Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 117.58 117.30-69 | EURUSD 1.15649 1.1530-89 | EURJPY 135.954 135.247-136.391 | AUDUSD 0.82247 0.8216-35 | NZDUSD 0.77929 0.7750-95 | USDCAD 1.1981 1.1960-80 | EURCHF 0.99467 0.9810-0.9977 | USDCHF 0.85961 0.8486-0.8640 | GBPUSD 1.51444 1.5120-1.5200 | EURGBP 0.7634 0.7615-44 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               117.67 | 116.925

EUR/USD             1.1575 | 1.1530

EUR/JPY               136.06 | 135.17

AUD/USD            0.8244 | 0.8197

NZD/USD             0.7806 | 0.7760

USD/CAD             1.1981 | 1.1961

EUR/CHF              1.0043 | 0.99195

USD/CHF             0.8690 | 0.85815

GBP/USD             1.5162 | 1.5120

EUR/GBP             0.7644 | 0.7630

 

For today

• EUR: With the capitulation of the SNB’s stance on holding the 1.2000 level in EURCHF the foretold imminence of QE for the Eurozone takes another step closer, as one imagines that the ECB would not have gone ahead and upset the CHF too much. Today however, the market is in for a limited period with the US closed for Martin Luther King Day so what action there is will be based in the London session and even here there is very little in the way of numbers. Opening around the 1.1560 levels the market made some initial gains before slipping back and spending the session holding around the 1.1550-60 levels for the session with very little to excite the market. With new lows posted on Friday, the downside is open to further moves lower, and 1.1000 would now appear the longer term support however, 1.1400 area is likely to be a little congested dating back to the period where the Euro rallied from below parity and for a brief moment in time suggested it could be a reserve currency to compete with the USD, so while not quiet in new territory it’s been a long time in its brief history since it was last here and a push through the 1.1400 levels is likely to see USD positions increasing on a break below the 1.1380 levels and further downside risk however, with USD longs reaching record highs in the market there is a need to be cautious and a period of consolidation before the QE may be in order. Topside offers are more clearly defined with light offers into the 1.1600 levels with weak stops likely through the 1.1650 areas if the market were to push ahead then the market could see a quick move higher.
• GBP: A nervous opening saw Cable range more in the first 5 minutes than the rest of the day, opening around the 1.5140 levels the market dipped to below the 1.5120 areas before moving back into the 1.5140’s as the market saw limited interest in the pair at the beginning of the session to create an exaggerated move, and apart from another brief gyration in Tokyo the market has held around the 1.5140 level for much of the session. Topside offers from the 1.5160 levels and into the 1.5200 level are thin and not likely to slow the market too much and only once the market starts moving towards the 1.5250 level is there likely to be anything of note in the market. However, while the EURGBP has now completely broken lower and lost roughly two big figures over the previous week the market is still likely to be dominated on any bids within the cross that slow the effects of the Euro on GBP. Downside bids begin around the 1.5120 areas and increase in size on a move through the 1.5080 levels and into the previous lows around 1.5040, a strong option barrier is likely as well as sentimental buyers around the level of 1.5000 so for the moment Cable seems to be stuck in consolidation.
• JPY: USDJPY opened in line with Fridays close however although the market saw some limited cross JPY selling in early trading the market traded to above the 117.60 levels into the Tokyo opening before slipping back through the session to trade back to the 117.00 areas and hold in a 20 pip range basing off that area in slow trading for the day. Downside sees light bids into the 116.80 level where the market broke up on Friday however, there has been really insufficient time for the market to refresh from last week’s attempts at the 116.00 level and that level is again vulnerable to be tested without the US markets support, 115.80 therefore is the key level for the day if the 116.00 level is tested. Topside offers from the 117.40-60 level will probably take out limited moment to the topside however, 117.80 as with the downside is likely to curtail the movement for today.
• AUD: The Oz has drifted for the most part opening around the Fridays close to post highs above the 0.8240 level in early Tokyo before the quiet market drifted lower in a couple of rounds of selling taking it to below 0.8220 and then to a test just below the 0.8200 level before trading sideways for several hours between the 0.8210-20 area in very quiet trading. Topside offers into the 0.8250 area are now likely to see those offers continuing into the 83 cent areas and likely to cap the market for today, downside bids into the 0.8170 levels are only likely to be slightly weaker than the topside and with very little news for the day to come its difficult to see the market fully testing either side however, a push through the 0.8170 level light support through to 0.8150 before any weak stops appear and they will probably be mixed with bids and likely to be ineffectual, downside strong bids then appear from 81 cent onwards and deep into the 0.8080 area.

Overnight News

JPY:

Japan Budget Shows ‘Incremental’ Progress on Deficit Cut: Moody’s

Japan Seeks Extension of Rights to UAE Oil Field, Nikkei Says

CNY:

China Stocks Sink Most since 2009 on Margin-Trading Suspensions

China 2014 GDP Growth May Be 7.4%: Securities Times

China to Promote Shenzhen-Hong Kong Stock Link: Sec. Journal

China’s 3 New Free Trade Zones May Start on March 1: Sec. News

Shanghai New Home Prices Rise 16.5% on Week, Uwin Says

HKD:

Hong Kong Won’t, Sees No Need to Change Dollar Peg: HKMA’s Chan

EUR:

Nowotny Says Euro Zone Won’t Be in Deflation in 2015: Tiroler

Sapin Says Expansionary Monetary Policy Key to Eurozone: Times

ECB Must Decide on QE Plan, Ex-ECB’s Lorenzo Smaghi Tells FD

GBP:

Cameron Pledges Full Employment in Economy-Based Re-Election Bid

U.K. January House Prices Rise 1.4% MoM, Rightmove Says

U.K. Financial Sector Grows Fastest Since ’96, CBI Says: Reuters

AUD:

Australia’s Dec. TD Monthly Inflation Gauge Unchanged. MoM

Today’s data

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

AUD       TD Securities Inflation M/M Dec A 0.00% | P 0.10%

GBP       Rightmove House Prices M/M Jan A 1.40% | P -3.30% | R -2.20%

JPY         Industrial Production M/M Nov (F) A -0.50% | C -0.50% | P -0.60%

JPY         Consumer Confidence Dec A 38.8 | C 38.5 | P 37.7

8:15        CHF        Producer & Import Prices M/M Dec C -0.80% | P -0.70%

8:15        CHF        Producer & Import Prices Y/Y Dec C -2.40% | P -1.60%

9:00        EUR        Eurozone Current Account (EUR) Nov P 20.5B

Weekend News

CHF:

Jordan Says Entire SNB Governing Board Supported Exiting Cap
EUR:

Merkel Said to See Greece’s Tsipras Making Deals as Crunch Looms
Greece’s Samaras Says Win Would Mean Feb. Bailout Exit: Ta Nea
Markets Consider Greek Debt to Be Sustainable, PM Samaras Says
Finland Won’t Accept Greek Debt Write down: Stubb in Kathimerini
Italy’s Padoan Says Italy to Meet Targets Set by EU: Sole
ECB QE Plans May Create Market Bubbles, Stark Tells Telegraaf
EUR/DKK:

Denmark Rejects Speculation It Will Quit Euro Peg After SNB Move

EUR/GBP:

Juncker Says EU Will Stick to ‘Red Lines’ That U.K. Can’t Cross
EUR/CHF:

Swiss Franc Sends Shoppers to German Border Town in Bargain Hunt
RUB:

Russia Cut to Baa3 by Moody’s on Oil as Junk Rating Looms
USD:

Obama Proposes Tax Increases on Wealthy to Aid Middle Class
China’s Treasury Holdings Decline as Japan’s Rise to Record
CNY:

Shenzhen Home Prices Rebound After China Rate Cut Boosts Demand
China Economy May Grow 7.3% in 2015, Says PBOC Adviser: Xinhua
China to Start Live Monitoring of Macau Money Flows, SCMP Says
JPY:

Katsuya Okada Named Leader of Japan Opposition Democrats
Japan’s Abe Pledges $2.5 Billion in Aid for Middle East
GBP:

Cameron’s Party Behind U.K. Opposition Labour, Poll Shows
Clash With Islam ‘Death Cult’ Can’t Be Called War, Cameron Says
U.K. Has ‘Biggest Opening Sales’ Ever for Retail Bond: Osborne
Cameron Urges U.K. Companies to Pass Oil Savings to Workers

Harry Hindsight

• EUR: After the previous day’s action the market moved into Asia trading around the 1.1620 levels drifting to a low of 1.1600 levels before holding around the 1.1640 into the London session. The market moved deep into the session before the impact of unexciting CPI numbers and the market quietly slipped through the 1.1600 levels to hold on the 1.1580 support levels. Which held into the NYK session and to be honest no surprises on the US CPI numbers but sufficient for the market to push through the support and into a better than expected Michigan number to send the Euros quickly through to touch 1.1460 levels before bouncing back and managing to regain the 1.1580 in the rest of the session, the move was probably exaggerated with liquidity lacking with the run to a long weekend for the US and the damage done to the market over the previous 24hrs by the SNB’s dropping of the EURCHF cap and the rate cut.
• GBP: Cable opened around 1.5180 levels and travelled quietly into the London market around that levels lifting off its lows of the session just above 1.5160 to push through the 1.5230 in early London trading before the Euro started to slip dragging GBP with it and the market fell back to its starting areas for the move into the NYK session. The market dropped quickly as in line CPI numbers started the USD rally and Cable pushed through the previous lows and dropped quickly to push below 1.5080 levels before bouncing quickly and moving more steadily higher over the remainder of the session but couldn’t quite make up the difference and closed slightly down on the day.
• JPY: USDJPY had a reasonable range through the Asian session with plenty of two way plays moving the market firstly higher from the 116.00 area close to push back to 116.40, the market was tempered by end of the week flows with the retail side cutting positions into the US bank holiday and those adding to current positions off a reasonably strong support levels eventually the buyers began to win the tussle and the market broke steadily higher pushing through 116.40 and into the grey hours holding the 116.60 levels for much of London, with what now appears to be pleasing numbers in the US or less disappointing than elsewhere the market moved quickly higher on the release and traded without much interference to just below 117.80 and held in the 117.60-40 area for the remainder of the session with light profit taking on the close to finish the day.
• AUD: The opened around the 0.8190 levels and overall the market was driven by the JPY movement with the Oz dominating in early trading to push from the opening steadily higher as AUDJPY maintained its move back to 96.00 levels, taking the Oz to peak briefly above the 0.8250 levels before the rally in the USDJPY started to take over and the Oz was now on the back foot as the AUDJPY found resistance at the 96.00 area. Saying that the Oz didn’t break into fresh areas until the NYK session and the strength of the USD pushed it to below the 0.8170 levels before rebounding on light but persistent buying into the close to finish the day around the 0.8230 levels.

Friday’s premiership results

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

JPY         Tertiary Industry Index M/M Nov A 0.20% | C 0.30% | P -0.20% | R -0.10%

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

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

CHF        Retail Sales (Real) Y/Y Nov A -1.20% | C 1.10% | C 0.30% | R 0.60%

EUR        Eurozone CPI M/M Dec A -0.10% | C -0.20% | P -0.20%

EUR        Eurozone CPI Y/Y Dec (F) A -0.20% | C -0.20% | P 0.30%

EUR        Eurozone CPI – Core Y/Y Dec (F) A 0.70% | C 0.70% | P 0.70%

USD       CPI M/M Dec A -0.40% | C -0.30% | P -0.30%

USD       CPI Y/Y Dec A 0.80% | C 0.80% | P 1.30%

USD       CPI Core M/M Dec A 0.00% | C 0.10% | P 0.10%

USD       CPI Core Y/Y Dec A 1.60% | C 1.70% | P 1.70%

USD       Industrial Production Dec A -0.10% | C 0.20% | P 1.30%

USD       Capacity Utilization Dec A 79.70% | C 80.00% | P 80.10%

USD       U. of Michigan Confidence Jan (P) A 98.2 | C 94.2 | P 93.6

USD       Net Long-term TIC Flows Nov A $21.0B | C $27.3B | P -$1.4B

Stay lucky

Andy