Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 117.758 | EURUSD 1.0859 | AUDUSD 0.69943 | NZDUSD 0.65451 | USDCAD 1.42154 | USDCHF 1.00146 | GBPUSD 1.45421 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               118.04 | 117.42

EUR/USD             1.0885 | 1.0840

EUR/JPY               127.935 | 127.645

AUD/USD            0.7004 | 0.6974

NZD/USD             0.6567 | 0.6544

USD/CAD             1.4237 | 1.4205

EUR/CHF              1.08765 | 1.0867

USD/CHF             1.00215 | 0.9992

GBP/USD             1.4560 | 1.4527

EUR/GBP             0.74905 | 0.7459

For Today

• EUR: Early trading saw a sideways movement around the 1.0850-60 opening levels before the USD again started to give a little ground with the Equity markets nominally red and renewed offshore CNH buying from the PBoC with commentary added, the Euro saw a gradual climb through to the 1.0880’s before running into resistance. Topside offers into the 1.0900 level are likely to be light with a decent push through the 1.0930 levels again opening a test to the highs of yesterday and better offers from 1.0980-1.1020, even through the level there is likely to be consistent offerings through to the 1.1050 areas. Downside bids light through to the 1.0850 levels with some congestion in the area however, a solid push through will again see the market testing through onto the 1.07 handle and the lows from last week vulnerable.
• GBP: Talk of Brexit seems to be influencing the market somewhat even if it’s a little premature, with Cable initially struggling from the opening around the 1.4545 areas the market was unable to convincingly push through the 1.4550 levels and drifted into the Tokyo session, GBPJPY buying into the session saw a modest 1.4560 areas trading before the market dropped back from the fixing period and trade for a long period around the 1.4640 levels with little independent movement, a strengthening Euro and EURGBP cross saw the Cable then come under pressure as the market moved towards the grey hours and the Cable steadily slipped to the 1.4520 levels, Downside bids into the 1.4500 levels could be a little weaker than they were last week having seen a sudden dip on the opening yesterday however, a push through the level sees only sentimental bids likely through to the 1.4300 levels and the lows of 2010 vulnerable in the long term. Topside offers light through the 1.4550 areas although the market struggled just above the level all day so far, with better offers suspected above the 1.4600 areas and continuing through the 1.4650 before the topside opens a little.
• JPY: Opening around the 117.80 levels the market drifted initially into the Tokyo session before attempting the topside and struggling for the second day to push through cleanly above 118.00. having failed the level and continuing intervention on the USDCNH the USDJPY drifted steadily from that point on to test into the 117.40 levels on a pretty lacklustre day for the pair which suggests that sentiment and fundamentals ran contrary through Tokyo. Topside offers into the 118.00 levels are likely to be insufficient to slow a strong run through however, in limited action through Asia the market only attempted to the level once and outside influences for the session dominated the USD, a push through the level though will allow the USDJPY to again test to the 118.80 levels with the intervening space less likely to be that difficult to move through however, for the moment that is a tough nut to crack, Downside bids into the 117.20 levels are likely to extend to the 116.80 area at which point they are likely to be reasonably strong with day traders possibly attracted to the years lows and what importers and yield buyers there are possibly becoming involved however, a push through this level could see the downside open up for a deeper move with limited bids likely around the sentimental levels and a long was to the levels of 2014.
• AUD: A quiet day for the Oz with the market moving more on carry trade movements and the Oz holding up better, opening just below the 70 cent level the Oz touched the 0.6980 after a quiet start and then the move into the Tokyo session saw steady AUDJPY carry buyers taking the Oz back towards the 70 cent level and a brief move through before holding for an extended period quietly around the 0.6990 levels, as the market moved towards Lunch the Oz started to drift lower and the move into the grey hours saw the market testing below the 0.6980 levels. Topside offers into the 70 cent level are possibly light in nature and the better offers are not likely to be seen until the market moves towards the 0.7040 area, even so those offers are likely to continue with a mixture of stops possibly through the 0.7060 level as the market targets a look at 71 cents however, given the current situation it could be a struggle, Downside bids on the 69 cent handle remain strong and particularly on any dips through the 0.6950 level and into the lows from yesterday however, a push through the 69 cent level and the market finds itself in areas not seen since 2009 and the longer term view would obviously be that of a deeper move towards the 0.6600-0.6500 areas.

 

Overnight News

CNY:

Yuan Overnight Interbank Rate in Hong Kong Soars to 66.8%

Yuan Decline to Stimulate Chinese Exports: Sec. Journal

China Said to Ask Banks to Cut Yields on Wealth Products: Rtrs

CNH:

Hong Kong Banks Raise Yuan Deposit Rates, Apple Daily Says

JPY: Japan Posts 17th Straight Current Account Surplus in November

Japan Dec bank loans rise 2.2% vs. year ago

GPIF Will Need 135-150 More Staff for In-House Investing: Mizuno

Mizuno: GPIF Is Mulling 3% Limit for In-House Stock Investments

Japan MSDF to Act If China PLA Ships Sail Near Senkaku: Yomiuri

USD:

Dallas Fed’s Kaplan Says He Argued for December’s Rate Lift off

Kaplan Sees No Great Bright Spots in World Economy Outside U.S.

AUD:

Australia ANZ Weekly Consumer Sentiment Falls 1.9% to 114.1

NZD:

New Zealand Export Commodity Prices Fell in December, ANZ Says

GBP:

U.K. LFL Dec. Retail Sales Up 0.1% Y/y, BRC Says

HKD:

Hong Kong Exporters to Cut Prices in 2016, HKEJ Says

KRW:

1. Korea Has Resumed Own Propaganda Broadcasts in DMZ: S. Korea

RUB:

Russia Plans 10% Budget Cut as Oil Hovers at $30/b: Vedomosti

Today’s data

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

JPY         Current Account (JPY) Nov A 1.42T | C 1.52T | P 1.49T

GBP       BRC Retail Sales Monitor Y/Y Dec A 0.10% | P -0.40%

JPY         Consumer Confidence Index Dec A 42.7 | C 42.3 | P 42.6

JPY         Eco Watchers Survey: Current Dec A 48.7 | C 46.7 | P 46.1

09:30     GBP       Industrial Production M/M Nov C 0.00% | P 0.10%

09:30     GBP       Industrial Production Y/Y Nov C 1.70% | P 1.70%

09:30     GBP       Manufacturing Production M/M Nov C 0.10% | P -0.40%

09:30     GBP       Manufacturing Production Y/Y Nov C -0.80% | P -0.10%

15:00     GBP       NIESR GDP Estimate Dec P 0.60%

Harry Hindsight              

• EUR: Pre-market trading was quiet and in line with Fridays close however, once the market officially opened there was JPY buying impacting the market again and as the USD dropped back in the face of continuing economic issues in China Euro’s moved to make the highs for the day trading to the 1.0970 level with light stops through the 1.0950 level in a thin market helping it attain those highs, the market then started to drift back to the 1.0940 levels and although Tokyo was officially closed the market struggled through the next few hours holding those levels before dipping back to the opening 1.0920 areas and a slow drift into the London session, with only Investor confidence to talk about the market was gradually forced lower as the EURGBP cross having made highs above the 0.7550 levels found itself under pressure and for once it was the Euro leg that seemed to give more ground with the break back below 0.7500 pushing the Euro to the 1.0870 levels in early London. The move through to the US session and a distinct lack of data saw the Euro holding around the 1.0900 levels, with NFP numbers last week reasonably robust and talk of the next hike start to enter the mind of the market and the Euro repeatedly tested the 1.0850 levels through the session with a reasonably wide range throughout the NYK session rising to the 1.0900 areas but struggling to recover the losses on the day and finishing just above the lows.
• GBP: Cable opened around the 1.4525 areas and movement in JPY crosses including the GBPJPY pair saw the Cable initially dip down to test below the 1.4500 levels and trigger supportive bids leaving the market short and then a nasty snap higher to trade towards the 1.4560 levels as said shorts in the market hit the panic button to cover their risk, once the buying was covered the market moved into the Tokyo portion of the day trading back around the opening levels, a steady rise saw the market move into the London session trading only just above the 1.4530 levels with EURGBP selling already starting the Cable started to climb higher through the early part of the session and pushed through the highs of Asia and continued to the 1.4580 areas before running out of steam, and holding the levels into the NYK session, NYK were again steady sellers of EURGBP and Cable was allowed to move towards the 1.4600 level and test briefly through before short term sellers quickly pared their longs and the Cable settled back to trade around the 1.4550 level in an ever decreasing range to the close just below the level. Talk now starting to appear on the subject of Brexit after several weeks of chatter of an accommodating Europe being bypassed and the consequences of an exit from Europe by the UK now being looked at as the summer vote on the subject suddenly has become closer given we are now in 2016 and in December we were not, nonetheless this is how many are now looking at the current weakness in GBP.
• JPY: On the opening the JPY immediately dropped through the 117.00 levels with predominantly ZARJPY selling impacting the market however, this also saw GBPJPY, AUDJPY and to a lesser extent other pairs losing ground to the safe haven of the Yen, however having quickly tested the 116.80 levels and slightly through the market saw steady buying as the USD started to rally and the market moved into the officially closed Tokyo session attempting to fill a small gap on the charts, the market eventually pushed through the 117.20 levels and moved back to the opening levels around the 117.40 areas and then traded quietly through to the London session. London were steady buyers from just before the opening and the market steadily rose in the first hour of trading to reach to just above the 117.90 levels before trading quietly into the NYK session, quick buying saw the market test briefly through the 118.00 levels before drifting back away from the level and pushing all the way back to the 117.20 levels through to the end of London before rising for a close just short of the 117.80 levels with continuing concerns for the economic situation in China and the far east in general.
• AUD: Initial Yen buying from the opening forced the Oz lower as AUDJPY selling moved into the market having seen the opening some 10 pips higher from the close on Friday, the Oz then pushed quickly to the 0.6930 areas before finding sufficient support to hold the market and the move into the Tokyo session saw steady AUDJPY buying and AUDUSD in general taking the market through the opening levels and testing the 0.6980 levels before running out of steam as the Sydney market came to a close and a prolonged grey hour movement into the London session. From the opening in London there was fresh impetus to buy and the market struggled initially around those 0.6980 highs before triggering light stops and a move through the 70 cent levels, the move continued through to the NYK session albeit slowly and the market pushed to the mid 0.7030 levels in the early part of NYK before seeing steady selling from profit takers to bring the market back to below the 70 cent level, the market traded back to the 0.6970 levels and as soon as London was out of the way there was some light attempts into the Sydney opening to push back to the 70 cent levels into the close.

Yesterday’s premiership results

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

NZD       Building Permits M/M Nov A 1.80% | P 5.10% | R 5.40%

CHF        Retail Sales (Real) Y/Y Nov A -2.10% | C 0.30% | P -0.80% | R -1.10%

EUR        Eurozone Sentix Investor Confidence Jan A 9.6 | C 11.5 | P 15.7

CAD       Housing Starts Dec A 173K | C 213K | P 211.9K

Good Luck,

Andy

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