Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 118.475 | EURUSD 1.13536 | EURJPY 134.50 | AUDUSD 0.77735 | NZDUSD 0.74984 | USDCAD 1.24672 | EURCHF 1.05801 | USDCHF 0.93187 | GBPUSD 1.53636 | EURGBP 0.73897 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               118.65 | 118.235

EUR/USD             1.1366 | 1.1322

EUR/JPY               134.78 | 133.96

AUD/USD            0.7809 | 0.7741

NZD/USD             0.7528 | 0.7482

USD/CAD             1.2480 | 1.2442

EUR/CHF              1.05995 | 1.0561

USD/CHF             0.93385 | 0.9315

GBP/USD             1.5382 | 1.5354

EUR/GBP             0.73925 | 0.7375
For today

• EUR: The market opened around the 1.1355 areas slowly drifted pre-Tokyo dropping back to just above the 1.1330 areas before running into EURJPY buyers into the Tokyo opening, and the market moved to above 1.1340 and held there until the fix and supply in EURJPY took the Euro back through the low and to just above the 1.1320 areas, this type of movement is likely to happen repeatedly over the coming months with repatriation of profits of Japanese Corps enter the market to oppose the outgoing yield buyers, the market then started a steady channelled rise back through the opening and topping around the 1.1365 areas before sufficient offers held the market. Offers into the 1.1380-1.1400 for the moment with the Euro group/Greek discussions ongoing or not as the case may be. Through the 1.1430 area the market the market is likely to see stronger offers and once the 1.1440/50 area breaks weak stops and an opening to the 1.1480 and a test of 1.1500 area. Downside see’s light bids through the 1.1320 and plenty of congestion likely until a break through the 1.1270 areas, the picture has not changed and a challenge of the 1.1200 and breakthrough opens up a new test of the 1.1100 areas.
• GBP: Cable today had nothing to do other than tag along with the Euro, dipping to lows of 1.5350areas before seeing a steady rise as the Euro led higher, pushing through the opening 1.5360 level and to just above the 1.5380 in quiet trading and limited offers into the 1.5400 areas. Offers into the 1.5400 level giving way to the 1.5420 areas and offers then to the 1.5450 levels. A strong push through that level opens up the 1.5500 and ultimately 1.5600 and worth watching the chart at that point. Downside light bids into the 1.5350 level and then stronger bids into the 1.5300, weak stops likely through the 1.5280 level as the market gives up the chance of a push higher and 1.5250-1.5200 probably hold significant amount of congestive orders in either direction.
• JPY: It’s that time of year with repatriation likely to increase over the coming weeks for the Financial Year end, while this is not as large as it used to be its likely to be significant however, this could possibly be balanced against the yield players who would be foolish not to take advantage of the situation. Today saw the market open around the 118.50 area and push only slightly higher until the Tokyo opening and a drop in the market to the 118.25 levels, demand for the fix was limited however, it was sufficient to turn the market and buying in other areas managed to drive USDJPY steadily higher to trigger weak stops through the opening levels and a stab at the 118.65 areas before going quiet and drifting back to the opening levels. Topside sees offers increasing into the 118.80-119.00 areas, even through there the market would have to have significant impetus to break through the 119.30’s and light stops for another push to the 120.00 and stronger offers, downside has bids through the 118.20 levels and those bids are not likely to disappear until 117.70 breaks leaving the market mixed over the next 50 pips before bids start to dominate the market again.
• AUD: The Oz drifted from the opening falling from the 0.7770 levels and into the 0.7755 area before holding the 0.7760 level into the RBA minutes, no real surprises with further rate changes put off until the next meeting as the RBA measures the success of the previous one, so at the earliest it will be March however, given previous comments May still seems the most likeliest point. The market reacted as only the Oz does dropping then rallying instantly after only falling to the mid 0.7740’s before pushing sharply to 0.7780 and pushing steadily higher from that point, struggling initially around the 0.7790 before triggering a few weak stops and a push to the 0.7810 areas. The market drifted once through the level in a quieter market to just below the 78 cent level. Offers appear above here and into the 0.7820 areas with weak stops likely through the stronger 0.7840-50 areas before opening the market for a test of the 79 cent level however, suspected stronger offers into that area. Downside has light bids through 0.7750 levels and down to the 0.7720 areas, a push through the 77cent level opens up the downside lows around the 0.7650-40 areas.

Overnight News

JPY:

Abe: Falling Yen Has Positive and Negative Economic Effects

Japan Finance Minister Aso Says Weak Yen Isn’t Necessarily Bad

Amari: Positive Effects of Weak Yen Bigger Than Negatives Now

Japan Pension Fund Should Have Two Directors, Ruling Party Says

Japan’s Bonds Extend Gain as Demand Rises at 20-Year Debt Sale

Abe Urged to Retain Remorse for ‘Aggression’ in War Statement

EUR:

Dijsselbloem Says Greeks Are Reliable ‘But Also Difficult’

AUD:

RBA Sees ‘Considerable Uncertainty’ in Timing of Domestic Growth

Australia ANZ Weekly Consumer Sentiment Falls 1.7% to 109.8

CNY:

China Banks End-Jan. Yuan Forex Purchase Positions 29.3t Yuan

China’s Big 4 Banks Jan. New Yuan Loans 1.22t Yuan

China Weakens Yuan Reference Rate Most Since Jan. 23

Today’s data

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

09:30     GBP       CPI M/M Jan C -0.80% | P 0.00%

09:30     GBP       CPI Y/Y Jan C 0.30% | P 0.50%

09:30     GBP       Core CPI Y/Y Jan C 1.30% | P 1.30%

09:30     GBP       RPI M/M Jan C -0.70% | P 0.20%

09:30     GBP       RPI Y/Y Jan C 1.20% | P 1.60%

09:30     GBP       PPI Input M/M Jan C -2.10% | P -2.40%

09:30     GBP       PPI Input Y/Y Jan C -11.90% | P -10.70%

09:30     GBP       PPI Output M/M Jan C -0.20% | P -0.30%

09:30     GBP       PPI Output Y/Y Jan C -1.40% | P -0.80%

09:30     GBP       PPI Output Core M/M Jan C 0.10% | P 0.00%

09:30     GBP       PPI Output Core Y/Y Jan C 0.40% | P 0.80%

09:30     GBP       DCLG UK House Prices Y/Y Dec C 10.30% | P 10.00%

10:00     EUR        German ZEW (Economic Sentiment) Feb C 55 | P 48.4

10:00     EUR        German ZEW (Current Situation) Feb C 30 | P 22.4

10:00     EUR        Eurozone ZEW (Economic Sentiment) Feb C 51.3 | P 45.2

13:30     CAD       International Securities Transactions (CAD) Dec C 5.35B | P 4.29B

13:30     USD       Empire State Manufacturing Feb C 9 | P 9.95

15:00     USD       NAHB Housing Market Index Feb C 58 | P 57

21:00    USD       Net Long-term TIC Flows Dec C 41.3B | P $33.5B

Harry Hindsight              

• EUR: Having opened just short of Fridays close and below the 1.1400 level the market eventually closed the gap on the charts moving off the 1.1390’s and pushing steadily higher into the mid Tokyo session to above the 1.1420 levels as expectations of the Euro group meeting with the Greeks appeared on the face of it to be a done deal or over bar the shouting, with the US out for Presidents day the market entered London little changed and pushing to the 1.1430 levels with very light activity. Light selling into the Eurozone trade balance saw the market bouncing off the 1.1400 levels with a better than expected result however, the market remained for the most part contained in the 1.1400-20 area for a good portion of the day before the meeting of EG/Greeks broke up with the EG proposing no change for the existing debt and the Greeks saying the proposals were absurd and unacceptable, Euro’s reacted as you would expect and although the market is a little unbalanced by the US bank holiday fell steadily to the 1.1320 levels from the meetings end. The market has since bounced a little however, it has struggled since the initial profit taking to gain any momentum and finishes the day around the 1.1350 areas.
• GBP: Opening slightly higher from Friday the market was quick to fill the gap on the Charts in the pre-Tokyo market before moving quickly higher on the Tokyo opening to above the 1.5420 levels and then slowly rising to test the 1.5440 over the course of the Asian session. Pre London market sold the pair back through to the 1.5410 opening areas before the market dropped back as profit taking moved into the market from a nervous and thin market. The market having pushed to the 1.5380 level spent the bulk of the session holding the levels until the breakup of the negotiations between EG and the Greeks sending Cable to the lows around the 1.5340 areas. Since the lows the market has made light headway to push back above the 1.5360 levels with limited liquidity within the market.
• JPY: A very quiet day for the USDJPY with early gains from the news that Japan eased out of recession with GDP recovering to 0.60% for the Q4 however, the number was worse than expected and the market having opened below Fridays close only managing to fill the gap from the 118.60-75 left on the charts before dropping back as Yen began to strengthen on data, falling back to the 118.60 levels the market spent several hours trading around the area before dropping steadily through to 118.40 areas with weak stops being triggered from earlier pre market action that saw original stops taken out to the 118.20 levels. Once cleared of interest the market again traded higher for several hours into the grey hours and pushing to the opening levels again. Trading in London saw the market kept in check with a tight range around that 118.60 levels and only late in the session did we see EURJPY selling kicking in to take the USDJPY back through the day’s lows and setting a new 118.30 level low for the day before holding in the 118.40-50 levels to the close.
• AUD: With strength in the JPY the Oz was able to push higher from the lows around the 0.7760 area having opened in line with Friday’s close. Tokyo saw the Oz moving to the 0.7770 level on the opening and then steadily rising over the course of the session in an attempt to test the 78 cent levels. The market ran out of time and into the grey hours and sagged back to hold around the 0.7780 levels for the bulk of the day and only the movement of the Euro upset that status quo, with the Euro dropping and dragging the Oz to some extent with it as EURAUD buying entered the market as the cross passed through technical levels around the 1.4670 areas. The Oz traded below the 0.7755 level and a 40 pip range was all the market could manage with the early Sydney players buyers from the moment they walked through the door to take the market to 0.7775 areas for a gain on the day and RBA minutes to chill out about.

Yesterday’s premiership results

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

NZD       Retail Sales Ex Inflation Q/Q Q4 A 1.70% | C 1.30% | P 1.50% | R 1.60%

JPY         GDP Q/Q Q4 (P) A 0.60% | C 0.90% | P -0.50%

JPY         GDP Deflator Y/Y Q4 (P) A 2.30% | C 1.90% | P 2.00%

GBP       Rightmove House Prices M/M Feb A 2.10% | P 1.40%

JPY         Industrial Production M/M Dec (F) A 0.80% | C 1.00% | P 1.00%

EUR       Eurozone Trade Balance Dec A 23.3B | C 21.3B | P 20.0B | R 21.6B

Good Luck,

Andy