Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 122.771 122.00-10 | EURUSD 1.11556 1.1100-10 | AUDUSD 0.74444 0.7430-40 | NZDUSD 0.6719 0.6690-0.6710 | USDCAD 1.26599 1.2663-73 | USDCHF 0.93888 0.9414-24 | GBPUSD 1.55163 1.5470-80 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               122.75 | 121.95

EUR/USD             1.11525 | 1.1090

EUR/JPY               136.835 | 135.40

AUD/USD            0.7469 | 0.7412

NZD/USD             0.6753 | 0.6701

USD/CAD             1.2716 | 1.2668

EUR/CHF              1.0477 | 1.0443

USD/CHF             0.9415 | 0.9393

GBP/USD             1.5533 | 1.5470

EUR/GBP             0.7185 | 0.7150

For today

• EUR: With no deal done over the weekend the market opened nearly a big figure lower in the pre-market area, with several items on the ability for Tsipras needing to get bailout laws through being just one of the problems facing a deal, initially it looked as if the deal was dead in the water before Hollande managed to persuade Merkel and for the moment a tenuous agreement has been put forward however, there is no backsliding this time with Brussels requiring guarantees on a follow through of any agreements given, this may be moot with some of the smaller nations already disagreeing with the body of the negotiations as the speculation over what is going to be required with growing numbers for the bailout, with top end numbers at $96B, even at this late point plans for an asset fund for privatization is so sensitive to the Greeks that one Greek official called it a deal breaker. The Euro rallied from the low opening pushing to above the 1.1140 areas but staying in a reasonably tight range through the Asian period with the market filling much of the gap on the charts but generally remaining in the 1.1120-40 areas on light volumes. Topside offers into the 1.1200 levels through to the 1.1220 with the likelihood of stops through the level and a push through the 1.1250 levels where better offers start to appear in the run to 1.1300 areas. Downside bids are likely to be a little light through the 1.1100 areas with the downside well traversed over the past week and the whole market still hanging on the Greek saga unfolding, A move through the 1.1100 will likely see only light bidding into the 1.1050 before the bids start to thicken into the 1.1000 areas with only light stops around the area.
• GBP: Quiet trading for Cable as the GBP takes second fiddle to the Euro and the events continuing to unfold however, with doubts in the market the market again becomes a safe haven for the moment. Cable opened around the closing levels and the market traded in a very narrow range stepping just below the 1.5500 level and then touching above 1.5520 but generally holding in between the levels. Light offers were sufficient on Friday to deflect the move higher around the 1.5550 levels however, as with today it was more Euro led than general Cable movement and today is not likely to be much different with no tier 1 data for Euro or GBP the market is likely to move on whispers, a push through the 1.5550 levels will probably see a quick test to the 1.5600 levels with probably better offers involved with only a strong push through this level likely to open up the topside to 1.5700. Downside has limited interest with possible weak stops through the 1.5450 areas and the market better bid from 1.5400 onwards into the lows of last week around the 1.5350 levels and not looking that exciting.
• JPY: As with the start to the previous two weeks the market opened down for the USDJPY with large offsets of the EURJPY cross, this was not really that different with EURJPY opening some 1.50 big figures lower and both the Euro and USDJPY legs opening down, USDJPY opened around the 122.40 before seeing quick buying to fill the gap on the charts but never making its way to the 122.80 levels where the market held for much of the back end of NYK on Friday, drifting away from the highs as the Euro gained slightly through the session, EURJPY regained a big figure before the USDJPY slipped however, the session has been limited through Tokyo and the market continues to hold in the 122.60 level. Topside offers remain through the 122.80 levels and into the 123.00 with a push through the 123.10-20 areas likely to see weak stops and an opening to test above the 123.50 levels however, from that point on the market is likely to see stronger offers and likely to be under the spell of the Euro. Downside bids into the 122.00 are likely to see further yield buying however, with the GPIF portfolio starting to show indications of reaching its limit to buying foreign investments the flow could start to decrease over the coming weeks, this does leave the smaller public pensions who are suspected not to have begun their shift yet but this is speculation. A push through to the downside will see weak stops through the 121.80 levels before some slight support appears around the 121.50-30 areas and an opening to test through the 121.00 level and back to last week’s 120.50 area.
• AUD: The Oz opened down with the other currencies as the USD rebalanced against the Euro after another weekend of talks came to nothing, moving off the 0.7420 areas the market chopped around the 0.7420-40 levels deep into the session with the market eventually seeing a rise after the release of the CNY trade balance numbers which while looking weak saw a decent rise in exports and emboldening the market to believe much of the Chinese woes over the past few weeks may be behind however, I would suspect this is a false dawn with the ramifications of an over extended leveraged market in China likely to impact Oz in the long term as the deleveraging continues. The market spiked on the release to just below the 0.7470 levels before settling down to the closing rates from Friday for a quiet move towards London. Offers into the 75 cent level continue to dominate the market for the moment with weak Iron ore prices and falling exports for the Ozzies continuing to weight on the economy while strong property prices worry. However, a push through the 75 cent level has potential to cause a short squeeze with little potentially until through the 76 cent levels however, given the current situation the topside would need strong indications that the economy will come through without any major catastrophes over the coming months. Downside has reasonable bids into the 74 cent level and likely to continue on a move through with a potential for a deeper move lower however, this is tempered with the RBA likely to be happy with the current levels and less inclined to interfere too much.

Overnight News

EUR:

EU Demands Total Capitulation as Greek Bailout Costs Spiral

Creditors’ Plan for Asset Fund Is Deal Breaker: Greek Official

Greece Resists IMF Role, Privatization Fund, Greek Official Says

Greece’s Tsipras May Seek to Expel Syriza Party Rebels: Reuters

Euro zone summit on Greece to discuss compromise proposal – RTRS

JPY:

Japan MOF, BOJ, FSA to Closely Communicate on Greece: Official

Japan PM Abe’s Cabinet Disapproval Rate Rises to 42%: Asahi Poll

CNY:

China June Exports Rise 2.8% Y/y in USD; Est. 1% Rise

China Sees Pressure on Exports in Next 2-3 Mos.

China Sovereign Credit Quality to Remain Intact, Moody’s Says

AUD:

Australian Bankruptcies Rise by Most Since 2009 Global Recession

NZD:

New Zealand June Home Sales Rise 29.2% Y/Y, REINZ Says

Today’s data

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

CNY        Trade Balance Jun A $46.61B | C $56.35B | P $59.49B

JPY         Industrial Production M/M May (F) A -2.10% | C -2.10% | P -2.20%

JPY         Tertiary Industry Index M/M May A -0.70% | C -0.20% | P -0.20%

18:00     USD       Monthly Budget Statement Jun C 40.5B | P -82.4B

Weekend News

EUR:

Greece Talks Spill Into 2nd Day as Finance Chiefs Deadlock
Germany Raises Pressure, With Greek Suspension From Euro Floated
Greek Govt. Official Says Grexit Plan Not Discussed in Eurogroup
Greek Capital Controls Could Stay 2 Months, Stathakis Says
EU’s Dombrovskis Says ‘Clearly Making Progress’ on Greece
Stubb Says Finland, Other Nations Won’t Authorize New Greek Loan
Creditors Say Greek Plan Not Enough to Meet Budget Target: FAS
Varoufakis Sees Germany Seeking Greek Exit as Warning to France
JPY/CNY:

Abe May Visit China in September for Talks with Xi, Asahi Says
JPY:

Toshiba Faces Full Investigation by Japan Regulator: Nikkei
CNY:

China Police Find Signs of Illegal Stock Trading: Xinhua
China Targets Lawyers, Law Firm in Anti-Crime Campaign: Xinhua

Harry Hindsight

• EUR: With more expectations of a resolution to the Greek saga the Euro maintained a steady rise from the opening 1.1040 levels, moving to the 1.1080 levels in early trading before moving quietly into the Tokyo session and then taking its time to get going again, by the time the grey hours were reached the Euro was touching through the 1.1100 levels with light selling into the London opening the market soon recovered and pushed through the 1.1130 levels and triggered weak stops from early London sellers and a move quickly to the 1.1180 level before breaking a little higher into the opening NYK session, unable to break through the 1.1220 areas the market drifted back below the 1.1200 levels, as time ticked by the market started to wane with no concrete commentary on the subject of the re-submitted proposals previously rejected by the Greek populace and the market slowly drifted to the 1.1120 levels into the London close and then rose for the close.
• GBP: A quick rise in the EURGBP from the opening saw the Euro move higher however, Cable maintained its levels around the 1.5380 opening area losing a little ground into the opening of Tokyo to trade into the 1.5360’s before starting to be dragged higher by the Euro, EURGBP the main catalyst for the moves over the session moved off the 0.7170 level and quickly traded to 0.7205-10 areas before slowly rising to above the 0.7220, Cable was pulled up to the 1.5400 level into the grey hours and moved into London quietly before quickly rising on the trade balance showing an improvement over the previous month and consensus and triggering weak stops through the 1.5420 levels and a steady rise through 1.5450, with further stops triggered the market struggled briefly around the 1.5500 levels and again triggered minor stops to set the market up for a test of the 1.5550 levels before holding and drifting lower over the course of the NYK session, EURGBP selling with good strength in Cable saw the cross drift back to the opening areas for the cross around 0.7170 levels.
• JPY: Early buying of the EURJPY cross took the USDJPY to the 121.80 levels from the opening below 121.40 and then stalled into the Tokyo session however, the market eventually pushed to the 122.00 levels and continued to push the level into the London session before breaking to 122.20 levels and light stops through to push into the NYK session around 122.40 levels. USDJPY continued gradually from there to push to the 122.80 levels and offers which capped the market into the close.
• AUD: A mixed day for the Oz with early gains seeing the Oz move off the 0.7450 levels to test higher with early AUDJPY carry trade buying before a quick push triggering light stops through the 0.7470 levels to pushing into the 0.7490 and stronger offers, with 60% of Chinese A list companies suspended the equities rose in the Chinese markets and this relieved some of the margin pressures in the market, the move into London saw some light profit taking and USDJPY continuing to rise and offers into the 91.40 levels on AUDJPY, this left the Oz down around the opening levels before another stab towards the highs tailed and the market dropped back with stronger selling and weak stops triggered through the 0.7450 levels for a quick move to 0.7420 eventually touching 0.7410 to make the lows, the run to the close saw the market eventually move back towards the opening levels.

Friday’s premiership results

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

JPY         Domestic CGPI Y/Y Jun A -2.40% | C -2.20% | P -2.10%

AUD       Home Loans May A -6.10% | C -2.80% | P 1.00% | R 0.70%

JPY         Consumer Confidence Index Jun  A 41.7 | C 41.9 | P 41.4

GBP       Visible Trade Balance (GBP) May A -8.0B | C -9.7B | P -8.6B

CAD       Net Change in Employment Jun A -6.4K | C -4.5K | P 58.9K

CAD       Unemployment Rate Jun A 6.80% | C 6.90% | P 6.80%

USD       Wholesale Inventories May A 0.80% | C 0.20% | P 0.40%

Stay lucky

Andy

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