Daily FX Market Commentary

Andy Harrison

Good morning,

 

LMAX Close

USDJPY 123.107 | EURUSD 1.05646 | AUDUSD 0.72274 | NZDUSD 0.65772 | USDCAD 1.33609 | USDCHF 1.02895 | GBPUSD 1.50562 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               123.275 | 122.645

EUR/USD             1.0597 | 1.0564

EUR/JPY               130.29 | 129.77

AUD/USD            0.7284 | 0.7222

NZD/USD             0.6647 | 0.6584

USD/CAD             1.3364 | 1.3327

EUR/CHF              1.08835 | 1.08565

USD/CHF             1.0291 | 1.0258

GBP/USD             1.5102 | 1.5053

EUR/GBP             0.7020 | 0.7008

 

For Today

  • EUR: Early trading was quiet from the opening holding around the 1.0570 levels however, the move into the Tokyo session was brightened up by the release of news that the Japan Government Pension Investment fund (GPIF) is to start hedging the currency risk involved with the offshore holding taken this year, this saw the Euro begin to rise and push through over the next couple of hours to touch into the high 1.0590’s before finding sufficient offers to turn the market and the move back to the 1.0580’s to hold the areas into the grey hours. Offers through to the 1.0620 areas with only light stops likely in the mix on a move to the 1.0640 areas and those offers are likely to continue through to the 1.0680 areas where stronger offers are likely to appear towards 1.0700 levels, the talk in the market is of greater divergence between the US and the rest of the world however, one would assume that the market had already taken that into account if there were to be a lift off this month. Downside bids are still thick on the ground through to the 1.0540 levels with the market likely to continue through the 1.0500 however, a push through the years lows and possibly through the 1.0480 areas will see break out stops appearing as the market moves towards the 1.0460 areas for the low of the year.
  • GBP: Cable was in a similar mood with the announcement in Japan on the GPIF story seeing Cable move off the lows just above the 1.5050 area and pushing steadily through the opening 1.5060 area and continuing through the first half of the session testing towards the 1.5100 levels before stalling and taking a second run as the market moved into the grey hours to push lightly through the level, Topside offers still remain around the 1.5100 level however, a push through the 1.5120-30 areas could see weak stops appearing and the market opening to the 1.5150-60 areas and then weakness until the market approaches the 1.5200 and then likely strong offers in a 1.5200-40 range, only a strong break through the 1.5260 will open further tests of the 1.5300 level. Downside bids light on the way down to yesterday’s levels with 1.5000 remaining the key area for further moves lower and the 1.4800 open if the market finds any momentum however, the last time the market was in these areas the market struggled in the 1.4900 areas for several weeks early in the year.
  • JPY: Early trading saw the USDJPY pushing ahead from the opening just below 123.00 and testing into the Tokyo session pushing above the 123.25 areas that is until the Dow Jones article where GBIF is considering hedging their currency exposure, and when you read the article it really seems to be a rehash of previous movements towards hedging and this one assumes is in relation to either yesterday’s announcements by Kuroda or the movement of the EURJPY below 130 having declined from the 133 levels seen in early November, the result though was to see the USDJPY quickly trade down through to test into the 122.60 levels before working hard to regain the 123.00 levels falling just short into the grey hours. Downside bids into the 122.60 areas are likely to be limited however, those bids are likely to extend to the 122.20 areas and only if the market gather impetus are they likely to be tested with a possible push through the 122.00 area likely to see quick selling moving in as a consequence of the GPIF news however, a push through the 121.80 levels will likely open the market to a test to the 121.00 levels and possibly the weaker of the levels with the 120.00 handle likely to be key on any further movements lower, this however, is with the background of the USD which is consolidating and is likely to be a little more supportive. Topside offers are likely to be a little stronger given yesterday’s Kuroda comments and the GPIF news, with offers into the 123.00 levels light but picking up strength as the market moves into the 123.40-60 areas and through to the 123.80 level which is likely to see stronger offers from then on. The GPIF news I have now read from four sources and none of them read the same and these are supposed to be from the same source with some actually making claims it is ongoing while other say the source stopped short of confirming whether or not they were currently using hedges, so take with a pinch of salt.
  • AUD: The movement in the Oz followed suit to the rest of the market with early trading holding around the 0.7230 areas before the GPIF DJ article saw the Oz quickly rise to push through the 0.7250 areas and triggering weak stops to test to just above the 0.7280 levels before finding sufficient offers to hold the rally and although the market has given ground the market has remained in touch with the area since making the highs although there was some movement around the RBA announcement it was limited to a 30 pip range. Topside offers from the 0.7280 areas and into the 73 cent level, a push through the level though is only likely to open the market for a test into the 0.7340-60 areas with reasonable offers into those areas and probably a stubborn 74 cent area, Downside bid weak through the 72 cent levels and weak stops on a move through 0.7160 however, this being the Oz expect some bids to smooth any fall back and the market to increase on the bid side into the 71 cent level.

 

Overnight News

AUD:

RBA Leaves cash rate target unchanged at 2.00%

RBA Monetary policy needs to be accommodative

RBA Inflation outlook may afford scope for further easing

RBA A$ adjusting to significant declines in commodity prices

JPY:

Japan GPIF joins other large pension, sovereign funds in hedging currency risk sources

GPIF uses benchmark to quietly hedge source

GPIF hedging against Euro in short term

CNY:

PBoC’s Yi says long term goal is very few interventions in the Yuan

PBoC will intervene if intl. payment balance moves abnormally Yi

IMF Doesn’t demand change of Yuan FX rate forming mechanism YI

Suspected intervention on USDCNY and CNH around $16b yesterday

NZD:

NZ 3Q Terms of trade fall 3.7% QoQ est. -2.6%

NZ 3Q import volumes rise 0.7% QoQ

NZ 3Q Export volumes rise 3.7% QoQ

 

Today’s data

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

NZD       Terms of Trade Index Q/Q Q3 A -3.70% | C -2.50% | P 1.30% | R 1.50%

JPY         Capital Spending Q3 A 11.20% | C 2.30% | P 5.60%

AUD       Current Account Balance (AUD) Q3 A -18.1B | C -16.6B | P -19.0B | R -20.5B

AUD       Building Approvals M/M Oct A 3.90% | C -2.40% | P 2.20% | R 2.30%

CNY        Manufacturing PMI Nov A 49.6 | C 49.9 | P 49.8

CNY        Non-manufacturing PMI Nov A 53.6 | P 53.1

CNY        Caixin PMI Manufacturing Nov A 48.6 | C 48.3 | P 48.3

CNY        Caixin PMI Services Nov A 53.1 | P 52

AUD       RBA Rate Decision A 2.00% | C 2.00% | P 2.00%

06:45     CHF        GDP Q/Q Q3 C 0.20% | P 0.20%

07:00     GBP       BOE Financial Stability Report

08:15     CHF        Retail Sales (Real) Y/Y Oct C 0.40% | P 0.20%

08:30     CHF        SVME-PMI Nov C 50.8 | P 50.7

08:45     EUR        Italy Manufacturing PMI Nov C 54.3 | P 54.1

08:55     EUR        German Unemployment Change Nov C -4K | P -5k

08:55     EUR        German Unemployment Rate Nov C 6.40% | P 6.40%

09:00     EUR        Eurozone Manufacturing PMI Nov (F) C 52.8 | P 52.8

09:30     GBP       PMI Manufacturing Nov C 53.7 | P 55.5

10:00     EUR        Eurozone Unemployment Rate Oct C 10.80% | P 10.80%

13:30    CAD       GDP M/M Sep C 0.10% | P 0.10%

15:00     USD       Construction Spending M/M Oct C 0.60% | P 0.60%

15:00     USD       ISM Manufacturing Nov C 50.5 | P 50.1

15:00    USD       ISM Prices Paid Nov C 40 | P 39

 

Harry Hindsight              

  • EUR: A quiet day overall with the market making moves to the downside and pushing continually at bids into the 1.0560’s, with Asia starting the move the market tested the 1.0570 levels into the early session having being pressured lower with strong EURJPY selling moving in from the opening in Tokyo before the movement began to drag on the USDJPY leg and the Euro was again free to rise slowly to recover the opening levels towards the grey hours, by the time London officially opened and a quick move to above the 1.0595 levels was quickly turned and sent lower to test through the 1.0570 level and into waiting bids, the market continued in the same manner through the day eventually testing through the 1.0560 levels into the NYK session with rather average volumes going through and the market finishing the day around that level for the close.
  • GBP: Cable had a more interesting day with early trading dominated by the Euro and drifting from the opening 1.5035 areas to test the 1.5020 levels before holding and trading in a tight range to the London opening, light grey hour buying saw the market make its first attempt to test the 1.5050 levels however it was a before the official opening and the market struggled from the opening and the market tested lower, the push for the 1.5000 levels continued through the early part of London and into the NYK session with the level briefly broken before the reversal and a rejection of the level and the market saw weak stops through the 1.5030 levels and moved quickly through the weakened offers around the 1.5050 levels however, the break above petered out around the 1.5070 levels and while the market drifted a little once London left it did eventually pick up and hold the 1.5060 levels. EURGBP selling dominated the market as Cable moved back higher with the cross breaking from the 0.7050 levels and then holding around the 0.7015 levels to the close.
  • JPY: USDJPY started quietly opening around the 122.80 levels and drifting through the session to test only marginally lower however, early EURJPY selling did little to dent the USDJPY and the market lifted from lows around the 122.70 levels to push to the 122.85 levels into the London opening, buying early in session in London saw the market pushing quickly through the 123.00 levels and holding for the most part through the 123.10 levels and moving into the NYK session testing steadily to above the 123.30 before holding for a short period above the 123.20 levels before slipping back slowly after a poor Chicago PMI showing but remaining above the 123.10 levels.
  • AUD: From the opening around the 0.7195 levels gave way slowly to trade to the 0.7170 levels into early Tokyo however, once the market had hit the lows it steadily rose through Asia to the opening levels and then moved back through the 72 cent levels into the grey hours and held the level into NYK and steady buying through session to take the market to the 0.7250 where the market held and drifted from deep in the session to the close just below 0.7230 areas

 

Yesterday’s premiership results

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

NZD       Building Permits M/M Oct A 5.10% | P -5.70%

AUD       TD Securities Inflation M/M Nov A 0.10% | P 0.00%

JPY         Industrial Production M/M Oct (P) A 1.40% | C 1.90% | P 1.10%

JPY         Retail Trade Y/Y Oct A 1.80% | C 0.90% | P -0.20% | R -0.10%

NZD       NBNZ Business Confidence Nov A 14.6 | P 10.5

JPY         Housing Starts Y/Y Oct A -2.50% | C 2.50% | P 2.60%

CHF        KOF Leading Indicator Nov A 97.9 | C 100.3 | P 99.8 | R 100.4

GBP       Mortgage Approvals Oct A 70K | C 70K | P 68.9k

GBP       M4 Money Supply M/M Oct A 0.60% | C -0.20% | P -1.00%

EUR        German CPI M/M Nov (P) A 0.10% | C 0.10% | P 0.00%

EUR        German CPI Y/Y Nov (P) A 0.40% | C 0.40% | P 0.30%

CAD       Current Account (CAD) Q3 A -16.21B | C -15.2B | P -17.4B | R -16.57B

USD       Chicago PMI Nov A 48.7 | C 54 | P 56.2

USD       Pending Home Sales M/M Oct A 0.20% | C 1.30% | P -2.30%

 

Good Luck,

Andy

LMAX Exchange Market Commentary   AUDUSD   Andy Harrison  

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