Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 120.131 | EURUSD 1.07808 | AUDUSD 0.7684 | NZDUSD 0.75638 | USDCAD 1.25466 | USDCHF 0.96646 | GBPUSD 1.48666 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               120.39 | 120.08

EUR/USD             1.0788 | 1.0760

EUR/JPY               129.73 | 129.42

AUD/USD            0.7703 | 0.7660

NZD/USD             0.7561 | 0.7527

USD/CAD             1.2567 | 1.2537

EUR/CHF              1.0431 | 1.04175

USD/CHF             0.9683 | 0.9663

GBP/USD             1.4886 | 1.4852

EUR/GBP             0.7251 | 0.7243
For today

• EUR: A very limited day early trading through the Sydney session saw the market holding above the 1.0780 level but not doing that much before the market dipped as USDJPY moved on the fix and the EURJPY stayed steady, Euro’s dipped to just above the 1.0760 level before slowly returning to the 1.0780 level and then drifting around the level into the grey hours. Topside offers light into the 1.0820 levels before weak stops appear above 1.0830 levels and opening the market to the 1.0880 level and possible stronger offers from there into the 1.0900 levels. Beyond this level the market is likely to see the offers increase the closer you get to the 1.1000 level. Downside bids into the 1.0750 level and likely to be strong until a push through the 1.0690 levels, below thee the market is likely to then run into a lot of congestion with profit taking likely in a repeat of last month’s run.
• GBP: Cable has had a very quiet session with the market opening just above the 1.4860 level and trading just below the level and just above the 1.4880 levels, early Tokyo selling saw the lows before a steady rise back through the opening and to the highs, the market holds for the moment just off the highs as we head into the grey hours. Downside bids light into the 1.4850 level and a break sets up a test of the 1.4800 level however, through the level sees better strength in the market and a very congested area down into the 1.4750 levels, a strong break through the level will set up a renewed test of the 1.4700 level and the years lows. Topside offers light into the 1.4900 area, with strong offers appearing from the 1.4950 areas and towards the very strong 1.5000 level, a move through the level will opening up a new test to the 1.5050-1.5100 levels.
• JPY: USDJPY opened around the 120.15 levels and eased slowly into the Tokyo session testing only slightly lower before fixing demand took the market higher and a push to the 120.35 levels and then trading for the bulk of the session around the 120.30 areas, eventually the market started to drift as the market moved towards the grey hours and slipped back to the 120.20 levels in slow trading. Topside offers continue from the 120.50 areas and strengthens as it moves higher, a push through the 121.00 level will likely see some stops appear in the market however, if it can move through the level those offers quickly reappear and the next level is likely to be even tougher. Downside bids are light into the 120.00 areas and stops are likely to make an appearance on a push through the 119.60 level light bids from the 119.20 area are likely to be limited in depth however, the yield players who are possibly the biggest component of the $36.1 bln of foreign securities in March, and again likely to step in on any dips.
• AUD: Light profit taking before moving into the Tokyo session saw the Oz dip down from the opening 0.7685 levels to 0.7660 before quickly bouncing as AUDJPY carry trade kicked into the market and the Oz returned to the 77 cent levels towards the end of the session before drifting a little lower. Topside offers into the 0.7720 areas and only a push through the 0.7730 is likely to see limited buying, however, it is limited with 0.7750-60 likely to see strong offers and an opening to above the 78cents. Downside bids  appear into the 0.7650 level but these are likely to be weak until the market starts to move into the 76 cent level and better bids into the lows of the year, a push through those lows are likely to run into an option play around the 75cents areas.

Overnight News

JPY:

Japanese Sold Net 3073.5 Billion Yen Overseas Debt Last Week

Japan Estimates Contribution to AIIB Could Grow to $3b: Yomiuri

JPY/CNY:

Japan’s Yamaguchi Tells China’s Ji Important That Leaders Meet

EUR/CNY:

Beijing Still Lagging on Business Front, EU Chamber Report Says

NZD:

Key Says Kiwi Likely to Decline Further Against US$

AUD:

Australia’s March Construction Index Rises 6.2 Pts M/m to 50.1

Today’s data

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

06:00     EUR        German Industrial Production M/M Feb C 0.10% | P 0.60%

06:00     EUR        German Trade Balance (EUR) Feb C 20.3B | P 19.7B

06:00     JPY         Machine Tool Orders Y/Y Mar (P) P 28.90%

08:30     GBP       Visible Trade Balance (GBP) Feb C -9.1B | P -8.4B

11:00     GBP       BoE Rate Decision C 0.50% | P 0.50%

11:00     GBP       BoE Asset Purchase Target Apr C 375B | P 375B

12:30     CAD       Building Permits M/M Feb C 5.10% | P -12.90%

12:30     CAD       New Housing Price Index M/M Feb C 0.10% | P -0.10%

12:30     USD       Initial Jobless Claims (APR 4) C 281K | P 268K

14:00     USD       Wholesale Inventories Feb C 0.10% | P 0.30%

Harry Hindsight              

• EUR: The Euro gradually moved higher through Asia pushing to the 1.0840 levels before running out of steam in the early part of the session, with only a minor set back the rally continued and the move into London saw the market move quickly higher after only a minor drift lower on the release of poor German factory order number, the move into London saw the market move to the 1.0880 levels and limited profit taking before ranging in the area for the session into NYK and touching into the 1.0850 as limited interest before the FOMC held the market in check. In fact a lot of the data releases for Europe were ignored along the way and perhaps the market originally started on the premise that the FOMC were going to be more dovish than they were, the push through the 1.0850 level saw weak stops triggered and the market dipped back to the 1.0820 levels, as it was the FOMC was pretty much unchanged so negating much of the chatter over the past month for one direction or the other, however, the fact that the US economy is showing signs of slowing and the weak NFP numbers last Friday would suggest policymakers will need time for confidence in any hike. Euro in the meantime pushed lower on the release and traded through the 1.0770 level before ranging to a close around the 1.0780 level so no bounce.
• GBP: Cable climbed slowly in Asia moving off the 1.4815 areas and pushing to trade above the 1.4840 levels into the grey hours, the market then suddenly jumped into life and rallied initially to the 1.4860 level and then a further move higher as the London session opened to stall initially at the 1.4900 areas and light resistance, the move was probably linked to the Shell/BG merger and retail buyers however, there is not likely to be any money flows from a merger of a UK/Dutch company and a UK company that didn’t stop the market jumping on the bandwagon and Cable pushed eventually above to 1.4940 levels before the US appeared. EURGBP moved to above the 0.7310 level through Asia a 10 pip move from the opening the move into the grey hours though saw the pair dropping steadily in a tight channel to the 0.7260 level and then into the NYK session and a quick dip to the 0.7230 levels. The drop back in the Euro dragged on the Cable into the NYK session and the release saw the Cable push back through the 1.4900 level triggering weak stops before stopping around the 1.4860 and a drift to the close.
• JPY: USDJPY opened around the 120.30 level and gradually slipped lower as Nikkei hit new highs and JPY buying moved into the market, USDJPY traded in a tight channel for most of the session and then saw a little choppy action on the release of the Eco watchers number before breaking down through the 120.00 level and light stops, the market bounced repeatedly off the 119.70 levels through the London session and started a recovery from NYK onwards lifting steadily through to the FOMC and a quick spike to the opening levels before holding steadily around 120.15 into the close. Monetary policy was unchanged and had little effect on the market originally however; one would surmise that was the initial triggering point for the market with likelihood of equity buying to continue bringing out the buyers and the requirement for Yen.
• AUD: A couple of points for the Oz, the stabilization of the pair around the 76 cent level has given rise to renewed interest in the carry trade after the market had declined from the parity level the reward was obviously not there above 2% interest against a 25% decline in the currency not so much a carry trade however, we have been in the 76-79 cent range for a decent amount of time and so the carry trade has started to see stronger buying enter the market, against which is the price of iron, with last year’s prices of $100 + per tonne to the current levels of $47 per tonne and the market in tatters and looking for government help to support it, China was meant to be the market for the Oz ore however, while the Oz government has been limited however, the tax breaks given to minor companies has now exacted a response from the Chinese with tax cuts aimed at their own mining interests. This would keep the pressure on the Oz for the time being and adds to the first point. Oz opened around the 0.7630 levels and moved steadily to above the 0.7720 levels into pre NYK and the carry trade was taken from the 92.00 level to 92.50 to range around the level to the close. Oz saw minor adjustments on the release of the FOMC dipping eventually to below the 77 cent level into the close.

Yesterday’s premiership results

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

GBP       BRC Shop Price Index Y/Y Mar A -2.10% | P -1.70%

JPY         Current Account (JPY) Feb A 0.60T | C 0.61T | P 1.06T

JPY         Eco Watchers Survey: Current Mar A 52.2 | C 50.9 | P 50.1

EUR        German Factory Orders M/M Feb A -0.90% | C 1.50% | P -3.90% | R -2.60%

CHF        CPI M/M Mar A 0.30% | C 0.10% | P -0.30%

CHF        CPI Y/Y Mar A -0.90% | C -1.00% | P -0.80%

EUR        Eurozone Retail PMI Mar A 48.6 | P 46.4

EUR        Eurozone Retail Sales M/M Feb A -0.20% | C -0.10% | P 1.10% | R 0.90%

USD       Crude Oil Inventories A 10.9M | C   3.3M | P 4.8M

Good Luck,

Andy

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