Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 120.69 | EURUSD 1.11086 | AUDUSD 0.72081 | NZDUSD 0.67709 | USDCAD 1.30886 | USDCHF 0.97307 | GBPUSD 1.53942 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               120.99 | 120.61

EUR/USD             1.1120 | 1.1072

EUR/JPY               134.20 | 133.79

AUD/USD            0.7257 | 0.7198

NZD/USD             0.6847 | 0.6781

USD/CAD             1.3111 | 1.3075

EUR/CHF              1.0816 | 1.0782

USD/CHF             0.9739 | 0.97265

GBP/USD             1.5414 | 1.5376

EUR/GBP             0.72155 | 0.72005

For Today

• EUR: Early sellers nudged the 1.1080 levels with a technical level in the area and the market hoping against reason that it would buckle quickly however, as with all plans though it didn’t work during the weakest part of the session, and quickly moved back above 1.1100 and a quiet move into Tokyo, the second attempt through the level was more concerted however, although it pushed into the mid 1.1070’s the result was the same and the market then struggled back through the 1.1100 levels and steadily moved to test towards the 1.1120 levels into the grey hours. Topside offers are likely to be light through the 1.1120 levels however, those light offers could possibly continue into the 1.1160 levels before the topside becomes vulnerable, with better offers likely to be present from the 1.1180 areas a strong move through 1.1200 areas is likely to see a short squeeze but keep in mind its Friday, PMI numbers for the area are likely to dominate the early session and while I’m not overly committed to the move lower could provide the catalyst for a move lower, bids remain for the moment below the 1.1100 levels and possibly stops then through the 1.1070 level and little in the way of a move to the 1.1030-20 areas with the potential for strong support before opening longer term exposure to the lows of the year.
• GBP: Cable moved off the lows with a brief test of the 1.5380 level following the move in the Euro to trade steadily higher and push back to the 1.5410 areas late into the session with the EURGBP cross moving off the 0.7200 level and slowly moving in a quiet range to the 0.7215-20 areas, Topside offers are limited for the Cable with light offers into the 1.5430 areas opening for a fresh push through 1.5450 and into the stronger offers on the Topside above 1.5500, through that level the market is likely to see weak stops building and the question therefore is, if it were to break through would the 1.5550 level be sufficient to curtail a further rise. Downside bids in the 1.5370-50 area are limited however, there is some congestion on a push through the level and the 1.5300 area seems to be the likely break down point for a fresh move to test those lows of the year in the long run, this is likely to be more connected to a lower Euro than anything else for the moment.
• JPY: USDJPY moved quietly from the opening around the 120.70 levels however, as with the Euro the market in the move into the Tokyo session decided to test the resolve of the offers in this case and quickly moved through the 120.80 level only to fail just short of the 121.00 level, the market did continue to test the level however after a short period the market gave up with the idea and dipped back to the 120.70 levels before drifting into the 120.60’s as the market moved towards the grey hours. Topside offers through the 121.00 level and likely to continue into the 121.30 areas before any weakness shows, weak stops are then likely to run the market slightly higher however, from the 121.60 level onwards the market is likely to be dominated by strong offers going back into the 122.00 levels, a push through the level though does give the longer term hope of a test back to the 124-125 levels of August. Downside bids light into the 120.20-00 areas and then possibly weak stops quickly appearing on a move through and the market open for a test to the 119.20 areas before strength again appears.
• AUD: The open saw the market move a little higher testing towards the 0.7215 areas before strong Oz selling on the Tokyo opening chased the market lower to test the 72 cent levels, the market bounced off the lows and pushed steadily through the highs of yesterday and although there was initial resistance to the move it was light and the market managed to push through to test above the 0.7250 areas into the later part of the session, ANZ raised its variable rate but the market was less inclined to do anything to day as the Mortgage market is generally expected to follow suit through the course of the next few days. Topside offers again start to firm as the market moves towards the 73 cent levels, however a push through the level will likely see only slight weakness until the market moves into the 0.7340-60 area and further offers and then stronger through 0.7380-0.7400. Downside bids look to be reasonably strong for the moment around the 0.7200 areas and only a strong push below 0.7180 is likely to open the downside with further strength into the 0.7150 areas.

Overnight News

JPY:

Aso: Are Limits to How Much Monetary Policy Can Push Up Prices

BOJ to cut price forecast for next FY only slightly -sources – RTRS

Nikkei Japan Oct. Flash Manufacturing PMI 52.5 vs 51 in Sept.

AUD:

NAB Raises Variable Home Loan Interest Rates by 17 Bps to 5.60%

ANZ Joins Other Major Banks in Raising Home-Loan Rates

CNY:

IMF Hasn’t Completed Review on Yuan SDR Inclusion: PBOC’s Lu

PBOC’s Ma Says China Should Watch for Deflation Risk: Herald

China 3Q Job Available to Job Seeker Ratio About 1.09

China Sept. Leading Economic Index Rises 1.6% M/m to 339.5

Today’s data

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

JPY         PMI Manufacturing Oct (P) A 52.5 | C 50.6 | P 51

CNY        Conference Board Leading Index Sep A 1.60% | P 1.00%

07:00     EUR        France Manufacturing PMI Oct (P) C 50.2 | P 50.6

07:00     EUR        France Services PMI Oct (P) C 51.9 | P 51.9

07:30     EUR        Germany Manufacturing PMI Oct (P) C 51.9 | P 52.3

07:30     EUR        Germany Services PMI Oct (P) C 54 | P 54.1

08:00     EUR        Eurozone Manufacturing PMI Oct (P) C 51.8 | P 52

08:00     EUR        Eurozone Services PMI Oct (P) C 53.5 | P 53.7

12:30     CAD       CPI M/M Sep P 0.00%

12:30     CAD       CPI Y/Y Sep P 1.30%

12:30     CAD       BoC CPI Core M/M Sep P 0.20%

12:30    CAD       BoC CPI Core Y/Y Sep P 2.10%

Harry Hindsight              

• EUR: A quiet session through Asia and deep into London as the market waited for the ECB Monthly Bulletin holding around the 1.1340 levels for the most part through the Asian session and then early sellers into the London opening with the bulletin released early in the session and a brief sell through the 1.1320 levels as Draghi spoke about waiting as usual, nothing changes, so Dec is the next date for the possibility of QE being re-examined, you have to smile, the market then hung around the 1.1310-20 levels for several hours with the rate decision unchanged, Draghi did say the discussion was very rich which would suggest that the stalling policy of the ECB found less support from individual FinMin’s however, the market absorbed the news and it was only the move into the NYK session that saw the US market evaluating the commentary and the market suddenly moved with heavy fund selling opening new positions on rumours and whispers however, given the lack of volatility over the past couple of months the market became vulnerable to the downside through the 1.1080 areas, the move saw strong selling driving easily through the bids to 1.1200 levels then the market saw plenty of two way interest with profit takers and general buyers willing to step in the way, the market continued trading lower however, the descent was slower and the market moved to the close just holding the 1.1100 areas.
• GBP: Cable moved steadily higher through the Asian session, nothing spectacular given the ECB bulletin to follow however, it pushed from the opening 1.5405 areas and traded steadily to the 1.5430 levels before moving into the London session, the Bulletin, which had more impact on GBP than the USD with the EURGBP cross dropping steadily through the 0.7300 level before bouncing back to the 0.7320 levels and into the NYK session, the retail sales numbers showed a large jump above expectations and Cable went quickly bid moving through the 1.5450 level to trigger weak stops on the bulletin and then continuing the move on the sales numbers to again test above the 1.5500 levels and the strong offers. The NYK session saw strong Euro selling with EURGBP dropping quickly back to the 0.7250 levels before the Euro slowed but continued to decline, the EURGBP followed the same pattern dropping into the close just above the 0.7200 levels however, the drag of the Euro was sufficient to pull the Cable lower with it as the market in NYK turned more to a bull USD run and Cable dropped back to the 1.5400 levels finding some support for several hours before dipping below the level to the 1.5370 area lows of the day and then close testing the 1.5400 areas again.
• JPY: USDJPY was fairly dead in the water moving through Asia drifting around the 119.90 levels and into the London session before dropping off in late trading to the 119.60 as the market took back its longs in preparation for the ECB, the market then traded around the 119.70 levels for much of the London session as the market moved quietly, the NYK market however, had other ideas for the day and USD buyers moved in and as the Euro dropped the USDJPY rose quickly pushing easily through the 120.00 areas, 120.30 seemed to hold for a brief period however, the market was in no mood for delays and having pushed through that level ran into further offers around the 120.40-50 levels, there was a couple of hours of 2 way trading before this level broke and the move to the 120.70 level quickly followed and this time the offers were sufficient to hold the market for the rest of the session and the market was unable to push through the 120.80 levels.
• AUD: While the Oz was choppy through the session for the most part it was limited in movement with the market initially opening around the 0.7210 areas the market gradually rose to the 0.7240 levels before Commonwealth Bank raised the interest rates on their variable mortgage rate and the market dropped quickly on concerns about the property markets and the economy if the bubble bursts, the Oz dropped to 0.7185 from the top before regain the 72 cent level and moving into the London session slowly rising, USD buying into the NYK session saw the downside tested again however, the Oz this time rose immediately higher and again tested to the highs and the range was set with the market drifting from that point to finish the day only slightly higher.

Yesterday’s premiership results

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

AUD       NAB Business Confidence Q3 A 0 | P 4

GBP       Retail Sales M/M Sep A 1.90% | C 0.40% | P 0.20% | R -0.40%

EUR        ECB Rate Decision A 0.05% | C 0.05% | P 0.05%

CAD       Retail Sales M/M Aug A 0.50% | C 0.10% | P 0.50% | R 0.60%

CAD       Retail Sales Less Autos M/M Aug A 0.00% | C 0.10% | P 0.00% | R 0.10%

USD       Initial Jobless Claims (OCT 17) A 259K | C 266K | P 255K | R 256K

USD       House Price Index M/M Aug A 0.30% | C 0.50% | P 0.60%

EUR        Eurozone Consumer Confidence Oct (A) A -7.7 | C -7.5 | P -7.1

USD       Existing Home Sales Sep A 5.55M | C 5.35M | P 5.31M

USD        Leading Indicators Sep A -0.20% | C 0.00% | P 0.10%

Good Luck,

Andy

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