Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 117.671 | EURUSD 1.09317 | AUDUSD 0.70118 | NZDUSD 0.6648 | USDCAD 1.41162 | USDCHF 0.99319 | GBPUSD 1.46175 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               118.595 | 117.4

EUR/USD             1.0934 | 1.0872

EUR/JPY               129.04 | 128.38

AUD/USD            0.7078 | 0.7005

NZD/USD             0.6679 | 0.6616

USD/CAD             1.4122 | 1.4058

EUR/CHF              1.08545 | 1.08445

USD/CHF             0.9984 | 0.9932

GBP/USD             1.4645 | 1.4609

EUR/GBP             0.7474 | 0.7432

For Today

• EUR: China suspended the circuit breaker rule in the equity market and the market remained orderly, this in turn saw the USD starting to rise quietly through the session and the Euro drifting initially from the opening and then picking up pace as the market moved through into the Tokyo session to trigger some light stops and the market moved quickly through the 1.0880 areas, since the move lower the market has remained fairly steading and for the most part unable to recover those early losses, Topside offers into the 1.0940-60 areas will likely see further offers quietly behind and continuing to the 1.0980 level lightly before again growing in size, a move to the 1.1000 levels are likely to see stronger offers and continuing through to the 1.1020 areas with a break here opening the market for a test to the 1.1100 areas. Downside bids light into the 1.0820 levels and those light bids possibly quickly disappearing as the market moves through the 1.0800 areas and opening the market to the possibility of moving to the 1.0700 level and ultimately the 1.0600 levels having already been cleared of bids in the early part of the year.
• GBP: With the market slowly recovering again from the closure of equity markets in China the Cable slowly rose with GBP doing better against both the USD and Euro through the session, opening around the 1.4615 areas the market drifted sideways before Cross GBPJPY buying moved into the market helping the GBP to move higher, with the EURGBP cross opening around the 0.7470 levels GBP found buyers in several areas and the Cable managed a reasonable push to the 1.4645 areas before holding for a period and then running into the Lunch time period and a drift lower, as the market then approached the grey areas single ticket trades started to have effect on the market and the rally for the moment was over. Topside offers remain into the 1.4650 however, while I’m not a big follower of short term technical patterns a push through the level would suggest the possibility of a stronger rise as the market catches up with the Euro in particular a push through probably weak offers around the 1.4700 levels with likely better offerings into the 1.4800 areas. Downside bids light into the 1.4600 levels and then likely better bids on a test to the 1.4520-30 areas again, a push through this level leaves Cable though vulnerable to further losses with longer term technical selling, however, one would say the market has to be cautious to the downside with the market possibly taking Osbourne’s comments yesterday with a pinch of salt and as we know this can be fatal.
• JPY: USDJPY eased into the Tokyo session holding the 117.50 levels before starting a steady rise to the 117.80 levels with little to impede a rise the poorer cash earnings numbers and better equity markets, USDJPY moved quickly through the 118.00 levels and continued triggering weak stops on the move through eh 118.20 levels and spiking towards the 118.60 levels before finding sufficient offers to curb the rise and a drift back to the 118.20-30 areas for a steady trade through the rest of the session pushing to above the 118.40 on occasion the market saw plenty of two way flow through the session. Topside offers into the 118.80 level are possibly strong and that resistance is likely to continue into the 119.00 areas, a push through the 119.20 areas is likely to leave the market open for a small squeeze higher and the 119.80 will likely provide the resistance for Friday, downside bids light through the 118.00 levels and is only likely to improve on a move through to the 117.40 lows of yesterday, with those bids likely to be in depth and into the 117.00 areas however, a strong push through the level will likely leave the 115.80 areas vulnerable and a longer term move through to the 110.00 possible however, the strength of the JPY is dependent on the markets in Asia with any further movement only as a result of safe haven flows.
• AUD: The Oz saw better AUDJPY buying today as carry trade re-initiation of positions started to flow as the USDJPY rallied, and the Oz pushed from the opening 0.7010 areas into the 0.7030 level, the release of in line retail sales numbers did a little to help the rally however the JPY cash earning numbers that triggered the USDJPY buying saw the Oz quickly push higher after a slightly dubious dip and the market pushed into the mid 0.7070’s before drifting around the 0.7050 levels for the rest of the session, Topside offers into the 71 cent level are likely to be weak at best and a push through to the 0.7120 area will possibly see fairly free movement into the usual 0.7140-60 areas and then better offers starting to appear from the 0.7180-0.7200 levels for the day. Downside bids having been cleared to the 0.7000 levels will start to improve on a move through the 70 cent level with a possible light mixture of stops and bids initially before the bias improves towards the buyers as the bids get progressively larger as the market moves down through the 69 cent handle with particularly strong bids below 0.6950 waiting.

 

Overnight News

CNY:

China suspends the circuit breaker rule on the equity exchange

China’s safe orders banks to limit USD purchases this month

ADB’s Nakao on Yuan, I don’t think there’s a currency war BBG

Capital flight pushes China to the brink of devaluation Telegraph

Reserves show a drop of $108B

JPY:

Some BoJ members doubted need to fine tune QQE at Dec meeting

JPY/CNY

Aso: China may find it difficult to continue buying Yuan

GBP:

Permanent starting salary growth hits two-year low in Dec

Today’s data

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

AUD       Retail Sales M/M Nov A 0.40% | C 0.40% | P 0.50% | R 0.60%

JPY         Labour Cash Earnings Y/Y Nov A 0.00% | C 0.70% | P 0.70%

JPY         Leading Index Nov (P) A 103.9 | C 103.9 | P 104.2

06:45     CHF        Unemployment Rate Dec C 3.40% | P 3.40%

07:00     EUR        German Trade Balance (EUR) Nov C 20.2B | P 22.3B

07:00     EUR        German Industrial Production M/M Nov C 0.50% | P 0.20%

08:15     CHF        CPI Y/Y Dec C -1.20% | P -1.40%

08:15     CHF        CPI M/M Dec C -0.30% | P -0.10%

09:30     GBP       Visible Trade Balance (GBP) Nov C -10.5B | P -11.8B

13:30     CAD       Net Change in Employment Dec C 10.0K | P -35.7K

13:30     CAD       Unemployment Rate Dec C 7.10% | P 7.10%

13:30     CAD       Building Permits M/M Nov C -3.00% | P 9.10%

13:30     USD       Change in Non-farm Payrolls Dec C 200K | P 211k

13:30     USD       Unemployment Rate Dec C 5.00% | P 5.00%

13:30     USD       Average Hourly Earnings M/M Dec C 0.20% | P 0.20%

15:00     USD       Wholesale Inventories Nov C -0.10% | P -0.10%

Harry Hindsight              

• EUR: A quiet start with the market trading quietly around the 1.0780 levels then the suspension of the CSI300 as the Chinese equities quickly dropped 7% and the equity markets should only red, the USD found little comfort in the second suspension of the week and the move to safe havens was quickly apparent and the Euro managed a quick push to the 1.0800 levels however, although the market continued pushing to the 1.0820 levels the move into the grey hours saw the market again steadily retracing the movement and testing through the 1.0780 levels into the London opening, retail PMI numbers in the Eurozone then saw the market moving quickly through the highs and triggering some light stops to trade to the 1.0860 areas and then ranging between 1.0840-70 deep into the NYK session as the market looked for fresh input, US numbers had little effect and only the break through on the topside triggering weak stops and a rally quickly to above the 1.0900 levels, the market continued to rise however, it was a little more sedately triggering weak stops on the push through 1.0920 before running into the offers around the 1.0940 areas and drifting to the close not far from those highs.
• GBP: Cable traded quietly through the Asian session with trading contained for the most part in the 1.4630-40 areas however, the move into the grey hours saw the market starting a steady sell off as the market migrated towards the breakout levels to the downside, comments from Osbourne initially didn’t help the Cable with the look ahead for the world economy likely to cause problems for the UK economy however, while Osbourne was quick to talk the market down, he was also quick to point out that interest rates cannot remain at the current levels for too long, given that and the rejection of the lows around 1.4530 saw the market steadily rise, while the Cable is not exactly connected to the USD or for that matter the Euro the fact that safe haven flows have been dominating the market this week GBP was not one of them, maybe the closer the market gets to the vote on EU membership gets closer the fracture may grow, the market did recover somewhat through the NYK session with obvious longer term profit taking and the slight drag of the Euro leaving the market only just adrift of the opening levels. EURGBP was another matter though, with the cross moving quickly higher as the buyers moved into the market during early London and quickly pushing through the 0.7400 levels and steadily pushing to the 0.7470 level into the pre-NYK hour, the market then drifted a little through the early part of NYK however, once the London session ended the rally continued and moved above the 0.7480 levels to trade to a little stronger resistance.
• JPY: USDJPY started slowly but positively moving from the opening 118.50 levels to test above the 118.70 area into the Tokyo session, however, the best laid plans of mice and men caught the buyers by surprise as the Chinese equity markets were suspended for the second time this week and the rush to safe havens saw strong JPY buying and the USDJPY quickly dipped to the 117.70 levels, USDCNH selling during a 10 minute flurry saw the pair drop substantially on the back of an estimated $10B dump also had a large baring on the movement in the USD over the day, USDJPY didn’t recover that much through the session and struggled on each approach to the 118.20 levels and the move into the London session saw renewed JPY buying and the USDJPY dropping quickly through the first hour to the 117.30 levels with weak stops and a general unwillingness for the market to step in front, having hit the 117.30 levels though the market started steadily to recover and although the recovery was tentative at first the breakthrough of the 117.70 areas into the NYK session saw the market quickly move back above the 118.00 levels for a period, as the London session came to the close the market again started to see JPY buyers reappearing and the market tested back to the 117.50 levels to hold in the area to the close.
• AUD: The Oz played out similar to the USDJPY with the market edging to above the 0.7080 early in the session and held the levels until the CSI300 suspension triggered safe haven flows, this saw strong AUDJPY carry trade selling and the Oz dipped to the 0.7030 levels before finding sufficient bids to hold the market, Asia then remained quiet in the Oz and ranged in the 0.7030-50 areas with little fundamental Oz news to persuade the market otherwise, the move into the London session saw the market moving steadily lower and a test to those better bids first into the 70 cent level and then through with the market seeing plenty of two way trading in the market before moving into the NYK session and Futures buyers coming out in force to take limited profits and long positioning moving in chasing the market steadily back above the 70 cent levels and away from the lows around 0.6980, from that point on though the market ran out of steam with good volumes across the market in general but limited for the final few hours and the market traded in the 0.7000-20 areas for much of the session after London’s close.

Yesterday’s premiership results

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

AUD       Trade Balance (AUD) Nov A -2.91B | C -2.98B | P -3.31B

AUD       Building Approvals M/M Nov A -12.70% | C -3.00% | P 3.90% | R 3.30%

EUR        German Factory Orders Y/Y Nov A 1.50% | C 1.10% | P 1.80% | R 1.70%

EUR        Eurozone Retail PMI Dec A 49 | P 48.5

EUR        Eurozone Unemployment Rate Nov A 10.50% | C 10.70% | P 10.70% | R 10.60%

EUR        Eurozone Business Climate Indicator Dec A 0.41 | C 0.39 | P 0.36 | R 0.4

EUR        Eurozone Consumer Confidence Dec (F) A -5.7 | C -5.7 | P -5.7

EUR        Eurozone Economic Confidence Dec A 106.8 | C 106 | P 106.1

EUR        Eurozone Industrial Confidence Dec A -2 | C -2.9 | P -3.2

EUR        Eurozone Services Confidence Dec A 13.1 | C 12.6 | P 12.8

EUR        Eurozone Retail Sales M/M Nov A -0.30% | C 0.20% | P -0.10% | R -0.20%

USD       Challenger Job Cuts Y/Y Dec A -27.60% | P -13.90%

USD       Initial Jobless Claims (JAN 2) A 277K | C 271K | P 287K

CAD       Ivey PMI Dec A 49.9 | C 56.7 | P 63.6

Good Luck,

Andy

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