Daily FX Market Commentary

Andy Harrison

Good morning,

 

LMAX Close

USDJPY 119.088 | EURUSD 1.14037 | EURJPY 135.807 | AUDUSD 0.77352 | NZDUSD 0.74368 | USDCAD 1.25104 | EURCHF 1.06156 | USDCHF 0.93098 | GBPUSD 1.53843 | EURGBP 0.74126 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               119.16 | 118.415

EUR/USD             1.1440 | 1.1394

EUR/JPY               135.87 | 135.24

AUD/USD            0.7793 | 0.7721

NZD/USD             0.7459 | 0.7415

USD/CAD             1.2521 | 1.2487

EUR/CHF              1.0616 | 1.05795

USD/CHF             0.9307 | 0.9276

GBP/USD             1.5420 | 1.5381

EUR/GBP             0.7420 | 0.7406
For today

  • EUR: Opening around the 1.1400 level the market drifted in early trading until the release of comments by Dijsselbloem and Tsipras in the Tokyo session, all appearing to be conciliatory and from the same page giving the Euro further impetus and a rally from the figure to the 1.1440 levels driving through some reasonable offers and improving the volumes on the day, which were beginning to look dire. As we move towards London the market has again slowed into those highs. Topside offers are light in the area and the market is likely to see offers running to above the 1.1500 levels building in size the closer you get to that figure a push through the 1.1520-30 areas will see weak stops and the market could possibly find itself squeezed higher towards the 1.1600 levels as details emerge of Greece’s acceptance of the new terms and its benefits for all. Downside is a little thin with light bids into the 1.1400 level for the moment and weak stops likely through the 1.1380 and then very little until the market reaches for the 1.1300 areas with better bids suspected.
  • GBP: Cable held quietly around the closing levels before being dragged higher by a resurgent Euro, moving away from the 1.5380 levels and again pushing through the 1.5400 level and touching the 1.5420 levels, for the moment the market is dominated by the Euro and although it lost a little ground over the session talk in the market of the 1.5550-1.5600 is starting however, for the moment I can’t see it and the next 50-100 pips are likely to be a grind at best. Topside offers around current levels however, once the 1.5420-50 levels are out of the way 1.5500 is likely to be a stronger area to break through, downside sees some weakness having come a reasonable way over the course of this week, with 1.5320-00 being light at best and a move down through the areas quickly opening up a test of the 1.5200 levels again.
  • JPY: With my cynical opinion of the BoJ fine tuning the JPY the market today has seen a steady day through the early part of the session holding in the 118.90-119.00 areas after dipping from the opening just below the 119.20 levels and then dropping late in the session through to the 118.40 levels as a weakening USD and comments on the subject of unhedged currency risk for the Japanese pension (GPIF) leaving the massive overseas investments of losing if the Yen were to strengthen considerably and given the amount of work its done in the past few months it would be a shock to the system at best, this article was laid out as the reason for the drop back and the market has remained in the 118.50 areas since. Topside offers are a bit scarce however, we are still likely to meet interest into the 119.00 areas and a push through 119.30 will again set the market on course to test 119.80 however, a push through this level will again see the market attempting to push through the 120.50 areas and test the 121.00 however, be wary of unofficial sources.
  • AUD: The Oz dipped from the opening to below the 0.7730 however, the market quickly reversed the movement with RBA Governor Stevens telling everyone no sudden movements “chill out” and you can just see them around a barbeeeee (barbeque) with a tinney (can of beer) in hand, the market moved higher from that point on moving through the 0.7750 levels and triggering a few weak stops before hitting just above the 0.7790 level as we move into the grey hours. Topside offers into the 78 cent level are likely to give way to a bland area with light two way business until approaching that 0.7850 level again and possible strong offers into it. Downside seems to be a little thin after trading down to the 0.7650 area yesterday and to be honest I don’t think there is likely to be much around unless the market tests back below 77 cents then further interest will be building into the 0.7650 areas.

 

Overnight News

JPY:

Zero Yen Hedge Policy Astounds Japan Pension Fund’s Adviser

Japan 5-Yr Bond Auction Draws Lowest Bid Cover Since April 2013

Japanese Bought Net 199.5 Billion Yen Overseas Debt Last Week

AUD:

Stevens Sees Slower Growth, RBA Rate May Be Less Effective

RBA’s Stevens Says Govt. Debt Trend Needs to Change Medium Term

RBA’s Kent Says Animal Spirits Are Lacking Among Businesses

CNY:

China Rate Cut Unlikely in Near Future: Sec. Journal Commentary

GBP:

BOE’s Cunliffe: Oil-Price Impact on CPI Should Fade Within Year

EUR:

ECB’s Constancio Sees No Deflation ‘in Proper Sense’ in Europe

 

Today’s data

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

CNY        Conference Board Leading Index Jan A 0.90% | P 1.10%

06:30     EUR        French GDP Q/Q Q4 (P) C 0.10% | P 0.30%

07:00     EUR        German GDP Q/Q Q4 (P) C 0.30% | P 0.10%

08:15     CHF        Producer & Import Prices M/M Jan C -0.60% | P -0.40%

08:15     CHF        Producer & Import Prices Y/Y Jan C -1.50% | P -2.10%

09:00     EUR        Italian GDP Q/Q Q4 (P) C 0.10% | P -0.10%

09:30     GBP       Construction Output M/M Dec C 2.60% | P -2.00%

10:00     EUR        Eurozone Trade Balance (EUR) Dec C 21.3B | P 20.0B

10:00     EUR        Eurozone GDP Q/Q Q4 (A) C 0.20% | P 0.20%

13:30     USD       Import Price Index M/M Jan C -3.50% | P -2.50%

13:30     CAD       Manufacturing Shipments M/M Dec C -0.90% | P -1.40%

15:00     USD       U. of Michigan Confidence Feb (P) C 98.2 | P 98.1

 

Harry Hindsight              

  • EUR: Get on the bus get off the bus, hurry up and wait, having made financial services a career its hard to imagine that after nearly 30yrs in this industry I had another career before that was really well versed in messing people around however, compared to some it would seem HM armed forces was naïve and the true masters are politicians. Before the market opened there was news that they had reached agreement to a cease fire in the Ukraine, the Euro rallied sharply into the close and on the reopening hit the 1.1350 levels some 50 pips higher than 10mins before, it was short lived and they denied it and the market set off back the other way and traded for several hours around the 1.1310 levels and into the grey hours, rumours again abounded that they had reached had reached an agreement and early London moved it up to the 1.1350 levels again, this was tempered by poor CPI numbers but the market held around the areas until the move into the NYK session when it was announced that the Euro Group had at last brow beat the Greeks into some sort of submission although that is not quiet what the communique said however, two pieces of news much needed for stability in Europe if not for the world economy itself, the Euro moved up in a three waves taking out the stalling point of 1.1370 areas first and then triggering stops through the 1.1380 level and into the 1.1400 area before finally pushing through that level a couple of hours later and looking at the volumes that was no mean feat trading to the 1.1420 levels before running out of steam. USD suffered across the board with a resurgent Euro, GBP and JPY with USDJPY doing a lot of work early on after comments in late Asia. The market eventually ran out holding on to the 1.1400 levels areas in quiet late trading.
  • GBP: Cable traded fairly quietly through the Asian session seeing less of the volatility at the end of NYK and beginning of Asia and actually losing ground to the Euro, the market traded down to the 1.5220 areas and remained around the levels until the grey hours saw the market moving back to the 1.5240 opening areas for the move into London. London were initial buyers from the opening but this was short lived as the early buyers pulled out before the BoE inflation report was released and the late news out of Tokyo. Cable caught a bid and raced quickly higher as suggestions by BoE governor Carney predicted the inflation rate likely to slip further to the negative area but unlikely to move through and start to rise later in the year with Oil prices stabilizing at current levels, this being said seemed to interest those that believe rates will rise either towards the end of the year or early into 2016 and produced the rise to the 1.5340 areas before slowing its ascent and pushing gradually through over the rest of the session to above the 1.5400 areas, EURGBP was sold back from the 0.7450 areas to trade firmly through to the lows not seen since 2008 and possibly exaggerating the strength of GBP overall as the cross traded to just above the 0.7370 levels before recovering later in the day when Euro got its second wind on the Greek news. Cable then held above the 1.5380 in late trading having drifted back late in the session.
  • JPY: A quiet Asian session did very little for the USDJPY and the market slipped slowly lower from the opening trading from above the 120.40 areas and down to the 120.00 area, it did recover later in the session to above the 120.30 and entered London around that area when an unnamed BoJ official made comments that further stimulus might be counterproductive which in net effect means were not doing any more cause we think it’s not going to work, with the USDJPY on healthy highs the balancing act for the BoJ continues and you can call me a cynic however, it was a well-timed comment with no one really looking for Stimulus packages in the middle of February. USDJPY dropped quickly from the 120.30 levels in the London session to 118.80 catching the market by surprise and pushing below the bids before the banks could react, the market then bounced as people played catch up and moved to the 119.60 levels and pushed slowly higher into the NYK session, poor retail sales numbers adding to which a higher than expected Initial claims count then set the USD on a move lower and the USDJPY already weak to the downside saw constant pressure to take the market through the previous low and dip below the 118.60 levels before holding and pushing back to 119 into a quiet close.
  • AUD: As with the rest of the market the Oz started the day quietly trading off the opening levels just below 0.7730 until the employment numbers hit the wires, then the market dropped quickly falling to the 0.7650 level as the market perceived increasing pressure for the RBA to lower rates for the second time this year after the unemployment rate moved up 0.20% however, the calculation they use to balance job creation, participation and employment change baffles mathematicians let alone us mere mortals however, the rocket scientists called the shots and only on the 0.7650 level did the market find sufficient liquidity to stop any further slides lower. The move into London saw the usual professional day traders quickly buying of the level and the market pushed to the 0.7690, European news, BoJ unofficial comments all led the market higher and once the market moved towards the NYK session the market was already pressing through the opening levels and pushing to the 0.7780 from there. Profit taking into the close of London saw the Oz drift off to near the opening levels again and the market held in the areas to the close of the day.

 

Yesterday’s premiership results

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

NZD       Business NZ Manufacturing Index Jan A 50.9 | P 57.7

JPY         Domestic CGPI M/M Jan A -1.30% | C -0.60% | P -0.40% | R -0.50%

JPY         Domestic CGPI Y/Y Jan A 0.30% | C 1.20% | P 1.90% | R 1.80%

JPY         Machine Orders M/M Dec A 8.30% | C 2.40% | P 1.30%

AUD       Consumer Inflation Expectation Feb A 4.00% | P 3.20%

GBP       RICS House Price Balance Jan A 7% | C 10% | P 11% | R 12%

AUD       Employment Change Jan A -12.2K | C -4.7K | P 37.4K | R 42.4K

AUD       Unemployment Rate Jan A 6.40% | C 6.20% | P 6.10%

JPY         Machine Tool Orders Y/Y Jan (P) A 20.4% | P 33.90%

EUR        German CPI M/M Jan (F) A -1.10% | C -1.00% | P -1.00%

EUR        German CPI Y/Y Jan (F) A -1.30% | C -1.30% | P -0.30%

EUR        Eurozone Industrial Production M/M Dec A 0.00% | C 0.30% | P 0.20% | R 0.10%

CAD       New Housing Price Index M/M Dec A 0.10% | C 0.20% | P 0.10%

USD       Advance Retail Sales M/M Dec A -0.80% | C -0.30% | P -0.90%

USD       Retail Sales Ex Auto M/M Jan A -0.90% | C -0.40% | P -0.90%

USD       Initial Jobless Claims (FEB 7) A 304K | C 279K | P 278K | R 279K

USD       Business Inventories Dec A 0.10% | C 0.20% | P 0.20%

 

Good Luck,

Andy

LMAX Exchange Market Commentary   AUDUSD   Andy Harrison  

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