Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 119.06 | EURUSD 1.07478 | AUDUSD 0.71605 | NZDUSD 0.66962 | USDCAD 1.39952 | USDCHF 1.00861 | GBPUSD 1.46752 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               119.17 | 118.35

EUR/USD             1.0774 | 1.07395

EUR/JPY               128.18 | 127.325

AUD/USD            0.7171 | 0.7107

NZD/USD             0.6709 | 0.6633

USD/CAD             1.4039 | 1.3973

EUR/CHF              1.0852 | 1.0839

USD/CHF             1.00945 | 1.0074

GBP/USD             1.4686 | 1.4657

EUR/GBP             0.7344 | 0.73225

For Today

• EUR: The Euro moved into the session around the 1.0750 levels and moved sideways until the Tokyo opening, fresh cross selling saw the market slowly drift lower to the 1.0740 levels before the release of Caixin PMI for the services sector this one showing a markedly different measure to earlier in the week and again the USD reacted, with the Euro rising quickly to the 1.0770 levls and holding for until the Tokyo lunch period before beginning a drift back to the opening area, Topside offers light through the 1.0780 levels with better offers through the 1.0800 areas and likely to extend to the 1.0840 levels, even through the 1.0840 level the market is likely to be a mixture of weak stops and offers and the bias towards the offers is likely to continue on any move higher, Downside bids into the 1.0700 areas with a possibility of only light congestive bids through to the mid 1.06 handle and stronger bids possibly around the 1.0620-00 areas.
• GBP: Cable drifted through the session having opened around the 1.4675 areas the market slowly made an attempt to push above the 1.4680 levels before early cross/JPY selling again turned it back, the market then drifted lower with only a brief blip higher on the release of CNY PMI figures before settling back to test into the 1.4650 levels into the grey hours as the pair played second fiddle to the USD, Topside offers are light through the 1.4680 areas and although on suspects stronger offers around the 1.4700 areas congestion around 1.4720-30 area is likely to play a strong part on any recovery to the topside, a push through the level will possibly see some weak stops and the market then testing the 1.4750 level and the chance of a small squeeze higher if the momentum is strong enough with possibly stronger offers into the 1.4800 levels, Downside bids into the 1.4620 areas are likely to continue through the 1.4600 area with the last time the market visited the area in May showing some resilience to the downward move however, a solid break below the level will likely see the breakout stops appearing for a deeper move to the 1.4000 levels a possibility in the longer term.
• JPY: A quiet opening saw the USDJPY slowly edge above the 119.10 levels however, the move into the Tokyo session saw the market balanced on the level when the CNY PMI number hit, with the USDJPY quickly sold lower and the 118.80 level didn’t hold this time as the market quickly pushed through the 118.50 levels to touch briefly through to the 118.30’s before regaining a little bit of composure and holding around the 118.50 level through the session, with the lows traded the market slowed down and the USDJPY eventually started to move slowly higher towards the 118.80 areas before moving into the grey hours unable to push through the level with any conviction. Topside offers light through the 118.80 areas and those light offers continuing through to the 119.50 areas before the market opens a little, downside bids are likely to be a little stronger into the 118.00 areas however, a solid push through could see the market testing quickly lower with previous moves through the level opening the 116.00 levels.
• AUD: Having slowly moved from the 0.7160 levels to test tentatively above the 0.7170 levels the release of the CNY PMI number sent both the Oz and Kiwi lower with the Oz quickly dropping through the 0.7140 level and then continuing to base off the 0.7100-10 areas through the session, there was no bounce and although the market did attempt a weak rise it was unable to push back through the 0.7130 level with any conviction and struggled until just before the grey hours where it gave up and dipped back to the 71 cent level, Downside bids through the 71 cent level however, those light offers will likely be replaced by stronger bids in the 0.7060-40 areas and then light bids then continuing through to the 70 cent level where stronger bids are likely to start appearing in the market. Topside offers light through to the 72 cent level with patches of offers around the 0.7140-60 areas and into the 0.7180 likely before stronger offers through 0.7200-20 area appear.

 

Overnight News

NZD:

Fonterra’s Globaldairytrade price index fell 1.6%

EUR:

Greece on collision course with creditors after vowing not to cut pensions

AUD:

Australian Dec services index falls 1.9 pts MoM to 46.3

SEK:

Riksbank sends out currency warning in an attempt to weaken the SEK

KRW:

South Korea reported that the N.Koreans detonated a nuclear device.

USD/KRW:

White House vows response to any N.Korea provocations

Equities:

Another day of red likely to spill over to the rest of the market

Today’s data

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

CNY        Caixin PMI Services Dec A 50.2 | C 52.3 | P 51.2

08:45     EUR        Italy Services PMI Dec C 53.6 | P 53.4

08:50     EUR        France Services PMI Dec (F) C 50 | P 50

08:55     EUR        Germany Services PMI Dec (F) C 55.4 | P 55.4

09:00     EUR        Eurozone Services PMI Dec (F) C 53.9 | P 53.9

09:30     GBP       Services PMI Dec C 55.6 | P 55.9

10:00     EUR        Eurozone PPI M/M Nov C -0.20% | P -0.30%

10:00     EUR        Eurozone PPI Y/Y Nov C -3.20% | P -3.10%

13:15     USD       ADP Employment Change Dec C 198k | P 217k

13:30     USD       Trade Balance Nov C -44.0B | P -43.9B

13:30     CAD       Trade Balance (CAD) Nov C -2.60b | P -2.76b

15:00     USD       ISM Non-Manufacturing Composite Dec C 56 | P 55.9

15:00     USD       Factory Orders Nov C -0.20% | P 1.50%

15:30     USD       Crude Oil Inventories P 2.6M

19:00     USD       FOMC Meeting Minutes

Harry Hindsight              

• EUR: While the market was reasonably active the Euro traded for the most part around the 1.0830 opening level through the Asian session, with the market limited to the 1.0820-40 range until the grey hours, with the mid-Tokyo session seeing some limited movement in the EURGBP cross however, considering the volumes it was surprising there was not more movement, the move into the grey hours and particularly the early London part saw the Euro break lower and test the 1.0810 levels before the official opening and from there it was all one way traffic with continual selling of the Euro in particular EURJPY and EURGBP, the Euro moved into the NYK session having barely faltered on the move through the 1.0780 areas and pushed through the 1.0760-40 areas steadily and then triggering weak stops on the quick move to the 1.0710 levels before finding sufficient support to hold the market, German unemployment numbers did little to deflect the mood and the CPI numbers came in weaker than expected and managed to possibly force the Euro lower at the right moment to continue the move, the run to the close was a quiet affair with the market having seen the lows and unable to muster any further action to finish around the 1.0750 levels.
• GBP: Cable held its own through the Asian session with the market trading around the 1.4720 level in limited trading the move into the London session saw strong GBPJPY selling and as with the Euro the Cable quickly moved lower shortly after the London opening quickly dropping to the 1.4680 levels and although it bounced on a stronger Construction PMI the USD benefitted from the cross selling through the early part of the session, EURGBP selling did little to elevate the situation and although the cross traded steadily lower through the session Cable was unable to capitalize on the move back towards the 1.4700 level and barely held the 1.4670 levels into the NYK session, NYK were strong buyers of the USD taking advantage of the USDJPY levels and Cable again was forced lower this time taking the 1.4670 level out and pushing to the 1.4640 levels before the USD buyers started ran out of steam, the move to the close as with the Euro was lacklustre and moved only quietly towards the 1.4670 levels before finishing just above those levels.
• JPY: Pre-Tokyo saw limited movement with the market dipping initially to the 119.30 levels before heading into the Tokyo opening to test the 119.50 levels before dropping quickly back on cross/JPY selling to trade to the 119.10 levels, talk of Kuroda continuing to push for the 2% inflation target seemed to turn the market higher for a short period and the market did move back to test above the 119.50 levels and into the 119.70 area however, having made the highs the market quietly moved through the Lunch period drifting back to the opening levels into the grey hours, early London saw strong cross/JPY selling again as if the yield buyers were making a concerted effort to hedge their risk before the market moved beyond their initial levels, USDJPY pushed down into the 118.80 levels and held the level through the session with periods of respite as early NYK took the opportunity to take profit on some of the longer term shorts and the market played around the 119.00 levels for the whole session.
• AUD: Early buying of both the carry trade and Oz saw the market moving off the opening levels around the 0.7180 areas to test above the 72 cent level however, the market could not really push much beyond the 0.7220 levels and spent the Asian session for the most part trading just above the 72 cent area, the move into London saw the market sold back to the opening levels as the cross/JPY selling in the other currencies triggering weak selling for the Oz, the market eventually settled around the 0.7170 levels to trade quietly through the early part of London before NYK moved in as strong USD buyers and the Oz again dipped lower and pushed into the 0.7130 areas in a steady move before slowly rising in line with the rest of the market to finish the day just above the 0.7160 levels on a day where the Oz was buffeted by the other pairs.

Yesterday’s premiership results

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

JPY         Monetary Base Y/Y Dec A 29.50% | C 33.20% | P 32.50%

EUR        German Unemployment Change Dec A -14K | C -8K | P -13K | R -14K

EUR        German Unemployment Rate Dec A 6.30% | C 6.30% | P 6.30%

GBP       Construction PMI Dec A 57.8 | C 56 | P 55.3

EUR        Eurozone CPI – Core Y/Y Dec (A) A 0.90% | C 1.00% | P 0.90%

EUR        Eurozone CPI Estimate Y/Y Dec A 0.20% | C 0.40% | P 0.20%

CAD       Industrial Product Price M/M Nov A -0.20% | C 0.00% | P -0.50%

CAD       Raw Materials Price Index M/M Nov A -4.00% | C -2.50% | P 0.40% | R 0.00%

Good Luck,

Andy

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