Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 118.42 | EURUSD 1.16207 | AUDUSD 0.71547 | NZDUSD 0.64921 | USDCAD 1.32837 | USDCHF 0.93031 | GBPUSD 1.57767 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               120.11 | 118.25

EUR/USD             1.1623 | 1.1525

EUR/JPY               138.59 | 137.12

AUD/USD            0.7234 | 0.7131

NZD/USD             0.6540 | 0.6440

USD/CAD             1.3292 | 1.3246

EUR/CHF              1.0820 | 1.0788

USD/CHF             0.93765 | 0.93065

GBP/USD             1.5777 | 1.5720

EUR/GBP             0.73625 | 0.73165

For today

EUR: Opening around the 1.1610 area the market started a steady decline to the 1.1570 areas in the pre-Tokyo period rising again to 1.1600 into the Tokyo session before the market renewed the USD buying across the board, with EURJPY almost back to its opening levels 24hrs ago, Euro’s eventually dipped to the 1.1530 levels before finding sufficient support and the market moves towards the London session holding the 1.1540 areas. Equity markets were broadly better also with all but the SHCOMP showing a healthy bounce. Topside offers are a little vague now that the market pushed so quickly to the 1.1800 levels however, one would suspect that offers are reappearing from the 1.1620 area with weak stops on a move through the 1.1630 level opening up the weak topside to the 1.1680 level and possibly stronger offers appearing, downside bids light through the 1.1500 levels with the likelihood of stops through 1.1470 area and a return to the previous ranges open for testing around the 1.1400 levels.

GBP: A quiet day for the Cable with the market again stuck in a tight range holding and trading around the 1.5760 levels with a 20 pip range at the widest, Topside offers into the 1.5800 level are likely to be reasonably strong and although technically the market is now open for a test to the 1.5900 levels fundamentally the market is still out on whether its currently stronger than the US and likely to be a follower on interest rates rather than the leader. Downside bids are light through the 1.5700 levels however, the market is a little reluctant for the moment with focus on the EURGBP cross however, having pushed from the 0.7050 level to above 0.7400 in a couple of days the downside in the cross is likely to be a little vulnerable so the downside for Cable is dependent on any weakness in the Euro and or the opening of the US session, for the moment a move through the 1.5700 level will open the downside up with a possibility of some stops through the level having taken a period of time to break through the offers yesterday, the break will likely open up a test into the 1.5640 levels and through to the 1.5600 areas and further weakness on a move through, if however, the EURGBP begins to weaken the Cable could possibly hold again in a tight range.

JPY: USDJPY opened around the 118.50 areas and traded sideways in early trading however, once the Tokyo market opened it was all one way with the USDJPY pushing to the 119.00 levels struggling for a short period to break through however as the equity markets increased across Asia the break through finally occurred with weak stops triggered and a quick move to just short of the 119.50 levels, from there the market moved again to the 120.00 areas and has spent several hours holding the areas. Topside offers are likely to be light through the 120.20 areas with possible stops through the 120.50 levels and opening up a short squeeze with limited potential with the likelihood of stronger offers into 121.00 however, the topside is possibly very light and a concerted push as seen with yesterday could see quicker moves. Its probably all about volatility and have we seen the best/worst of it yesterday, given the volumes today it would suggest that the market having seen a clear out will take time to repopulate and for investors to decide on their next move. A push back through the 119.50 levels will likely see some weak stops with better bids into the 119.00 areas before the weak stops appear again, neither the bids or the stops are likely to be that strong and the downside is open for a further test to the 117.00 and with momentum to test yesterday’s lows however, for the moment everything seems to be recovering.

AUD: A steady recovery for the Oz over the course of the session with the leading index doing little to deter the steady stream of AUDJPY carry buying moving back in the market, opening around the 0.7130 areas the market gradually pushed higher with little in the way of stops and trading to the 0.7230 areas over the course of the session before meeting resistance and then drifting back to hold the 72 cent level into the grey hours. Topside offers are likely to be light through the 0.7240-60 areas with the market again opening for a test to the 0.7300-50 areas of last week, with stronger offers into the 74 cent level. Downside bids limited until the market has time to refill however, light bids into the 0.7150 areas with a break through the 0.7140 opening up a test to the 71 cent level and possibly stronger bids. Of course the market is likely to remain beholden to the equity markets and while everything is green apart from SHCOMP the opening in the US is likely to dominate.

Overnight News

CNY:

Chinese Securities Regulatory commission won’t intervene in the stock market again

KRW:

South and North Korea to lift semi-state of war from midday local time

JPY:

FinMin Aso FX move was abrupt

Amari Yen is being bought as safe asset

Aso not at stage for G7 or G20 response

Today’s data

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

AUD       Conference Board Leading Index Jun A -0.20% | P 0.20%

CNY        Conference Board Leading Index Jul A 0.90% | P 1.00% | R 0.60%

NZD       RBNZ 2-Year Inflation Expectation Q3 A 1.90% | P 1.90%

06:00     EUR        German GDP Q/Q Q2 (F) C 0.40% | P 0.40%

08:00     EUR        German IFO – Business Climate Aug C 107.6 | P 108

08:00     EUR        German IFO – Current Assessment Aug C 113.9 | P 113.9

08:00     EUR        German IFO – Expectations Aug C 102 | P 102.4

08:30     GBP       Index of Services 3M/3M Jun C 0.70% | P 0.40%

13:00     USD       House Price Index M/M Jun C 0.40% | P 0.40%

13:00     USD       S&P/Case-Shiller Composite-20 Y/Y Jun C 5.10% | P 4.94%

14:00     USD       New Home Sales Jul C 510K | P 482K

14:00     USD       Consumer Confidence Aug C 93.1 | P 90.9

Harry Hindsight

• EUR: Moving off the 1.1380 areas the market headed steadily to the 1.1400 however, volumes were brisk and once the 1.1400 level broke the market moved rapidly higher to the 1.1450 levels and the next resistance point and so on to eventually touch the 1.1500 levels before the market ran out of steam for the first time, Asia was busy and the market dropped back to the 1.1450 areas and the move into early London saw grey hours selling before London took the market higher and back to the 1.1500 levels at this point the day had already had some decent movement however, the thought of moving into NYK helped the market through 1.1500 with conviction and the ensuing equity mauling saw the USD dropping hard, Euro’s jumped quickly to above the 1.1700 level before dropping back a little more slowly and holding around the 1.1550 level as the equity market after the limit down period was over with and a recovery started, the Euro though slowly rose over the course of the session to head to a close just above the 1.1600 levels.
• GBP: In the great scheme of things the Cable remained in a tight range roughly 1.5630-1.5800 and only 170 pips however, the quiet trading in the Asian session saw the Cable opening around the 1.5700 levels and slowly slipping lower to test the 1.5660 moving in the opposite direction to the rest of the market with EURGBP steadily moving higher from the opening 0.7240 areas to push above the 0.7320 area in the Asian period. The move into the grey hours saw the Cable test to the lows and into the 1.5630’s before the pull of the Euro and the general USD selling eventually kicked in and Cable started to rise pushing quickly to the 1.5720 level that had proven so difficult over the previous couple of weeks, even so it was a couple of hours before the market pushed through and triggered light stops to the 1.5740 level and then a steady grind higher to trade briefly through the 1.5800 areas into the NYK session. As the US markets started to recover the Cable drifted back to trade around the 1.5740 levels again and ranged to the 1.5780 areas to the close.
• JPY: Opening around the 1.2200 areas the market drifted steadily lower over the course of the Asian session dipping to the 120.70 areas, the market managed a small recovery into the London session and like the other pairs held for a period into early London, and then dipped a little to test the 120.50 levels and the summer lows. The NYK opening and devastating moves in the equity markets sent the USD quickly lower with the USDJPY moving to trade into the low 116.00 levels bouncing to the 117.00 level before fresh buying moved in as bargains were snapped up however, it must be noted that like Jan 15^th the movement lower saw the bids stripped and an unwillingness for the market to provide the necessary liquidity given the circumstances the bounce back was decent and the market moved steadily back to the 119.00 levels, it eventually made a weak attempt at the 119.50 levels before sliding over the rest of the session to the 118.50 level and into the close. A combination of situations applied themselves to the JPY with safe haven flows, a collapse of equity prices and squeezing of margins causing carry trade selling all gave the impetus for the market to test towards the years lows around the 116.00 levels.
• AUD: The Oz traded similarly to the Cable, quietly through the Asian session when compared with the range on the day, tipping lower from the opening the market moved away from the 0.7340 levels and into the opening Tokyo session pushing through the 73 cent levels to quickly hit the 0.7250 areas before drifting only slightly lower over the next several hours, the market triggered some light stops through the 0.7240 levels and tested to the 72 cent level before running sideways into the London session, unusually for the Oz London left it alone probably suspecting what was to follow, limited buying to the 0.7270’s through early London was slowly eaten away to leave the market resting in a 0.7220-40 areas when the NYK session began and the complete capitulation of the USDJPY leg and strong selling of the carry AUDJPY as margins and cut outs hit the market, Oz quickly collapsed to the 0.7040 levels and seven years lows before bouncing a big figure and then rising back to above 72 cents as the sellers disappeared and the pressure released from the market, although the market dropped back once the London session ended the move was steady and limited to the 0.7130 areas before closing.

Friday’s premiership results

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

Stay lucky

Andy

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