Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 122.059 122.12-20 | EURUSD 1.1387 1.1360-75 | AUDUSD 0.73147 0.7307-15 | NZDUSD 0.66871 0.6675-88 | USDCAD 1.31856 1.3178-89 | USDCHF 0.94646 0.9460-0.9510 | GBPUSD 1.5692 1.5675-90 |

 

Interbank Ranges as of 6am London time

Highs    Lows

EUR                        1.14983 | 1.1369

JPY                         121.929 | 120.721

GBP                       1.56937 | 1.56562

CHF                        0.94813 | 0.93635

AUD                       0.7312 | 0.7201

NZD                       0.6687 | 0.6577

EURCHF                1.0817 | 1.0763

EURGBP               0.7332 | 0.7247

EURJPY                 138.99 | 138.09

For today

• EUR: Slowing global growth, particularly in China, rising tensions in the Korea’s all spilling over in to the EM areas adding to the sluggish economics’ of Europe leaving the US on the verge of raising rates at a point of time that may not be advantageous, so equity markets lose there lustre, commodity markets start to slide and all of a sudden the slow recovery looks very vulnerable. So the Asian market opens after the Friday carnage in the equity market and apart from cross JPY selling the market looked quiet trading from around the 1.1380 areas and through the early Sydney hours the Euro held in place, news absorbed from the weekend and the move through the 1.1400 level saw solid buying carrying through the market however, while the Euro triggered some weak stops the crosses were mostly to blame for the initial movement and as USDJPY moved lower the Euro was forced higher as the buyers of EURJPY found only limited Euro offers to match off against and the Euro pushed through the 1.1450 levels triggering further stops and a push to test the 1.1500, the market fell just short of the level and then dropped back to hold around the 1.1450 levels as volumes receded and the market took a breath before the London session. Topside offers into the 1.1500 levels remain in play however, a push through the level is likely to open the topside for a stronger move technically with the 1.1700 likely to be the strongest area once the market moves through, whether there are sufficient stops of shorts left in the market remains to be seen however, 1.1580-1.1610 is likely to slow the market for the moment with a move through the 1.1640 area likely to see some breakout stops and then the 1.1700 opens for a test. Downside bids for the moment are likely to be patchy from the current levels and strengthening into the 1.1420 levels, a push through 1.1390 is likely to see weak stops appearing and the market then caught with little protection to the downside apart from what comes to the market.
• GBP: So Cable, as with Friday, opened below the 1.5690 areas and then slipped back to trade into the low 1.5660’s as the Euro moved higher taking the EURGBP cross from the opening 0.7260 areas to trade steadily through the 0.7300 level and touching above 0.7320 area, even once the Euro slipped back GBP struggled to regain the losses against the Euro however, it briefly recaptured the 1.5690 areas before drifting in a tight range between 1.5680-90 as Cable plays the idle bystander and somewhat insulated for the moment. For the moment topside offers through the 1.5700-20 areas are likely to leave a small gap before further offers reappear into and through the 1.5750 areas, a clear push through the 1.5800 will likely see stops appearing and the market then opens for a test of the 1.5900 areas however, for the moment the 1.5700 area remains largely intact. Downside bids through the 1.5650 areas and the tight range over the past 4 weeks between 1.5550-1.5650 to absorb any selling, and while GBP in itself is reluctant to follow the general USD selling it stubbornly refuses to move in the other direction as well.
• JPY: The catalyst for the most part of the moves today, with pre-market cross JPY selling seeing the EM markets (bonds, Equity holders) cutting and quickly moving to safe havens, in particular the JPY, whether this is yield holders running home remains to be seen but for now those flows are likely to continue as long as concerns in several places impact the market, of course the other concern is that currency wars break out with other EM areas replicating the Chinese move which ultimately affects outside investments. USDJPY opened only a little lower and just below the 122.00 after a jittery pre-market movement however, the move towards the Tokyo opening again saw strong selling trading into the 121.20 areas before bouncing back for the Tokyo fix however, the reprise was short and the market again pushed steadily lower and this time triggered weak stops through the 121.00 areas into the 120.70 areas and holding for a short period, as the session wore on the volumes started to drop off and the USD found room to recapture limited levels across the market with USDJPY slowly rising into the 121.20’s and running in the area to the grey hours.
• AUD: Considering the amount of focus on the CNY revaluation just over a week ago, the Oz has managed to remain for the most part out of trouble however, today’s cross JPY selling saw the Oz opening around the closing areas from Friday however, as soon as the Tokyo session opened the Carry trade was aggressively sold as JPY buying moved in across the board with the Oz deemed more likely to face consequences of a slowing economy in China, even though Japan’s economy is just as exposed to the economy of China as Oz, the first move took the market from the 73 cent areas and touched the 0.7260 area before finding bids sufficient to stall the market however, that is all it did as the market continued to gradually push through the bids to trigger further stops on the move through the 0.7240 level a few hours later and a quick trip towards the 72 cent level not quiet breaking below, if you could call it a bounce the market managed to push back into the 0.7230 levels before holding into the grey hours. Topside offers thin into the 0.7260 levels before the market opens a little with possibly better offers as you approach the 0.7300 areas, a move through the area is likely to see a light mixture of offers and stops before the market again sees offers building into the 0.7360 levels and although there are some openings to the 74 cent level from that point on to the 0.7440 there is likely to be stronger resistance again. Downside bids are likely to still be strong into the 72 cent level with possibly strong stop losses on a move through the level and the market opening for a test towards the 0.7130 areas an possible support dating back to the 2008-9 period.

Overnight News

JPY:

Japan’s Abe says acceptable for BoJ to miss price goal

CNY:

Yuan opens weaker despite firmer guidance

China stocks give up year’s gains after CB fails to act

GBP:

UK employers raise growth outlook

EUR:

Greek eurosceptics to take government mandate amid early election row

OIL:

Makes fresh 6 ½ year lows.

Today’s data

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

JPY         Coincident index Jun (F) A 112.3 | P 112.0

JPY         Leading Index Jun (F) A 106.5 | P 107.2

Weekend News

KRW:

North and South Korea remain on high alert amid talks in bid to end standoff

OPEC:

Iran says OPEC emergency meeting may stop oil price slide however, it reserves the right to its market share

EUR:

Spain’s economy to keep growing at around 1% in the third quarter Minister

IMF:

Official says premature to speak of Chinese crisis

CNY:

Chinese Pension funds to invest in stock market

USD:

Fed’s Bullard; Yuan devaluation puts focus on China growth risk

Fed’s Bullard; FOMC has talked about normalization strategy

Fed’s Bullard; concerned by expectations mismatch between market, FOMC

Fed’s Bullard; Fed will assess economic progress at Sept. FOMC

US Treasury to closely monitor how China implements FX shift

Harry Hindsight

• EUR: Early trading through Asia slowly pushed the Euro towards the 1.1300 levels before drifting off again as the market moved into the London session with the market having seen better volumes overnight, less than impressive PMI numbers saw the market holding the 1.1250 areas for much of the session however, as the market moved towards NYK the equity markets came under increasing pressure and the market moved back towards the 1.1300 levels and traded through the opening in NYK around the level, as the market moved on the equity markets decline steepened and once the London session was out of the way S&P’s in particular dropped off quickly and the USD with it. Euros pushed through the 1.1350 level and stalled only because it ran out of time trading to just below the 1.1400 areas.
• GBP: With the market dominated by China and the EM markets in particular during Asia and then tipping in to the rest of the day with the USD suffering setbacks as the thought of delays in interest rate rises for the US Cable found itself ignored for the most part and only playing minor role in the Euro and USD moves, and lost ground against the Euro as the Euro became the focus of attention away from any risks involved with China and subsequently the US. Cable traded quietly through the Asian session holding around the 1.5690 levels for the most part and rising once the market moved into the grey hours, as with previous attempts last week the market struggled on the move through 1.5700 however, this time it managed to push into the 1.5720 areas before dropping back through the 1.5700 levels and dipping to the 1.5660 level, even with the strong Euro and weak USD the Cable moved through the balance of the session not testing either level again and held into the last few hours within the 1.5680-1.5710 for the most part and close almost unchanged on the day as the flows moved around the small island of sanity.
• JPY: The USDJPY opened quietly and traded around the 123.50 areas until the release of the CNY PMI numbers at which point the safe haven flows kicked in and JPY buying dominated for awhile, dipping from the opening levels the market dropped through the 123.00 levels before then trading around that level through deep into London, the move into NYK saw early sellers push the USDJPY quickly through to 122.50 areas and then the market struggled for several hours before again giving ground and dipping through the 122.00 level to set the low around 121.80 before closing off those lows.
• AUD: Apart from the initial selloff in the Oz after the CNY PMI numbers the Oz remained as the Cable in a contained range, moving from the opening around the 0.7340 levels the market moved into the release and dipped to the 0.7290 level to make the lows for the day, it then struggled over the course of the Asian session back above the 73 cent level and London steadily bought the Oz back to the opening levels, the move into NYK sent the market to its highs however, weak stops through the 0.7330 areas saw the market to 0.7360 and then the market traded for the most part in a 0.7355-30 range slowly slipping to trend along that 0.7330 to the close.

Friday’s premiership results

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

JPY         PMI Manufacturing Aug A 51.9 | C 52.1 | P 51.2

CNY        PMI Manufacturing Aug A 47.1 | C 47.7 | P 47.8

EUR        German GfK Consumer Sentiment Sep A 9.9 | C 10.2 | P 10.1

EUR        French PMI Manufacturing Aug A 48.6 | C 49.7 | P 49.6

EUR        French PMI Services Aug A 51.8 | C 52 | P 52

EUR        German PMI Manufacturing Aug A 53.2 | C 51.7 | P 51.8

EUR        German PMI Services Aug A 53.6 | C 54 | P 53.8

EUR        Eurozone PMI Manufacturing Aug A 52.4 | C 52.2 | P 52.4

EUR        Eurozone PMI Services Aug A 54.3 | C 54 | P 54

GBP       Public Sector Net Borrowing (GBP) Jul A -2.1B | C -2.3B | P 8.6B

CAD       CPI M/M Jul A 0.10% | C 0.20% | P 0.20%

CAD       CPI Y/Y Jul A 1.30% | C 1.40% | P 1.00%

CAD       BoC CPI Core M/M Jul A 0.00% | C 0.00% | P 0.00%

CAD       BoC CPI Core Y/Y Jul A 2.40% | C 2.40% | P 2.30%

CAD       Retail Sales M/M Jun A 0.60% | C 0.30% | P 1.00% | R 0.90%

CAD       Retail Sales Less Autos M/M Jun A 0.80% | C 0.50% | P 0.90% | R 0.80%

EUR        Eurozone Consumer Confidence Aug A -6.8 | C -6.9 | R -7.1

Stay lucky

Andy

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