Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 121.226 | EURUSD 1.1212 | AUDUSD 0.71138 | NZDUSD 0.63418 | USDCAD 1.31399 | USDCHF 0.96726 | GBPUSD 1.53452 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               121.265 | 120.585

EUR/USD             1.12775 | 1.1209

EUR/JPY               136.22 | 135.86

AUD/USD            0.7155 | 0.7102

NZD/USD             0.6389 | 0.6339

USD/CAD             1.3153 | 1.3125

EUR/CHF              1.0844 | 1.0829

USD/CHF             0.9674 | 0.9610

GBP/USD             1.5405 | 1.5341

EUR/GBP             0.73295 | 0.7305

For Today

• EUR: Euro’s rose steadily through the Asian session with the equity markets turning red across the board again, all important PMI numbers conflicted somewhat and were mixed in general leaving the equity markets in particular vulnerable and pressing the USD lower to add to yesterday’s Oil news. Moving from the opening 1.1210 levels the market steadily rose into the Tokyo opening and pushed through the 1.1250 levels only stalling for an hour or so before continuing to test above the 1.1270 levels before stronger offers appeared to keep the market trading around the 1.1270 levels into the RBA release, very little movement after the release and the Euro struggled quietly holding its highs into the grey hours. Topside offers from the current levels and into the 1.1300 areas, and the potential for a clear break through the 1.1310 levels opening a test higher into the 1.1360 areas before further offers are likely to hold any sway however, this does expose further moves to the highs of last week if the USD weakness continues and while the equity market has been reasonably orderly during Asia everything is lower and may have more of a baring once the market moves into London and then NYK, a push therefore through the 1.1400 areas opens up the 1.1550 levels as the better offers build. Downside bids light into the 1.1250 areas now that its moved through the level and those light bids are likely to be through the 1.1200 areas before weak stops appear on a push through 1.1170 and into a weak 1.1140-60 area with possibly even lighter bids through 1.1100 and opening the better bids sub 1.1050.
• GBP: Cable seemed to be dragged along for the ride with the Euro, with light position cutting through the session particularly the GBPAUD before reaching the 1.5400 areas from the open around the 1.5350 areas, GBP lost ground slightly to the Euro over the course of the session with the cross spiking to above 0.7330 before holding around 0.7320. Light offers through the 1.5400 levels with the potential of a minor short squeeze through the 1.5450 areas, with weak stops likely above the area and exposing a weak 1.5500 level and a larger move. Downside for the moment sees bids into the 1.5350 areas however, this seems to be dominated by EURGBP plays in the market and a month long support level could be under pressure If the cross pushes higher.
• JPY: With the equity markets awash with red the market in USDJPY again started to see safe haven flows, add to which light AUDJPY selling before the RBA announcement and the USDJPY steadily moved from the opening 121.20’s to drift through to the 120.60 into mid-session before risk takers moved in for the RBA, as it was the market had mixed feelings about the announcement and once the no change was released the USDJPY again saw selling from the 120.90 areas. The move into the grey hours saw the USDJPY again testing lower with the ever present concerns over currency wars and devaluation of regional EM currencies a real threat for off shore investments, Downside bids into the 120.20 and through to 119.80 however, one suspects while the market is likely to find some bids through those levels a strong move could see the market moving deeper and through 119.00 if the flows continue through the day and/or if equity markets continue to trade negatively. Topside offers are light through the 121.00 level however, once the market covers weak stops on a break higher it is likely to find some reasonable offers through the 121.80 levels and into 122.00 of course unless equity markets have a sudden recovery.
• AUD: After a quiet start the market saw limited Oz selling as the buyers took over with most believing that the RBA would remain on hold balanced against the cross AUD sellers who cut positions before the release, having dipped again to below the 0.7110 levels the market eventually started to move through to the 0.7140 areas before the release, the market had less of a reaction than usual and although it quickly push through the 0.7150 levels it just as quickly fell back to 0.7140 and then traded into the 0.7130 levels, the market then traded very quietly into the grey hours. With the RBA announcement over with the focus again shifts more to the commodity prices and CNY numbers for the month, with comments on the rates unchanged for the most part the Oz has drifted lower into the grey hours and is likely to remain under pressure, light bids through the 71 cent level are likely to continue deeper with a possible break below 0.7050 seeing strong stops appearing and then likely option interest into the 70 cent level from there its likely to be choppy for a while as the market decides whether moving into a new range not seen since 2008/09 is economically correct. Topside offers are likely to be increasingly strong through the 0.7150 areas however, a breakthrough to test 72 cents could open up weak stops and the market quickly testing through to 0.7250-60 stronger resistance.

Overnight News

CNY:

PBOC Said to Make Banks Trading FX Forwards Hold Reserves: Rtrs.

China’s Official Factory Gauge Shrinks to Lowest in 3 Years

Caixin China Aug. Manufacturing PMI 47.3; Est. 47.1

AUD:

RBA’s Stevens Holds Benchmark Interest Rate at 2% (Full Text)

Australia July Building Approvals Rose 4.2% M/M; Est. 3% Gain

Australia Aug. Manufacturing Index Rises 1.3 Pts M/m to 51.7

Australia ANZ Weekly Consumer Sentiment Rises 0.3% to 113.3

JPY:

Japan 2Q Capital Spending Rises 5.6% Y/y; Est. +8.8%

Nikkei Japan Aug. Manufacturing PMI 51.7 vs 51.2 in July

NZD:

N.Z. Export Prices Post First Gain in Five Quarters

Today’s data

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

NZD       Terms of Trade Index Q/Q Q2 A 1.30% | C -2.00% | P 1.50% | R 1.20%

JPY         Capital Spending Q2 A 5.60% | C 8.90% | P 7.30%

CNY        Manufacturing PMI Aug A 49.7 | C 49.7 | P 50

CNY        Non-manufacturing PMI Aug A 53.4 | P 53.9

AUD       Current Account Balance (AUD) Q2 A -19.0B | C -15.8B | P -10.7B | R -13.5B

AUD       Building Approvals M/M Jul A 4.20% | C 3.00% | P -8.20% | R -5.20%

CNY        Caixin PMI Manufacturing Aug (F) A 47.3 | C 47.2 | P 47.1

CNY        Caixin PMI Services Aug A 51.5 | C 53.9 | P 53.8

AUD       RBA Rate Decision A 2.00% | C 2.00% | P 2.00%

07:30     CHF        SVME-PMI Aug C 49.8 | P 48.7

07:45     EUR        Italy Manufacturing PMI Aug C 55 | P 55.3

07:50     EUR        France Manufacturing PMI Aug (F) C 48.6 | P 48.6

07:55     EUR        German Unemployment Change Aug C -4K | P 9K

07:55     EUR        German Unemployment Rate s.a. Aug C 6.40% | P 6.40%

07:55     EUR        Germany Manufacturing PMI Aug (F) C 53.2 | P 53.2

08:00     EUR        Eurozone Manufacturing PMI Aug (F) C 52.4 | P 52.4

08:00     EUR        Italian Unemployment Rate Jul (P) C 12.70% | P 12.70%

08:30     GBP       Mortgage Approvals Jul C 68.3K | P 66.6K

08:30     GBP       M4 Money Supply M/M Jul C 0.20% | P -0.50%

08:30      GBP       PMI Manufacturing Aug C 51.9 | P 51.9

09:00     EUR        Eurozone Unemployment Rate Jul C 11.10% | P 11.10%

12:30     CAD       GDP M/M Jun C 0.20% | P -0.20%

14:00     USD       Construction Spending M/M Jul C 0.80% | P 0.10%

14:00     USD       ISM Manufacturing Aug C 52.8 | P 52.7

14:00    USD       ISM Prices Paid Aug C 39 | P 44

Harry Hindsight              

• EUR: A reasonably quiet day overall with a bank Holiday in the UK likely to have contributed along the way, Opening around the 1.1170 areas the market then traded gradually higher as the market digested the weekend commentaries from Jackson Hole and other pertinent news, pushing steadily through limited offers to push to the 1.1260 levels before slipping back as the market entered the grey hours. Early London’s limited presence sold the pair lower and the market traded in the first couple of hours to test the 1.1200 levels and reversing most of the day’s range before moving sideways into the NYK session. Rumours about the IEA revising the US production and demand numbers more in favour of a stronger Oil price and that OPEC was ready to talk to other producers to achieve a fairer price, in relation to what would be the question for those that drive however, the OPEC countries have to concern themselves with why the US would want a stronger oil price and the consequences of that rather than the “fair price” this in turn saw the WTI price surge ahead gaining some $5.5 per barrel during the NYK session and undermining the recent USD strength if limited, Euro’s therefore recovered from its lows it had tested into the mid part of the NYK session and managed to push back to the 1.1240 areas before slipping a little into the final hours.
• GBP: A quiet rise during the Asian session saw Cable push from the opening 1.5410 areas and into the mid 1.5430’s to trade quietly into the early London session, early sellers saw the market move a little lower as the EURGBP cross pushed back through the 0.7300 levels however, it was short lived and the market on the cross slipped back to mid range and held around the 0.7270’s into the NYK session, Cable followed suit to some degree however the movement was less pronounced and from the highs the market struggled each time it traded to the 1.5400 levels and broadly held into the NYK session. With the drop of the USD on the oil news Cable seemed to be dragged lower one assumes that the market now perceives that the Fed lift off is likely to signal the same reaction from the BoE which for me doesn’t really make sense as a rising Oil price if it were to continue would eventually filter into the inflationary data and persuade the MPC that the time is right. The market having slipped through the 1.5400 level gathered a little momentum and pushed through the 1.5390 levels to trigger weak stops and the market continued to gradually move into the 1.5350 areas testing through to the 1.5340 level before trading quietly into the close.
• JPY: The one exception to the moves was the USDJPY and having initially opened higher for the week at the 121.70 areas the market dropped quickly to fill the gap in the light Sydney market and then continued falling through to the Tokyo opening testing the 121.20 levels, the move into Tokyo while slower in movement was nonetheless in the same direction and the market again saw reasonable safe haven flows taking the USDJPY down to the 120.90 levels and into the grey hours, London were steady buyers to take the market back to the 121.30 levels before heading into the NYK session, even with movements in USD’s elsewhere the market in USDJPY remained in a reasonably tight range through the session trading around the 121.20 levels and peaking just above the 121.40 levels and down to the 121.10 areas to the close.
• AUD: The Oz drifted lower from the opening trading down from the 0.7160 levels to trade around the 0.7140 levels into the London period, with the market more focused on the downside and upcoming RBA announcement the Oz struggled for any meaningful move briefly flirting with the downside below 0.7090 into the NYK session before rising off the lows to finish the day holding around the 0.7110 levels.

Yesterday’s premiership results

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

NZD       Building Permits M/M Jul A 20.40% | P -4.10% | R -3.30%

JPY         Industrial Production M/M Jul (P) A -0.60% | C 0.10% | P 1.10%

AUD       TD Securities Inflation M/M Aug A 0.10% | P 0.20%

NZD       NBNZ Business Confidence Aug A -29.1 | P -15.3

JPY         Housing Starts Y/Y Jul A 7.40% | C 11.00% | P 16.30%

EUR        German Retail Sales M/M Jul A 1.40% | C 1.30% | P -2.30%

CHF        KOF Leading Indicator Aug A 100.7 | C 100.3 | P 99.8 | R 100.4

EUR        Eurozone CPI Estimate Y/Y Aug A 0.20% | C 0.10% | P 0.20%

EUR        Eurozone CPI – Core Y/Y Aug (A) A 1.00% | C 0.90% | P 1.00%

CAD       Current Account (CAD) Q2 A -17.4B | C -$17.00B | P -$17.50B | R -18.1B

USD       Chicago PMI Aug A 54.4 | C 54.7 | P 54.7

Good Luck,

Andy

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