Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 119.278 | EURUSD 1.11717 | AUDUSD 0.69252 | NZDUSD 0.62575 | USDCAD 1.33069 | USDCHF 0.9752 | GBPUSD 1.52731 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               119.53 | 118.855

EUR/USD             1.1224 | 1.1154

EUR/JPY               133.57 | 132.995

AUD/USD            0.6971 | 0.6926

NZD/USD             0.6285 | 0.6260

USD/CAD             1.3310 | 1.3290

EUR/CHF              1.0891 | 1.0875

USD/CHF             0.9762 | 0.9701

GBP/USD             1.5315 | 1.5270

EUR/GBP             0.7330 | 0.7301

For Today

• EUR: A quiet start to the day with the market opening around the 1.1170 levels and drifting from the levels to test into the 1.1150’s before holding quietly in the 1.1160’s, Chinese trade surpluses increased with the highest export number since January and a low import number providing a better than expected number and the markets saw USD’s dipping, Euro’s quickly moved higher triggering weak stops on the move through the 1.1180 level and pushing to the 1.1220 areas on fairly light volume with mixed demand with few sellers. Topside offers continue into the 1.1220 areas and are likely to open up through the 1.1230 level with possible congestion through to the 1.1280 areas and stronger offers from then through the 1.1300 levels; a break here though opens up a larger move exposing the 1.1500-1.1600 areas. However, the fact that the Europeans are talking of further QE as an impact of the slowdown in China could the topside for the moment. Downside bids through to the 1.1100 and likely into the 1.1080 level before the market sees the chance of stops appearing and the market opening up to the ranges from the beginning of last month and a test of the 1.0900 levels.
• GBP: As with the Euro the Cable opened around the 1.5275 areas and traded quietly however, Cable saw a concerted rise pushing gradually through to test above the 1.5300 levels losing ground against the Euro as the EURGBP moved from the 0.7300. The steady trade lower over the past week or so has now had its first reversal and is currently pushing through the 1.5320 levels with Light offers likely to be around the 1.5350 areas and 1.5400 levels however, the market didn’t really take that long to penetrate those levels and the selling we’ve seen over the past week has been a fairly steady pressure and the upside could be similar if the market continues with the move started yesterday. Through 1.5450 though the market may find itself short and a possible squeeze higher with 1.5500 the only likely sticking point before opening up the topside ranges. Of course if the ECB were to instigate further QE in the short term we could see the EURGBP testing its lows and although the Euro has the potential to trade lower one would imagine that the GBP would reverse some of the losses over the past couple of weeks. Downside now seems to be fairly strong below the 1.5200 level and is likely to see bids on dips through the level and into the 1.5170 areas, however, a strong push through the level on bad numbers in the coming weeks could see the downside opening further as possible limited contagion from the Chinese economy impacts, this could open up the 1.5200-1.5000 range from the beginning of the year and a deeper move through that level however, not today with very little data to appear in the market.
• JPY: Opening around the 119.30 levels the market slipped a little lower before the Tokyo session opened and steadily pushed through the 119.50 levels to test the light offers however, with the Chinese trade balance the USD started to slip and the USDJPY dropped from the highs steadily moving lower and pushing through the lows, the market then accelerated a little and pushed down to the 118.80’s and found the same bids as yesterday and the level continues to hold in the area. USDJPY for the moment is now stuck in the 118.80-119.60 range with the topside offers likely to continue weakly into a stronger 120.00 area however, through the 120.00 level the market is likely to see weak stops building above the 120.60 level and the market opening to a fresh test of the 121.50 levels from the end of last month. Downside bids for the moment extend probably to the 118.50 levels with a mix of stops on a break through the 118.70 area and opening a test of possibly stronger bids into the 118.00 areas.
• AUD: The Oz opened around the 0.6925 areas and slowly moved higher into the Tokyo session, moving quickly on the CNY numbers, moving quickly to test the 0.6970 levels with leveraged demand, before drifting around the 0.6960 levels to trade sideways through to the grey hours. While the Oz received a boost from the CNY trade numbers it should be pointed out that Iron ore imports cargoes slipped by 14% course of July and will have an impact on the already faltering Oz exports. With the Oz economy treading water the market is likely to remain quiet for the most part with topside offers above the 0.6970 level and into the 0.7060 levels likely to see plenty of supply however, a push through the level will quickly expose the 71 cent level and less resistance to a move higher. Downside bids for the moment look fairly strong into the 0.6900 level and a break here is likely to open up a larger move lower however, while the Oz economy is treading water I would suspect that fundamentally pushing to the 65 cent level is a little premature and with the market at these low levels the RBA is probably more comfortable with the situation.

Overnight News

CNY:

China’s Aug. Exports Fall 5.5% Y/y in Dollar; Est. 6.6% Fall

China May Postpone VAT Reform for Financial Sector: Info Daily

Chinese Banks Should Reduce Risks from Rising Bad Loans: Daily

JPY/GBP:

Mitsui Sumitomo Insurance Is in Talks to Buy Amlin, Nikkei Says

JPY:

Abe: Halfway Through the Course of Abenomics

Abe to Run Unopposed in Japan’s Ruling Party Election

Japan Revised 2Q Annualized GDP Falls 1.2%; Est. -1.8%

Japan’s July Current-Account Surplus 1.81t Yen; Est. +1.73t Yen

Asia:

Moody’s Cuts Asia Growth Forecasts on Exports, Domestic Demand

USD:

Fed’s Williams Sees Rate Rise This Year If Risks Decline: WSJ

AUD:

RBA Ellis Says Recession to Happen in Her Lifetime, No Bets When

Australia Aug. Business Confidence Falls 3 Pts M/m to 1

Australia ANZ Weekly Consumer Sentiment Lowest Since July 2014

KRW/JPY/USD:

S.Korea, Japan Sharing Intelligence on N.Korea Missiles via U.S.

GBP:

U.K. LFL Aug. Retail Sales Fall 1% Y/y, BRC Says

NZD:

English Says Lower NZ Dollar Will Offset Impact of Dairy Prices

English Say NZ Treasury Forecasts Less GDP Growth Than in Budget

Statistics New Zealand Revises Annual Inflation Rate Higher

N.Z. 2Q Manufacturing Curbed by Meat, Dairy, Beverages

Today’s data

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

NZD       Manufacturing Activity Q2 A 0.40% | P -2.80% | R -2.60%

GBP       BRC Retail Sales Monitor Y/Y Aug A -1.00% | P 1.20%

JPY         Current Account (JPY) Jul A 1.32T | C 1.25T | P 1.30T

JPY         GDP Q/Q Q2 (F) A -0.30% | C -0.40% | P -0.40%

JPY         GDP Deflator Y/Y Q2 (F) A 1.50% | C 1.60% | P 1.60%

AUD       NAB Business Confidence Aug A 1 | P 4

CNY        Trade Balance Aug A $57.77B | C $51.10B | P $43.03B

JPY         Eco Watchers Survey: Current Aug A 49.3 | C 52.1 | P 51.6

05:45     CHF        Unemployment Rate Aug C 3.30% | P 3.30%

06:00     EUR        German Trade Balance (EUR) Jul C 21.8B | P 22.0B

09:00    EUR        Eurozone GDP Q/Q Q2 (P) C 0.30% | P 0.30%

Harry Hindsight              

• EUR: As you would expect the market was fairly well contained through the session with early attempts in the Euro to push above the 1.1170 as EURJPY pushed however, the topside offers in the Euro contained the market and the market again headed back to the opening levels and traded in a range from those 1.1160 levels to 1.1145 until the grey hours opened the market for a test lower with the German IP numbers coming in lower than expected and the 1.1120 areas forced the market back higher as light profit taking and bottom pickers turned the market, the topside was tested again from this point and again the offers contained, although London continued to see some movement the market eventually ran out holding around the 1.1170 levels.
• GBP: Cable eased through the Asian session trading fairly quietly with the market making early highs from Tokyo opening around the 1.5200 levels before drifting back to hold the 1.5190 levels for the greater part of the session, grey hours selling pushed the market lower however, this just filled a slight gap from the opening 1.5180 areas down into the 1.5170’s before stronger selling in EURGBP started to emerge with the poor IP numbers opening a steady fall from the 0.7350 levels to test eventually the 0.7300 areas, Cable was able to make reasonable gains trading steadily through to the 1.5270 levels before struggling in the late period of the day to push towards the 1.5290 area and slipping to run to the close.
• JPY: USDJPY had a jittery start with less liquidity in the market than you would normally expect however, although the market opened lower than Fridays close it moved quickly higher to test the 119.20 levels from the opening 118.90 areas eventually touching the 119.30 level as the equity market stuttered in Asia, the market dropped back and the lows were made around the 118.80 before the overspill from the Chinese equities stopped and the Nikkei was able to rally giving the USDJPY the ability to rise and push through to the 119.60 areas and make the highs, the rest of the day traded in a 119.20-50 areas into the London session before eventually closing to a 119.30-40 market to the long drawn move to the close.
• AUD: The Oz was contained for the day with less interest in the market, downside seemingly blocked and the sellers lining up so from the opening 0.6910 to the 0.6950 through the session unable to break either side of the market closing mid-range after a long flat day.

Yesterday’s premiership results

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

JPY         Leading Index Jul (P) A 104.9 | C 104.9 | P 106.5

EUR        German Industrial Production M/M Jul A 0.70% | C 1.20% | P -1.40% | R -0.90%

CHF        Foreign Currency Reserves Aug A 540B | P 531.8B

EUR       Eurozone Sentix Investor Confidence Sep A 13.6 | C 16.2 | P 18.4

Good Luck,

Andy

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