger offering area.
• Copper eventually fell to -8.7% before reversing some of the losses, the Oz was and commodity currencies in general were those affected the most with the Oz as stated the largest mover, Nikkei and gold also being effected and setting up the AUDJPY selling as margins across the retail sector came under pressure.

Overnight News

JPY:

Japan’s Cabinet Approves Record 96.34T Yen Budget for FY2015

Japan Projects 1.3T Yen From Japan Post IPOs in FY2015 Budget

Japan Needs Thorough Spending Overhaul to Reach FY2020 Goal: Aso

BOJ Said to View Oil Adding to Risk of Inflation-Target Miss

JPY/VND:

Honda May Move Production Line From Vietnam to Japan: Tuoi Tre

USD:

Fed’s Kocherlakota Says Low Yields a ‘Source of Unease to Me’

CNY:

China’s Biggest Threat Is Deflation Risk This Yr: Sec. News

NZD:

New Zealand House-Price Inflation Slows to 4.9%, Quotable Says

CAD/SGD/KRW:

Canada Pension, Singapore GIC to Invest in Korea Property: Daily

EUR:

ZEW Head Says Greek Haircut Would Be Grave Mistake: Handelsblatt

Hollande Approval Rating Up 8 Points at 29%, Le Parisien Says

Today’s data

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

JPY         Japan Money Stock M2+CD Y/Y Dec A 3.60% | C 3.60% | P 3.60%

JPY         Machine Tool Orders Y/Y Dec (P) A 33.8% | P 36.60%

10:00     EUR        Eurozone Industrial Production M/M Nov C 0.00% | P 0.10%

13:30     USD       Advance Retail Sales Dec C 0.10% | P 0.70%

13:30     USD       Retail Sales Less Autos Dec C 0.10% | P 0.50%

13:30     USD       Import Price Index M/M Dec C -2.40% | P -1.50%

15:00     USD       Business Inventories Nov C 0.20% | P 0.20%

15:30    USD       Crude Oil Inventories P -3.1M

19:00    USD       Fed’s Beige Book

Harry Hindsight              

• EUR: The market drifted from the opening moving down to the 1.1825 areas before a fairly strong rally into the Tokyo session as the USDJPY weakened and a general USD weakness ensued into the middle of the session. As the USD reasserted itself the market again drifted back to the opening levels just above the 1.1830 levels and pushing to the 1.1820 area. The move into the grey hours saw some strong buying of the EURGBP in front of the UK Inflationary numbers. The market held the 1.1820 levels in the grey hours and the market hit the 1.1850 levels before the move lower started in earnest. The market moved down to the 1.1790 levels with UK numbers holding no surprises really for the market and the general USD buying continued into the NYK session taking the market steadily down through the 1.1800 levels fully and again testing the lows into the 1.1750’s for the third time this month. The bounce off the lows pushed back to the 1.1800 levels but was unable to push through the level and drifted and held into the 1.1780’s for the close.
• GBP: Asia saw the same pattern as the Euro with USD weakness in the early part of the session pushing to the 1.5160 lows before bouncing back and testing the topside and into the 1.5190 levels, as with the Euro it was more a USDJPY move more than anything else which was eventually eclipsed by the USD which pushed the market back to the 1.5150 levels holding into the grey hours and into the London opening. The official opening saw some strong selling before the numbers and the market had already moved to the 1.5120 levels as the inevitable lower numbers hit with the CPI monthly number hitting 0.5% and below expectations. The market dropped quickly down to the 1.5080 levels however, given that we knew this was likely to be the result buyers quickly appeared in the market to push quickly back to the previous ranges with the most likely sentiment that the declining inflationary pressures are likely to disappear as soon as the energy products and retail wars by the large retailers come to an end. EURGBP had briefly moved to the 0.7830 levels before the reversal of GBP fortunes sent the market quickly moving the other way with the EURGBP dropping through the 0.7800 levels triggering weak stops through the level to drop down to the 0.7760 levels and holding in a tight range. Cable moved into a choppy session through the later part of London and NYK ranging between the 1.5150 levels and to the 1.5190 area before settling down to close just above the 1.5160.
• JPY: The USDJPY opened around the 118.30 areas and moving to push above the 118.40 and into the Tokyo session and strong selling appeared weakening the USD more or less across the board with better current account numbers. Fix selling added to the selling and the market made its way to the 117.80 areas and held for several hours in that area before bouncing quickly higher and triggering weak stops on the break back above the 118.20 levels and a steady move to above the 118.80 levels into the grey hours. Strong EURJPY selling then moved into the market and dipped back away from the offers, while the strong selling in the cross JPY continued through the session the USDJPY maintained a reasonably tight range through until the end of London before dropping back to the 118.20 and a strong push through the 118.00 level and triggering stops below 117.80 to touch below the 117.60 before finding enough support to hold the market.
• AUD: The AUD was the exception to the market with early cross selling in AUDJPY quickly absorbed and then the Oz managed to move  higher as the movement in the JPY allowed the market to move higher. The Oz made it to just below the 82 cent levels and the USD started to take control again and USDJPY moved higher squeezing the market back to the 0.8130 lows. The rest of the day was barely affected by the movements in general in the majors and the market slowly moved higher to the 0.8165 closing area.

Yesterday’s premiership results

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

JPY         Current Account (JPY) Nov A 0.91T | C 0.69T | P 0.95T

GBP       BRC Sales Like-For-Like Y/Y Dec A -0.40% | P 0.90%

CNY        Trade Balance Dec A $49.60B | C $48.00B | P $54.47B

JPY         Eco Watchers Survey: Current Dec A 45.2 | C 44.3 | P 41.5

GBP       CPI M/M Dec A 0.00% | C 0.10% | P -0.30%

GBP       CPI Y/Y Dec A 0.50% | C 0.70% | P 1.00%

GBP       Core CPI Y/Y Dec A 1.30% | C 1.40% | P 1.20%

GBP       RPI M/M Dec A 0.20% | C 0.20% | P -0.20%

GBP       RPI Y/Y Dec A 1.60% | C 1.60% | P 2.00%

GBP       PPI Input M/M Dec A -2.40% | C -2.50% | P -1.00% | R -0.70%

GBP       PPI Input Y/Y Dec A -10.70% | C -12.20% | P -8.80% | R -8.20%

GBP       PPI Output M/M Dec A -0.30% | C -0.40% | P 0.20% | R -0.20%

GBP       PPI Output Y/Y Dec A -0.80% | C -0.60% | P -0.10%

GBP       PPI Output Core M/M Dec A 0.00% | C -0.10% | P 0.50% | R 0.00%

GBP       PPI Output Core Y/Y Dec A 0.80% | C 1.10% | P 1.40% | R 0.90%

GBP       DCLG UK House Prices Y/Y Nov A 10.00% | C 10.10% | P 10.40%

USD       Monthly Budget Statement Dec A $2.0B | C $3.0B

Good Luck,

Andy