Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 120.197 120.11-30 | EURUSD 1.06026 1.0595-1.0600 | AUDUSD 0.76795 0.7670-80 | NZDUSD 0.75343 0.7520-45 | USDCAD 1.25713 1.2561-90 | USDCHF 0.97946 0.9790-0.9819 | GBPUSD 1.4632 1.4622-65 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               120.50 | 120.095

EUR/USD             1.0620 | 1.05835

EUR/JPY               127.64 | 127.30

AUD/USD            0.7678 | 0.7581

NZD/USD             0.7538 | 0.7445

USD/CAD             1.2624 | 1.2555

EUR/CHF              1.0389 | 1.03775

USD/CHF             0.98035 | 0.97805

GBP/USD             1.4649 | 1.4601

EUR/GBP             0.72525 | 0.72425

For today

• EUR: Opening slightly lower the Euro pushed back through the 1.0600 level into the Tokyo session and then a quiet period with the market holding just below the 1.0620 levels for a good period. The release of the CNY numbers set the market back a little and made the lows for the day trading just below the 1.0590’s before again settling into a tight range to the 1.0600 level as we head to the grey hours. Topside offers are likely to be light into the 1.0620 levels however, a push through the 1.0640 level will likely see weak stops above the level and a push to test the 1.0680-1.0700 levels, a strong push will possibly see a small short squeeze and better volatility however, the previous short squeeze have removed some of the shorts and the sort of move previously seen is less likely. Downside bids are likely to be patch and profit taking to the 1.0500 and then better bids are likely building in size through the level and possibly stronger to the previous lows of the year around the 1.0460’s, a push through will likely see breakout trades entering the sell side and new lows however, last week’s buying of options on the lower strikes will see option plays coming into the market and possible stall to the downside move.
• GBP: The media talks of worrying consequences with the election at hand however, for me the market is being dragged more by the Euro and deflationary pressures of oil. Cable opened unchanged and edged into the 1.4640’s into the Tokyo session before dropping back to the 1.4620 levels, the market never recovered and lost a little ground to the Euro and dipped to the 1.4610 levels as we head for the London session. Topside offers likely into the 1.4700 levels however, a push through the 1.4720 level will likely see the market open to the topside with weak stops and little in the way until the 1.4800 areas. Downside bids into the 1.4600-1.4580 before giving way to break out traders and the downside sentimental levels come into play with the market possibly looking for a deeper move towards the 1.43 handle given time.
• JPY: EURJPY and GBPJPY selling saw early trading from the opening level of 120.25 areas rise to above 120.30 only for Tokyo to sell the crosses and USDJPY fall back to the 120.10 areas, once the fix was over with the market started to move off the lows and in a tight channel the market moved back higher pushing through the opening and previous high to trade towards the 120.50 levels and the beginning of the offers into the 121.00 areas, even through this level the market is still likely to see offers and those offers will likely build into 122.00 with even more significant offers. Downside bids light through 120.10-119.80 a push through the 119.70 levels will open up the downside and a test of the 119.00 areas, whether the yield player’s move into the market remains to be seen as most have moved in either on necessity or the market has been on the 117-118 handles.
• AUD: Oz drifted from the opening a little lower and drifting from the opening 0.7670 levels the market moved into the Tokyo session with light carry trade selling before the CNY Trade balance was released and the market then dived quickly lower to test the 76 cent level and eventually dipping through to hold the 0.7580 areas as we approach the London session. Downside bids into the 0.7550 level and the previous lows will likely to limit downside movement however, a push through the lows will see limited profit taking and option barriers around the 75 cent levels. Topside offers are likely light into the 0.7660 areas a push through the 0.7720 area will likely see light stops and the market opening for a test of 0.7740 and stronger offers from there until 0.7770.

Overnight News

CNY:

China’s Export Engine Loses Steam, Adding to Slowdown Pressures

JPY:

Japan’s Abe Gets Boost From Regional Election Wins: Japan Times

Few BOJ Members: Possible for CPI to Become Slightly Negative

Kuroda: Japan Economy Has Continued Moderate Recovery Trend

BOJ Lifts Assessment of 3 Domestic Regions, Keeps Rest Unchanged

Japan Feb. Core Machine Orders Fall 0.4%; Est. -2.2% M/m

CNY/TWD:

China to Let Taiwan Collect Stock Capital Gains Tax: Comm. Times

USD:

Fed’s Williams Sees Less Rate Retreat Risk, Reuters Says

Hillary Clinton Announces She’s Running for U.S. President

NZD:

Fonterra New Zealand Milk Collection 3% Lower in March

N.Z. Hasn’t Given Up on Achieving Budget Surplus This Year: Key

Key Says RBNZ Property Tools Better Than Rate Rises

New Zealand Retail Card Spending Rose for Second Month in March

Today’s data

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

JPY         Japan Money Stock M2+CD Y/Y Mar A 3.60% | C 3.60% | P 3.50%

JPY         Machine Orders M/M Feb A -0.40% | C -2.30% | P -1.70%

JPY         Domestic CGPI M/M Mar A 0.30% | C -0.20% | P 0.00% | R -0.10%

CNY        Trade Balance Mar A $3.08B | C $40.20B | P $60.62B

CNY        Exports Y/Y Mar A -15% | C 12% | P 48.30%

CNY        Imports Y/Y Mar A -12.70% | C -11.70% | P -20.50%

Weekend News

EUR:

ECB Criticizes Greek Draft Law Protecting Indebted Home Owners
Greece Not Moving on Structural Reforms in Aid Talks: FAS
EUR/GBP:

International Paper Mulls GBP6b Bid for Smurfit Kappa, Sky Says
USD:

Obama, Cuba’s Castro Agree to Disagree at Historic Meeting
Obama: Iran Deal May Not Happen If Ayatollah Doesn’t Back Text
Obama Says Iran’s Leaders Using Nuclear Talks for Political Spin
U.S. Capitol Reopens After Sign-Carrying Man Commits Suicide
Obama Says Hillary Clinton Would Make ‘Excellent President’
CNY:

China May Issue Policies to Stabilize Growth in 2Q: Sec. Journal
China Issues Reform Plans for Policy Banks
China Premier Li Urges Acceleration of Railway Spending
CNY/USD:

China-Led Infrastructure Bank Keeps Door Open to U.S. ‘Anytime’
MYR/JPY:

Amcorp in Talks to Buy First Tokyo Property, Edge Reports
MYR/GBP:

Malaysia’s EPF in Talks to Sell Some U.K. Properties
GBP:

U.K. Liberal Democrats to Pledge Higher Dividend Tax for Wealthy

Harry Hindsight

• EUR: Asia limped higher moving from the 1.0660 level and held the 1.0680 level into the grey hours, the market dipped back to the opening level at this point and then the selling entered the market in earnest dipping to the 1.0620 level on the opening and then slowly pushing over the London session to trade into the 1.0570’s before the NYK session entered the market and stabilised the situation. Although NYK took the market back to the 1.0630’s the movement was short lived and the market again drifted lower and finished the day around the 1.0600 levels, concerns about Greece continued through the day and one assumes the rhetoric has put a few noses out of shape for which the news wires report a position of no return however, given the perchance for placation the ECB generally has maybe it is not the end of the road.
• GBP: EURGBP cross held its own through the day so given the weakness in the Euro the Cable gave ground eventually. The market opened in Asia around the 1.4715 areas and traded in a very narrow band barely pushing through the 1.4720 areas, the market moved into the grey hours and dipped to below the 1.4700 level before holding until the UK number releases, weak IP, and manufacturing numbers did little for the Cable and it dropped quickly down through the 1.4840 levels and then a slower push to below the 1.4600 levels for the first time since 2010. The market recovered into the NYK session with light profit taking moving in and the market moved back to range in the 1.4640-60 area until close to the close before dipping into a weaker finish.
• JPY: USDJPY came under pressure from the combination of cross selling moving into the market with Euro’s and GBP crosses being particularly weak through the session but dropping into the London session more noticeably, USDJPY opened around the 120.60 levels and traded gradually lower to trade around the 120.50 levels, the move into the London session saw the market move to the 120.30 levels and trade for a good period around that level, early NYK buying pushed the market higher a little but the official opening saw selling reappear and the USDJPY test the 120.10 area before holding around the 120.20-30 level into the close.
• AUD: While the move in the markets was not particularly a USD move the Oz slowly lost ground over the session rising initially from the 0.7690 area to test above the 0.7720 area the topside proved to strong before the market started to slide with concerns of economic problems focused on exports and falling prices of Iron. The market moved steadily from the highs and drifted through the remainder of the session and tested the 0.7640 into mid-London and only profit taking in NYK stopped the rot and Oz pushed quickly back to the opening levels before holding around the 0.7680’s into the close.

Friday’s premiership results

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

CNY        CPI Y/Y Mar A 1.40% | C 1.30% | P 1.40%

CNY        PPI Y/Y Mar A -4.60% | C -4.70% | P -4.80%

AUD       Home Loans Feb A 1.20% | C 3.10% | P -3.50% | R -1.70%

CHF        Unemployment Rate Mar A 3.20% | C 3.20% | P 3.20%

GBP       Industrial Production M/M Feb A 0.10% | C 0.30% | P -0.10%

GBP       Industrial Production Y/Y Feb A 0.10% | C 0.30% | P 1.30% | R 1.20%

GBP       Manufacturing Production M/M Feb A 0.40% | C 0.40% | P -0.50% | R -0.60%

GBP       Manufacturing Production Y/Y Feb A 1.10% | C 1.30% | P 1.90% | R 1.70%

CAD       Housing Starts Mar A 190K | C 175.0K | P 156.3K | R 151K

CAD       Net Change in Employment Mar A 28.7K | C 0.0K | P -1.0K

CAD       Unemployment Rate Mar A 6.80% | C 6.80% | P 6.80%

USD       Import Price Index M/M Mar A -0.30% | C -0.40% | P 0.40%

Stay lucky

Andy

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