Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 120.537 | EURUSD 1.12074 | AUDUSD 0.70189 | NZDUSD 0.63939 | USDCAD 1.32542 | USDCHF 0.97567 | GBPUSD 1.53688 |

Interbank Ranges as of 6am London time

Highs    Lows

EURUSD               1.1246 | 1.1195

USDJPY                 121.33 | 119.98

GBPUSD               153.79 | 1.5349

USDCHF               0.9790 | 0.9734

AUDUSD              0.7021 | 0.6946

NZDUSD               0.6388 | 0.6256

USDCAD               1.3290 | 1.3234

EURGBP               0.7323 | 0.7289

EURCHF                1.0974 | 1.0923

EURJPY                 135.91 | 134.75

 

For Today

• EUR: The Euro moved quietly in early trading with a mixture of cross buying against the antipodean currencies initially however the market was not able to move through the 1.1220 by to much as the EURJPY selling around the 135.00 areas kept the market in check however, fixing supply in Tokyo took USDJPY lower and the Euro triggered some weak stops and was able to rise without breaching the EURJPY areas to much and spiked to the 1.1245 areas before failing the push and dropping back steadily through to the opening levels over the rest of the session, Topside offers into the 1.1240 level likely to extend through the 1.1250 levels before the market opens a little to the 1.1280 areas and possible stubborn offers through to the 1.1320 areas, and then the market see’s weak offers through 1.1350 and the topside opens to last month’s ranges. Downside bids are light into the 1.1200 areas and a move through the 1.1170 area will likely see weak stops appearing in the market before the market then tests towards the 1.1080-1.1120 supportive area with better bids, through the 1.1080 level though the market see’s patches of support and this is likely to strengthen on a test through 1.1050 and onwards.
• GBP: Cable has struggled through the session with the numbers from yesterday impacting on a market that did seem to be rallying steadily over the past few weeks, the market having for the moment found strong resistance to the topside 1.5400 areas. Opening from around the 1.5365 levels the market drifted through the session unaffected by the NZD rate cut and better AUD employment numbers dipping slowly towards the 1.5350 areas. Light Cable bids into the 1.5350 levels with better bids likely into the 1.5300 levels however a push through this level again opens the downside 1.5170-152.50 range from last week, for the most part though the market is likely to be dominated by the EURGBP cross and its ability to test higher through the 0.7320 areas. Topside offers into the 1.5400 levels are likely to continue in patches through to the 1.5450 levels before the market opens up for a test to 1.5500 and a move further opening ranges from last month. Today’s official MPC vote is likely to be important if there is any further change.
• JPY: The USDJPY traded lower over the course of the early session trading from the 120.50 levels and into the 120.00 area as first NZDJPY selling and followed closely by AUDJPY as the Oz was dragged lower with the Kiwi, USDJPY dropped with that movement testing 120.00 before slowly recovering once the Oz employment numbers were released and the market in AUDJPY again started to recover moving from the 83.40 levels to steadily recover the 84.40 opening levels, USDJPY was taken steadily higher to the 120.50 opening levels before the market started to peter out with strong volumes moving through the market, moving towards the grey hours the market drifted back to the 120.30-40 levels in slower trading, late comments from Yamamoto and Kuroda sent the USDJPY higher with growing expectations for a further easing measure in the October meeting a possibility saw the market quickly push to the 121.30 areas with HFT quickly taking the market to those levels before drifting back to a more comfortable 120.80 area into the grey hours. Topside offers remain from the 121.20 areas into the 121.80 area not particularly strong overall however any move into the 121.80 will likely see stronger offers building into the 122.00 areas.
• AUD: The opening was around 15 pips lower from the closing and continued lower as the NZD selling spilled over and dragged the Oz with it, after the initial selling the market pushed through the 0.6980 levels and early Tokyo saw fresh Carry trade selling in the form of both NZDJPY and AUDJPY with the AUDNZD rising but not enough to protect the decline of the Oz initially and only once the initial moves were over did the Oz flatten out moving off the lows around the 0.6950 level and the release of the Oz employment numbers and a quick turnaround pushing quickly to the 70 cent level again and recovering its losses, having pushed through the level the market then stalled as the market quietened after a fairly busy few hours and currently trades just below the 70 cent level moving into the grey hours. The Oz continues to push towards the 0.7020 levels and through the level the market will again likely open to further attempts to the 0.7070-0.7100 areas with likely reasonable offers continuing over the next 50 or 60 pips before stronger offers begin to appear in the market and into the 0.7200 areas. Downside bids from the 0.6950 areas again held the market today and these bids are likely to be substantial into the 69 cent level before the market opens to the downside opening up a larger drop on a move through the areas if there is an option play in focus around the 69 cent level.

Overnight News

NZD:

RBNZ cut rates by 25bps as expected

RBNZ’s Wheeler says plenty in the tank if things get worse than expected

Wheeler: raising rates last year was right decision

Wheeler: watching Auckland house situation very carefully

Wheeler: Auckland houses among most expensive in the world

Wheeler: too early to say if house market is cooling

Wheeler: have potential to cut rates substantially if needed

Wheeler: cut warranted by soft economy, need to keep CPI near 2%

AUD:

Australian employment numbers rose again, with better than expected 17.5k and as expected drop to 6.20% rate

Hockey Says New Rules to Make Aussie Jobless Rate More Volatile

CNY:

China exports to see positive growth this year Ministry

Li Says China to Allow Foreign Central Banks in Onshore FX Mkt

Hong Kong watchdog says Moody’s broke code of conduct with red flags report

China’s Consumer Prices Rise Fastest in a Year on Pork Crunch

China’s Downward Pressure on Growth May Persist: PBOC Adviser

China Doesn’t Need Massive Economic Stimulus: Financial News

USD:

US services data suggests 2^q GDP may be revised up

Labour market dashboard increased from 3.6% to 3.9% as openings soared to 430k

JPY:

Strong overseas buying over the past week reached 1.1Tln Yen

Kuroda: expects trend of inflation to continue to improve

Kuroda: expects inflation to reach 2% around 1h 2016

Kuroda: Japan’s economy has continued to recover moderately

Yamamoto: Japan should issue new JBG’s for stimulus if needed

Yamamoto: BoJ whould boost asset buys by at least 10Tln Yen

Yamamoto: Oct 30 BoJ meeting good opportunity for more easing

Yamamoto: imperative inflation reaches BoJ goal around 1H 2016

Today’s data

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

NZD       RBNZ Rate Decision A 2.75% | C 2.75% | P 3.00%

GBP       RICS House Price Balance Aug A 53% | C 46% | P 44%

JPY         Machine Orders M/M Jul A -3.60% | C 3.40% | P -7.90%

JPY         Domestic CGPI Y/Y Aug A -3.60% | C -3.20% | P -3.00% | R -3.10%

AUD       Consumer Inflation Expectation Sep A 3.20% | P 3.70%

CNY        CPI Y/Y Aug A 2.00% | C 1.90% | P 1.60%

CNY        PPI Y/Y Aug A -5.90% | C -5.50% | P -5.40%

AUD       Employment Change Aug A 17.4K | C 5.2K | P 38.5K | R 39.2K

AUD       Unemployment Rate Aug A 6.20% | C 6.20% | P 6.30%

11:00     GBP       BoE Rate Decision C 0.50% | P 0.50%

11:00     GBP       BoE Asset Purchase Target Sep C 375B | P 375B

11:00     GBP       MPC Official Bank Rate Votes C 1–0—8 | P 1–0–8

11:00     GBP       MPC Asset Purchase Facility Votes C 0–0—9 | P 0–0–9

12:30     CAD       NHPI M/M Jul C 0.20% | P 0.30%

12:30     USD       Import Price Index M/M Aug C -1.70% | P -0.90%

12:30     USD       Initial Jobless Claims (SEP 5) C 279K | P 282K

14:00     USD       Wholesale Inventories Jul C 0.30% | P 0.90%

14:30    USD        Crude Oil Inventories P 4.7M

Harry Hindsight              

• EUR: A choppy day but confined within a reasonably tight range, moving from the opening around the 1.1200 levels the market initially tried the topside but ran into difficulties as it approached the 1.1220 levels and slipped back as the market reacted a little to a weak consumer confidence number in the Oz. As the USDJPY moved higher the Euro’s drifted either as a consequence of the USD movement or the market running into offers in the EURJPY cross either way the market drifted through the session pushing down to the 1.1150 levels before running into the grey hours and weak buyers holding the market, official London opening saw the market move quickly back towards the 1.1200 levels with strong buying in the EURJPY cross seeing the market test the 135.00 levels, the cross eventually failed the level and Euro’s was again pushed lower trading quickly to the lows and breaking eventually to push to the 1.1130 levels and the lows of the day in the NYK session, a lack of US numbers and very little to excite NYK saw the Euro then start a steady rise to finish the day almost unchanged.
• GBP: A little bit of chop through the session however, for the most part Cable was more contained than the Euro, early trading saw the market trading to just above the 1.5400 level but never quiet pushing through the level fully and holding the 1.5390 levels before dropping away as the market moved towards the grey hours and testing through to 1.5370 levels as weak position closed out before the IP and MP numbers, in the end a poor set of numbers across the board saw the market drop away from the 1.5400 levels and quickly to the 1.5350 levels however, that was as far as it moved and although NYK bought Cable from the opening the market didn’t move to the 1.5390’s before drifting off again and closing around the 1.5365 areas in quiet training, I what really should have seen more movement given the 3 sets of poor numbers.
• JPY: Early trading saw equity markets in the green and the JPY saw solid selling as cross buying kicked in pushing the market from the opening 119.85 areas moving quietly to the 120.00 level and then into Tokyo and then strong buying testing to the 120.30 levels and pausing for several hours pushing only to the 120.45 areas as the market ran out of interest, the move into the grey hours saw the market drift a little lower and then the strong buying moved in after Tokyo lunch to push the market into the official opening to 120.70 and stronger offers, weak UK numbers saw limited GBPJPY selling in the market however, it only deflected the buying for a limited period before the market started to rise again into the NYK session pushing to the 120.80 levels and a little bit of a two way battle all the way through to the 121.20 areas where the market spent several hours before drifting off late in the day and triggering weak stops as the market dropped back to the 120.50 levels with only limited liquidity.
• AUD: The Oz made steady headway through the early part of the session with the market more focused on the AUDJPY carry trade with strong buying taking the cross a big figure higher through the early part of the Tokyo session, having taken the Oz from the opening 0.7020 levels to the 0.7070 and stronger offers the market then held around the 0.7050 into the grey hours and the London session, the market for a change in London had less appetite for the Oz and it drifted lower and back to the opening levels into the NYK session, NYK took the market off the lows and briefly higher but again was unable to break the topside stalling around the 0.7060 areas before again starting a long drift to the close almost unchanged on the day.

Yesterday’s premiership results

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

GBP       BRC Shop Price Index Y/Y Aug A -1.40% | P -1.40%

JPY         Japan Money Stock M2+CD Y/Y Aug A 4.20% | C 4.10% | P 4.10% | R 4.00%

AUD       Westpac Consumer Confidence Sep A -5.60% | P 7.80%

AUD       Home Loans Jul A 0.30% | C 0.80% | P 4.40% | R 4.80%

JPY         Consumer Confidence Index Aug A 41.7 | C 40.6 | P 40.3

JPY         Machine Tool Orders Y/Y Aug (P) A -16.50% | P 1.70%

GBP       Industrial Production M/M Jul A -0.40% | C 0.10% | P -0.40%

GBP       Industrial Production Y/Y Jul A 0.80% | C 1.40% | P 1.50%

GBP       Manufacturing Production M/M Jul A -0.80% | C 0.20% | P 0.20%

GBP       Manufacturing Production Y/Y Jul A -0.50% | C 0.50% | P 0.50%

GBP       Visible Trade Balance (GDP) Jul A -11.1B | C -9.5B | P -9.2B | R -8.5B

CAD       Housing Starts Aug A 217K | C 194K | P 193.0K

CAD       Building Permits M/M Jul A -0.60% | C -4.70% | P 14.80%

CAD       BoC Rate Decision A 0.50% | C 0.50% | P 0.50%

GBP       NIESR GDP Estimate Aug A 0.50% | P 0.70%

Good Luck,

Andy

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