Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 119.378 | EURUSD 1.13161 | AUDUSD 0.70177 | NZDUSD 0.63287 | USDCAD 1.32575 | USDCHF 0.95891 | GBPUSD 1.53056 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               120.465 | 119.225

EUR/USD             1.1320 | 1.12605

EUR/JPY               135.80 | 134.97

AUD/USD            0.7035 | 0.6982

NZD/USD             0.6368 | 0.6312

USD/CAD             1.3260 | 1.3225

EUR/CHF              1.0854 | 1.0832

USD/CHF             0.9632 | 0.9583

GBP/USD             1.5320 | 1.5291

EUR/GBP             0.7395 | 0.7360

For Today

• EUR: The focus today will be about the ECB meeting although so far the market has been dominated by the reversal of the equity markets in the Asian session with mostly green across the market and a steady reversal of fortunes for the USD with the Euro dipping from the opening around the 1.1320 areas drifting lower into the Tokyo session and pushing through the 1.1300 on into the Tokyo fix to quickly test the 1.1270 levels, with the equity market quickly recovering some of its losses over the early part of the session the buyers of USD’s quickly moved in and although the market managed only to test the 1.1260 levels there was plenty of two way flow through the market, there was a rally from the lows and the market managed to touch the 1.1290 levels however, Asia was never quite strong enough to test the 1.1300 levels and as the actions slowed the market again dipped into the 1.1270 in quiet trading. Topside offers have likely improved however, 1.1330 does not instil that much confidence on a decent test of the level and a push through will likely see clusters of weak stops in a move to the 1.1350 level and then an opening to test into the 1.1380 level before better offers are likely. Downside bids light into the 1.1240 areas with the possibility of the market moving through the 1.1240 and quickly testing to the 1.1180 areas and weak stops below there, a solid movement to test the 1.1150-40 areas will open a deeper move with bids possibly thin on the ground and clustered mover towards the 1.1020 areas.
• GBP: Cable drifted early in the session from the opening just above 1.5300 and early into the Tokyo session the market took a stab at the downside however, it was short lived and was unable to push through the 1.5290 levels and failed to trigger any meaningful stops and reversed the move and to push gradually to the 1.5320 level before slipping back as the market approached the grey hours. Topside offers likely to the 1.5340 levels however, a push through the 1.5350 level is likely to see weak stops appearing and the market opening for a test of the stronger 1.5400 areas before again struggling but with the potential for a larger move to the 1.5500 areas. Downside bids just through the 1.5300 levels are likely to see weak stops just beyond the lows from yesterday, and the market then having freedom to test into the 1.52 handle however, stronger bids are likely as you move towards the 1.5200 areas and the downside could find support to hold the market in check.
• JPY: The market rose off yesterday’s lows in the pre-Tokyo session pushing from the 119.30 areas to test into the 119.60 levels on the opening, the steady rise continued however, the push through the 119.80 level sent the market quickly higher as strong demand for the USD pushed the market swiftly through the 120.20 levels before hitting stronger offers into the 120.40 areas, most of the move was attributed to expectations of the BoJ doing more to increase the easing and bolster the USDJPY in an effort to contain the fallout from the region, the market then spent a decent amount of time probing the topside but although it pushed several times through the level was unable to make any further headway, Topside offers are showing around the 120.40 areas however, further rumours of easing could see this level broken and even the possibility of equity movements remaining green and even gaining further could help the USDJPY higher, 121.20-40 area now looks the stronger level and even through to the 121.80 offers are likely to continue if a little mixed with stops along the way opening a strong test of the 122.00 levels. Downside bids into the 119.20 levels are likely to be strong with the likelihood of a possible break through the 118.80-60 areas opening the chance of a half decent sell off.
• AUD: A reasonably quiet session with the market moving quietly into the Tokyo session and dipping to test the 70 cent level on the back of a weaker than expected Q2 GDP reading, some decent support and a stronger USDJPY helped the Cross buyers support the dip as AUDJPY moved higher and the market moved away from the level to test into the 0.7030’s before dropping quickly on the release of the GDP data and the market briefly pushed down into the 0.6980;s before immediately bouncing as strong buying emerged to chase the market back to the 0.7020 levels, from there the market rose a little over the course of the session and again more to do with the strong AUDJPY carry trade buying but was fairly quiet overall. Downside opens a little now with the 70 cent levels cleared however, the downside still has limited bids and the possibilities of opening up further downside weakness through the 69 cent levels and fresh lows, however, for the moment one suspects the bids to continue into the 0.6950 levels with long term shorts possibly looking to cover portions of their positions and bottom pickers, topside offers are likely to be light into the 0.7040 areas and possibly through the 0.7060 area before opening up the possibility of a test back to the 71 cent level with light stops through 0.7080, from there thought the market becomes a little stronger and only a push beyond 0.7160 will open the topside up a little.

Overnight News

AUD:

Australian 2Q GDP Rose 0.2% Q/Q; Est. 0.4% Gain

Hockey: Falling GDP Growth Consistent With Budget Forecasts

CNY:

China’s AIIB to Offer Loans with Relaxed Restrictions: Reuters

IMF:

Lagarde: Asia Needs to Let Exchange Rates Act as Shock Absorber

PHP/CNY:

China Beginning to Be Worrisome, Philippine Treasurer Tan Says

HKD:

HKD Peg Strength Strong Given Hong Kong’s Finances: Fitch

JPY:

Nakaso: Stable Finance, Prices Contribute to Potential Growth

Nakaso: BOJ’s Bond Buys Haven’t Disrupted Market Functioning

NZD:

New Zealand Export Commodity Prices Drop for a Fifth Month: ANZ

Today’s data

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

JPY         Monetary Base Y/Y Aug A 33.30% | C 33.20% | P 32.80%

AUD       GDP Q/Q Q2 A 0.20% | C 0.40% | P 0.90%

08:30     GBP       Construction PMI Aug C 57.5 | P 57.1

09:00     EUR        Eurozone PPI M/M Jul C -0.10% | P -0.10%

09:00     EUR        Eurozone PPI Y/Y Jul C -2.10% | P -2.20%

12:15     USD       ADP Employment Change Aug C 200K | P 185K

12:30     USD       Non-Farm Productivity Q2 (F) C 2.50% | P 1.30%

12:30     USD       Unit Labour Costs Q2 (F) C -0.70% | P 0.50%

14:00     USD       Factory Orders Jul C 0.70% | P 1.80%

14:30     USD       Crude Oil Inventories P -5.5M

18:00    USD       Fed Beige Book

Harry Hindsight              

• EUR: Euro’s moved from the opening 1.1210 areas and headed steadily higher as equity markets again reacted to the CNY numbers and the USD followed the move, Euro’s eventually pushed to the 1.1270 levels before the market found sufficient offers to curtail further gains until the market moved into the grey hours, pushing to the 1.1300 areas before London moved in. London were initial sellers taking the market slightly lower before quickly taking the market higher and through to the 1.1300 levels to top above the 1.1330 levels and running into further concerted levels and the market dipped back as the European equity markets held better than the US through the session. The move into the NYK session saw the market holding the 1.1250 areas with a fairly quiet session until the London market closed and the resurgent Euro again tested back through the 1.1300 levels to finish the session pushing against the 1.1320 levels.
• GBP: Cable climbed steadily from the opening to push only lightly through the 1.5400 areas before slowing and holding in the area through into London, the release of the PMI numbers was just the back end of the move lower, with strong EURGBP buying to push the cross above the 0.7370 levels, Cable dropped to the 1.5350 areas and the numbers continued the move to bounce off the 1.5300 areas back to the 1.5370 level before the market again started to drift and test the lows again, even with the London market gone for the day the market couldn’t move off the lows and the market remained close to the level to the close.
• JPY: As the equity markets moved again in Asia the market in USDJPY dropped steadily lower through the session with safe haven flows continuing to buy the JPY and by the time the market hit the grey hours was already testing through the 120.50 areas from the opening around 121.20, the move into London saw little reprieve and the USDJPY continued to move lower and quickly broke through the 120.00 areas pushing to the 119.60 areas before finding a base for the majority of the session but struggling through the 120.00 levels, the move towards the close saw solid selling move in to the market and the USDJPY again dipped this too threatening the 119.20 levels.
• AUD: Moving off the 0.7115 levels and quietly traded into the Asian session, pushing a little higher on the early PMI numbers, which came in unchanged and discarding the non-manufacturing numbers, Caixin numbers set the market again lower and reached the opening levels having topped above the 0.7140 levels. From that point on though the market tested lower over the course of the day stalling at 0.7080, 0.7060, 0.7040, and finally the 0.7020 area as the market continues to worry about the economy and its connections to the Chinese markets.

Yesterday’s premiership results

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%

CHF        SVME-PMI Aug A 52.2 | C 49.8 | P 48.7

EUR        Italy Manufacturing PMI Aug A 53.8 | C 55 | P 55.3

EUR        France Manufacturing PMI Aug (F) A 48.3 | C 48.6 | P 48.6

EUR        German Unemployment Change Aug A -7K | C -4K | P 9K | R 8K

EUR        German Unemployment Rate s.a. Aug A 6.40% | C 6.40% | P 6.40%

EUR        Germany Manufacturing PMI Aug (F) A 53.3 | C 53.2 | P 53.2

EUR        Eurozone Manufacturing PMI Aug (F) A 52.3 | C 52.4 | P 52.4

EUR        Italian Unemployment Rate Jul (P) A 12.00% | C 12.70% | P 12.70% | R 12.50%

GBP       Mortgage Approvals Jul A 68.8K | C 68.3K | P 66.6K

GBP       M4 Money Supply M/M Jul A 1.00% | C 0.20% | P -0.50%

GBP       PMI Manufacturing Aug A 51.5 | C 51.9 | P 51.9

EUR        Eurozone Unemployment Rate Jul A 10.90% | C 11.10% | P 11.10%

CAD       GDP M/M Jun A 0.50% | C 0.20% | P -0.20%

USD       Construction Spending M/M Jul A 0.70% | C 0.80% | P 0.10%

USD       ISM Manufacturing Aug A 51.1 | C 52.8 | P 52.7

USD       ISM Prices Paid Aug A 39 | C 39 | P 44

Good Luck,

Andy

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