Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 120.622 | EURUSD 1.12785 | AUDUSD 0.70738 | NZDUSD 0.63025 | USDCAD 1.32529 | USDCHF 0.97322 | GBPUSD 1.54449 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               120.98 | 120.58

EUR/USD             1.1303 | 1.1273

EUR/JPY               136.47 | 135.98

AUD/USD            0.7088 | 0.7064

NZD/USD             0.6321 | 0.6288

USD/CAD             1.3253 | 1.3214

EUR/CHF              1.0992 | 1.0965

USD/CHF             0.9747 | 0.9716

GBP/USD             1.5464 | 1.5435

EUR/GBP             0.7321 | 0.7298

For Today

• EUR: The Euro moved from the opening 1.1280 areas to slowly rise to test the 1.1300 levels into the Tokyo open, the market rejected the level and then moved back to hold the 1.1280 levels in very quiet trading. Topside offers through the 1.1300 levels and extending to 1.1330 before weak stops are likely a solid break above 1.1360 opens up a test through the 1.1400 levels with a possibility of a light defence however, the market talks of the Euro’s move higher being against the flow however, I probably don’t have to remind you how long it takes the ECB to make a decision on any subject so for the moment even if the US were to raise rates next week it would be only a light move possibly 0.10% so would that necessarily be a reason for USD to rise quickly, I doubt it and only additional QE by the ECB would weaken the Euro significantly. However, a push through the 1.1400 levels the market is potentially open to a return to the higher ranges from last month. Downside bids light through the 1.1250 levels and then stronger as the market pushes to the 1.1200 areas and beyond with the stronger point likely to be below the levels and the closer you get to 1.1100 the stronger the bids are likely to be for the moment, even a test through this level is likely to run into further bids running into the 1.1050 areas and the lows of last month.
• GBP: Cable opened around the 1.5445 areas and the range was really only 5 pips either side for the most part with very quiet trading and a lack of movement across the board. No change yesterday in rates or sentiment however, with M&A flows on the side-lines the market has returned to moving to the topside with offers into the 1.5500 levels now the light resistance level with a push through the offers opening a test to the bottom edge of last month’s higher ranges around the 1.5600 level and possibly stronger offers as the market approaches those levels. Downside bids possibly light into the 1.5350 areas but defining now a return to the lower ranges with the market not really likely to show strength until the market approaches the 1.5200 levels and possible strength through the level to the 1.5150 areas.
• JPY: USDJPY moved off the 120.60 levels and pushed to the Tokyo session pushing the 120.80 levels however, Tokyo opened and the market was sold back, decent Large manufacturing was more or less ignored as the buying from the fix for USD’s took the market above the 120.90 and close to the 121.00 areas before running out of steam and trading around the 120.80 levels for the session in an ever decreasing range. Strong buying of offshore from pension funds over the past 2 weeks has again moved the market back above the 120.00 areas and this weeks range has shown a downside resilience, bids light through the 120.00 areas and the market then opening for a test to the 119.40-118.80 levels with potentially strong buying over that range. Topside offers likely to be light on a move back through the 121.00 areas and then stiffening into the 121.40-60 areas before again allowing only a brief respite before stronger offers appear around the 121.00 areas and the way cleared to 121.80 areas.
• AUD: The Oz opened a little lower but with the markets running to the close the market stayed in and around the 0.7070 levels with little volume going through. Recession risks remain strong however; with current pricing those risks are now embedded only in the possibility of a move higher in the Oz. A rock and a hard place springs to mind the downside bids remain through the 0.6950 levels with strong buying increasing to the 0.6900 areas in what could possibly be an option barrier in the market, and the potential if the market can break through for a deeper move with ranges not seen since 2009 opening, however, is the fundamentals there for such a move? Topside offers into the 0.7100 levels and while for the moment they are holding the market in place a strong push through will likely see some weak stops and the potential for a quick spike a little higher however, from that point there is further offers from the 0.7100 level to the 72 cent level in so guise or other and the move higher will be a grind at best.

Overnight News

JPY:

Big Japanese manufacturers’ mood improves in Q3

CNH:

Offshore Yuan jumps in suspected intervention

Today’s data

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

NZD       Business NZ Manufacturing Index Aug A 55 | P 53.5 | R 53.7

JPY         BSI Large Manufacturing Q3 A 11 | C -1.9 | P -6

06:00     EUR        German CPI M/M Aug (F) C 0.00% | P 0.00%

06:00     EUR        German CPI Y/Y Aug (F) C 0.20% | P 0.20%

12:30     USD       PPI M/M Aug C -0.10% | P 0.20%

12:30     USD       PPI Y/Y Aug P -0.80%

12:30     USD       PPI Core M/M Aug C 0.10% | P 0.30%

12:30     USD       PPI Core Y/Y Aug P 0.60%

14:00     USD       U. of Michigan Confidence Sep (P) C 92 | P 91.9

Harry Hindsight              

• EUR: Slightly better volumes over the course of the day with the market initially testing higher helped by Oz numbers driving cross JPY in particular higher, with the market opening just below the 1.1220 levels and testing into the Tokyo session towards the 1.1250 levels before drifting for the next half of the Tokyo session to just below the 1.1200 levels and the move into the grey hours, with only a slight rise before London entered the market, the market then slipped back to test the bids into the 1.1180 levels pushing lightly through before holding the levels into the NYK session. NYK were light buyers but as the market pushed to the 1.1220 areas and saw USD’s dip back and the market quickly rising to test the 1.1280 areas pushing gradually through the levels but never able to capitalize on the move and failing the 1.1300 to the close.
• GBP: Cable moved quietly through the Asian session drifting around the 1.5360 level and down into the 1.5350’s the move into the grey hours saw early buying from Europeans only for the early London players to sell the market off, with expectations of no change for rate decisions, the move into the official opening saw the market moving off the lows of 1.5340 and steadily rising to test the 1.5400 for the first time and then drifting as the market awaited the numbers, the buying was soon resumed and while there was no change chatter was less dovish from the MPC and the market moved quickly through the 1.5400 level triggering weak stops to trade to the 1.5450 levels and light offers, again the market dropped back to the start of the move higher 1.5400 however, the market saw NYK enter as strong buyers and the market broke through the 1.5450 levels triggering weak stops and the market moved close to the 1.5480 levels before dropping back however, the market having moved above the 1.5450 level trended around the level to the close making another brief effort to the topside as London closed but liquidity now was limited from the buy side.
• JPY: USDJPY suffered from the start with selling in the carry trades after the rate cut in the NZD taking the market from the 120.50 areas to trade into the Tokyo session to 120.00 level, this was then quickly reversed by better than expected employment news in the Oz and carry trades quickly became the darling of the day again trading back to the opening levels before running to the grey hours, several comments from Yamamoto and Kuroda then hinted to for easing suggestions for the JPY and the market quickly headed to above the 121.30 levels before dropping back from the spike however, the move was not over and the market moved into the London session pushing steadily higher to again eventually test above the 121.30 levels and holding for a period in the area as the market looked to break through the offers, as it was those offers remained strong and the move into the NYK session saw profit taking and weak stops appearing on the move back through the 121.00 areas and the market dipped back to 120.60 levels and then slowly slipping into a range around that level to the close.
• AUD: A busy day for the Oz with the NZD interest rate cut dragging on the Oz as NZD dropped further back opening a little gap from the start of the session the market moved down quickly through the 70 cent level and pushed to the 0.6950 areas briefly pushing through before running into the Employment data and a surprise rise again and the sellers of Carry trades were quickly back in the market to buy, this took the market quickly to the 70 cent levels and then slowing to move into the grey hours testing the 0.7020 levels, official opening in London saw very solid buying move in and the push through the 0.7080 levels saw weak stops triggered but the market failing to break 71 cents, London held the 0.7060-80 levels in the NYK opening and the market saw some brief selling from day traders to test the 0.7050 levels before slowly rising to test above the 0.7090 levels the market did touch the 71 cent level however, it could not break through the level and the market drifted to play around the 0.7070 levels.

Yesterday’s premiership results

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%

GBP       BoE Rate Decision A 0.50% | C 0.50% | P 0.50%

GBP       BoE Asset Purchase Target Sep A 375B | C 375B | P 375B

GBP       MPC Official Bank Rate Votes A 1–0—8 | C 1–0—8 | P 1–0–8

GBP       MPC Asset Purchase Facility Votes A 0–0—9 | C 0–0—9 | P 0–0–9

CAD       NHPI M/M Jul A 0.10% | C 0.20% | P 0.30%

USD       Import Price Index M/M Aug A -1.80% | C -1.70% | P -0.90%

USD       Initial Jobless Claims (SEP 5) A 275K | C 279K | P 282K | R 281K

USD       Wholesale Inventories Jul A -0.10% | C 0.30% | P 0.90% | R 0.70%

USD       Crude Oil Inventories A 2.57M | C 0.9M | P 4.7M

Good Luck,

Andy

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