Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 119.726 | EURUSD 1.13787 | AUDUSD 0.72458 | NZDUSD 0.66714 | USDCAD 1.3038 | USDCHF 0.95779 | GBPUSD 1.52474 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               119.80 | 119.47

EUR/USD             1.1401 | 1.1377

EUR/JPY               136.355 | 136.165

AUD/USD            0.7247 | 0.7199

NZD/USD             0.6681 | 0.6619

USD/CAD             1.3040 | 1.2998

EUR/CHF              1.0913 | 1.0902

USD/CHF             0.95855 | 0.9572

GBP/USD             1.5291 | 1.5250

EUR/GBP             0.7470 | 0.7450

For Today

• EUR: Euro’s traded quietly over the session stuck between the 1.1380-1.1400 areas for the most part as the Euro plays second fiddle to other markets for the moment, Employment numbers for the UK and retail sales in the US are likely to dominate, and the UK numbers not particularly of import for the Euro however, given the move in EURGBP yesterday there is a possibility that a strong employment number could see those cross gains disappear in a quick move. Topside offers through the 1.1400 levels are likely to continue deep into 1.1420 areas before the danger of light stops appearing in the mix, even so the market is likely to see resistance to the topside through the 1.1450 levels before the market opens with likely breakout type stops and the 1.1500 levels under threat and a larger move a potential. Downside bids light through to the 1.1320 levels before bids of any size are likely to appear, a move through is likely to open up the downside for around a big figure before the bids again start to dominate and strong congestion through that level.
• GBP: EURGBP peaked during the session around the 0.7470 level before the market started a steady correction with the cross falling back to the 0.7450 areas, this led to the Cable moving gradually higher once the market moved into the Tokyo session to test through the 1.5280 levels as the market adjusts to the next set of numbers today. If the media is to be believed as the market looks likely to be following the employment numbers could see the market again regaining some strength as the balance between inflationary numbers and skills shortages impact on the decision making of the MPC, Topside offers likely light into the 1.5300 levels but have been sufficient in a slow market during Asia to hold the Cable in place, through the level the market is likely to see weak stops appear and the market possibly testing back to the 1.5380-1.5400 levels and stronger offers defending the next leg higher and last month’s higher ranges above 1.5500. Downside bids through the 1.5200 level with plenty of congestion for the downside with stronger bids from the 1.5150 levels and towards 1.5100 areas.
• JPY: Again limited movement in the USDJPY moving from the 119.75 levels the market held into the Tokyo market before dipping lower as Chinese numbers impacted the market to trade slightly through the 119.50 levels before revering and holding the 119.65 areas into the grey hours. Topside offers light through the 119.80 areas and increasing to the 120.20 levels now, from there the market is a little patchy however, the offers are likely to remain strong through the 120 handle increasing in size to 121.00. Downside bids steadily increasing in size through the current levels and into the 119.00 areas, only a strong break through the 118.70 area is likely to open the market for a further move lower however, with the market still waiting to see if further easing will be forthcoming this month the market is likely to remain pinned in a tight area.
• AUD: As the market in NYK showed weakness into the close, talk of further rate cuts by the RBA are balanced with the news that lenders are again likely to increase interest rates to borrowers, whether this two tier balancing act can manage the ballooning property market while giving exporters the space to breath and expand to compensate for the weak commodity pricing remains to be seen however, talk of a further rate cut dominated early trading and the Oz saw an early attempt on the 72 cent level failing and a move to 0.7220 into the Tokyo session, trading in a tight range for the most part through the session there was another one ticket type move to test the 72 cents level before steadily rising back through 0.7220 and trading to the 0.7240 levels into the run to the grey hours. Topside offers likely to be light through the 0.7240 areas but continuing to the 0.7260 levels, a move through here again opens the 73 cent level and possibly weak stops on the move through however, the market is again likely to struggle from that point on into the 0.7360 levels and even stronger offers above the 0.7380 area. Downside bids are not particularly strong around the 72 cent level however, for the moment that is what is holding the market and a move through the level possibly sees only light buying through to 0.7050 areas where the bids are likely to start to increase, even so the line in the sand again remains below the 0.6950 area and only a push through those levels opens the downside potential and talk of interest cuts have to be seen in the light of the above with those cuts only aimed at certain areas of the economy and debatable on there effectiveness.

Overnight News

CNY:

China Sept. Consumer Prices +1.6% Y/y; Est. +1.8%

China Should Speed Up Yuan Internationalization: People’s Daily

JPY/AUD:

Nippon Life, NAB Reach Agreement on Insurance Ops Deal: Nikkei

AUD:

Australia Oct. Consumer Sentiment Rises 4.2% M/m to 97.8

NZD:

English Says N.Z. Government Revenue May Be Weaker Than Forecast

New Zealand Posts Narrow Budget Surplus, First in Seven Years

Fonterra Ratings Cut to ‘A-/A-2’ by S&P; Outlook Stable

Fonterra Says Underlying Finances, Credit Quality Remain Strong

Today’s data

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

AUD       Westpac Consumer Confidence Oct A 4.20% | P -5.60%

JPY         Domestic CGPI Y/Y Sep A -3.90% | C -3.90% | P -3.60%

JPY         Japan Money Stock M2+CD Y/Y Sep A 3.80% | C 4.30% | P 4.20%

CNY        CPI Y/Y Sep A 1.60% | C 1.80% | P 2.00%

CNY        PPI Y/Y Sep A -5.90% | C -5.90% | P -5.90%

08:30     GBP       Jobless Claims Change Sep C 1.0k | P 1.2k

08:30     GBP       Claimant Count Rate Sep C 2.30% | P 2.30%

08:30     GBP       Average Weekly Earnings 3M/Y Aug C 3.10% | P 2.90%

08:30     GBP       ILO Unemployment Rate 3M Aug C 5.50% | P 5.50%

09:00     EUR        Eurozone Industrial Production M/M Aug C -0.50% | P 0.60%

09:00     CHF        ZEW (Expectations) Oct P 9.7

12:30     USD       Advance Retail Sales Sep C 0.20% | P 0.20%

12:30     USD       Retail Sales Less Autos Sep C -0.10% | P 0.10%

12:30     USD       PPI M/M Sep C -0.30% | P 0.00%

12:30     USD       PPI Y/Y Sep C -0.90% | P -0.80%

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

12:30     USD       PPI Core Y/Y Sep C 1.20% | P 0.90%

14:00     USD       Business Inventories Aug C 0.10% | P 0.10%

18:00    USD       Fed Beige Book

Harry Hindsight              

• EUR: Slipping from the opening levels around 1.1360 the market initially dropped to test the 1.1340 areas before finding a little support from the EURAUD cross as Chinese numbers failed to inspire the markets, moving steadily back to the opening levels into the grey hours, with several numbers to be released through the London session, and unchanged CPI number was sufficient to keep the market moving higher, the release of the UK’s inflationary numbers again saw the CPI number slip back into negative territory and the EURGBP cross moved off its lows to quickly test through the 0.7450 areas and the Euro tested through the 1.1400 levels before the release of the ZEW numbers for Germany and the Eurozone, Germany in particular saw a large downward adjustment and the Euro was sent quickly back to the opening levels only to hold in a 20 pip range into the NYK session, the market again attempted to push through the 1.1400 levels in early NYK trading however, the failure this time saw the days longs quickly exit the market and again the market tested into the opening levels before finishing the day higher overall but clearly unable to push through the 1.1400 with any confidence.
• GBP: Cable drifted in early trading moving from above the 1.5340 levels to test back to the 1.5300 areas in slow trading, the move into the London session saw early buying in Cable and light EURGBP selling taking the cross below the 0.7400 areas and Cable to test the highs above the 1.5380 area before the release of inflationary data, with the CPI monthly number again dipping back into negative territory the market reversed its moves and Cable quickly moved down through the opening levels and triggered some weak stops as it weak stops on a quick move to the 1.5240 levels, EURGBP buying also moved in and the cross quickly moved off the lows around the 0.7390 level to push quickly above the 0.7450 levels as GBP lost ground across the market, with the CPI numbers again laid at the feet of falling energy prices and supermarket pricing wars being blamed for the moment however, while this may be the major factor it does question the perceived chances of a rate rise in the short term to be further delayed until inflationary pressure returns to the economy. The move into the NYK session saw the market continuing to test the downside and the market came close to pushing through the 1.5200 levels however, the support at the level was enough to turn the market back higher and the market returned to the 1.5240 levels before trading sideways to a little higher once the London session finished and moved into the 1.5250-60 levels to the close.
• JPY: News in other areas did little to impact the JPY market with AUDJPY selling possibly the biggest cross traded during the Asian session with the USDJPY dragged lower, early trading saw the market holding around the 120.05 areas before the slipping to the 119.95 levels into Tokyo, then the release of the CNY numbers saw the Trade balance numbers a little better than expected however, the balance between exports and imports increase with a drop in imports the main fact for a good trade balance number, and the AUDJPY selling moved in and the USDJPY moved to the 119.80 levels into the London session, London saw limited selling and although the market drifted to the 119.60 levels it was the NYK session that saw the lows with the market testing to the 119.55 levels from the opening before recovering to the 119.85, the close in London then saw the pair drifting a little lower to the close.
• AUD: With confidence high and exports weak one wonders where NAB collects its business numbers from, early selling of AUDJPY dominated the early part of the session however, while this continued through the session the CNY numbers saw the market struggling to maintain the 73 cent level once those numbers were released to the market saw a two way battle through the London session before the market pushed strongly through the 73 cent in the move into the NYK session dipping through the 0.7260 levels before recovering, even though the market rallied back to the 73 cent level it struggled through the session and once the early Sydney traders moved into the market before the close they were already steadily selling and the market making fresh daily lows on the close.

Yesterday’s premiership results

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

GBP       BRC Sales Monitor Y/Y Sep A 2.60% | P -1.00%

AUD       NAB Business Confidence Sep A 5 | P 1

CNY        Trade Balance (USD) Sep A 60.3B | C 46.9B | P 60.2B

JPY         Consumer Confidence Index Sep A 40.6 | C 41.6 | P 41.7

JPY         Machine Tool Orders Y/Y Sep (P) A -1.91% | P -16.50%

EUR        German CPI M/M Sep (F) A -0.20% | C -0.20% | P -0.20%

EUR        German CPI Y/Y Sep (F) A 0.00% | C 0.00% | P 0.00%

CHF        Producer & Import Prices M/M Sep A -0.10% | C -0.10% | P -0.70%

CHF        Producer & Import Prices Y/Y Sep A -6.80% | P -6.80%

GBP       CPI M/M Sep A -0.10% | C 0.20% | P 0.20%

GBP       CPI Y/Y Sep A -0.10% | C 0.20% | P 0.00%

GBP       Core CPI Y/Y Sep A 1.00% | C 1.10% | P 1.00%

GBP       RPI M/M Sep A -0.10% | C 0.10% | P 0.50%

GBP       RPI Y/Y Sep A 1.00% | C 1.00% | P 1.10%

GBP       PPI Input M/M Sep A 0.60% | C 0.10% | P -2.40% | R -3.00%

GBP       PPI Input Y/Y Sep A -13.30% | C -13.00% | P -13.80%

GBP       PPI Output M/M Sep A -0.10% | C 0.10% | P -0.40% | R -0.50%

GBP       PPI Output Y/Y Sep A -1.80% | C -1.80% | P -1.80% | R -1.90%

GBP       PPI Output Core M/M Sep A 0.10% | C -0.10% | P 0.00%

GBP       PPI Output Core Y/Y Sep A 0.20% | C 0.20% | P 0.10%

EUR        German ZEW (Economic Sentiment) Oct A 1.9 | C 6.8 | P 12.1

EUR        German ZEW (Current Situation) Oct A 55.2 | C 66.5 | P 67.5

EUR       Eurozone ZEW (Economic Sentiment) Oct A 30.1 | C 30.1 | P 33.3

Good Luck,

Andy

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