Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 117.677 | EURUSD 1.0877 | AUDUSD 0.69557 | NZDUSD 0.65527 | USDCAD 1.4342 | USDCHF 1.0062 | GBPUSD 1.44063 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               117.685 | 117.29

EUR/USD             1.08975 | 1.0875

EUR/JPY               128.01 | 127.75

AUD/USD            0.6961 | 0.6919

NZD/USD             0.6516 | 0.6468

USD/CAD             1.4382 | 1.4339

EUR/CHF              1.0960 | 1.0946

USD/CHF             1.00735 | 1.0055

GBP/USD             1.4427 | 1.4390

EUR/GBP             0.7570 | 0.7544

For Today

• EUR: A quiet day for the Euro with the market moving from the opening around the 1.0875 areas to push into the Tokyo session testing the 1.0890 levels, with the 1.0900 holding some offers the market was never able to push through the level and held in the 1.0880-95 areas for a good proportion of the session with limited impact by the other pairs, Topside offers into the 1.0900 level are likely to continue through to the 1.0950 levels with weak stops likely to be in the 1.0920-30 areas however a solid push through will only open the market for further limited movement with the 1.1000 likely to be similarly offered and the 1.1050 areas becoming more of a key to any further topside gains. Downside bids are weak through to the 1.0820 levels and likely to continue through to the 1.0780 levels, possibility of weak stops through the level will in all likelihood run into better bids on a move into the 1.0740-60 areas and the market then is likely to have further bids on any further push to the 1.0700 levels however, there is a possibility that commentary from the ECB MPM into the NYK session could upset the balance and a run lower through the 1.0700 opens a deeper move and the lows from December around the 1.0550 area become vulnerable.
• GBP: A quiet drift through the session with early gains to above the 1.4420 levels quickly eroded into the Tokyo opening, from there the market dipped to the 1.4390 levels on light GBPJPY selling and EURGBP buying, before spending much of the session mired around the 1.4400 levels, Downside bids into the 1.4380 levels are likely to see very little interest until the 1.4350 areas and the lows from earlier in the week, those bids though may be present to the 1.4320-00 area where likely stronger bids now reside, a move through that level will see the market more open with a reliance on historic levels dating back to 2008 with possibly better bids around the sentimental 00/50 areas. Topside offers looking fairly resistant on a move through the 1.4470 levels and likely to continue to the 1.4500 area before the market opens up however, there could be some weak stops on a break above the 1.4480 area and this lead to a push for the 1.4520 area where light offers are likely, a strong push though could see the market open for a move to the 1.4600 areas with momentum.
• JPY: USDJPY was pinned for most of the session in a 30 pip range with the downside bids through the 117.30 level holding the market on 3 separate occasions however, although the market had found its base the session it was unable to push much beyond the 117.60 levels until late in the session and into the grey hours, Topside offers likely to be weak through the 118.00 areas and only as the market pushes towards the 118.30 level does the market see offers in any particular size with only a push through the 118.50 areas opening up more upside potential into the 119.00 area, however, with enough impetus the market could possibly stretch higher if the sentiment were to change, Downside see’s bids into the 117.20-00 areas and these bids are likely to continue through the level and the downside looks technically weak with the 116.00 possibly key to a move back to the 110.00 levels over time, however, for the time being a break below the 116.80 is likely to meet a mixture of bids and stops appearing and the market vulnerable to a test of the 116.20-00 areas and stronger bids.
• AUD: The Oz opened around the 0.6960 levels and traded sideways until the release of the Employment numbers and while the numbers showed a decline of 1k the revision of the previous month higher should have compensated with an improvement of 3k however, as is the markets want with the Oz employment numbers it spiked higher above the 0.6960 level before dropping back just as quick to touch the 0.6920 area and yesterday’s lows, the market then steadied and ranged through the session within those two levels with neither buyers or sellers really committing to any strong moves and looking more like steady range plays through the session, with a police operation around the Opera house in Sydney raising concerns however, very little was heard outside of Sydney on what the problem was. Downside bids still strong through the 69 cent level however, one has to suspect breakout stops will make an appearance once any option barriers are removed, with the market then below that level the historical levels would suggest more interest likely through the 0.6850 areas however, technically this should open a deeper move with 65 cent opening for the future, Topside offers light through the 70 cent level however, once the market makes its way towards the 0.7050 areas the offers are likely to reappear and especially from Medium term buyers looking for some profit however, a break through the level will likely see only token offers on a run to the 72 cent levels however, this would likely to be connected to a rise in commodity pricing or China news as the RBA is currently happy with the level and on the side-lines for the moment.

 

Overnight News

JPY:

Japan May Use FX Reserves to Cover Reduced Tax Rate: Nikkei

Kuroda Says 2016 Vital to See If Virtuous Cycle Continues

Japan Nov. Core Machine Orders Fall 14.4% M/m; est. -7.3%

JPY/KRW:

Japan Would Accept If S. Korea Seeks Currency Swap, Sankei Says

KRW/JPY:

Bank of Korea’s Lee: Will Consider Swaps With Japan If Needed

AUD:

Australia Dec. Employment Falls 1,000 M/M; Est. 10,000 Fall

IDR:

Explosions, Gunfire Reported in Central Jakarta

Indonesia Asks Regions to Prepare for Highest Alert: Republika

Jakarta Police Received Threat From Islamic State: Metro Tv

CNY:

China Tightens Money Exchange Control to Stem Outflow: Ming Pao

CAD:

Dollar Isn’t Something Canada Gov’t Can Control, Morneau Says

NZD:

New Zealand December Retail Card Spending Falls 0.2% M/M

Today’s data

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

JPY         Machine Orders M/M Nov A -14.40% | C -7.30% | P 10.70%

JPY         Domestic CGPI Y/Y Dec A -3.40% | C -0.40% | P -3.60%

AUD       Employment Change Dec A -1.0K | C -10.3K | P 71.4K | P 74.9K

AUD       Unemployment Rate Dec A 5.80% | C 5.90% | P 5.80%

JPY         Machine Tool Orders Y/Y Dec (P) A -25.80% | P -17.70%

12:00     GBP       BoE Rate Decision C 0.50% | P 0.50%

12:00     GBP       BoE Asset Purchase Target Jan C 375B | P 375B

12:00     GBP       MPC Official Bank Rate Votes C 1–0—8 | P 1–0–8

12:00     GBP       MPC Asset Purchase Facility Votes C 0–0—9 | P 0–0–9

12:30     EUR        ECB Monetary Policy Meeting Accounts

13:30     USD       Import Price Index M/M Dec C -1.40% | P -0.40%

13:30     CAD       New Housing Price Index M/M Nov P 0.30%

13:30     USD       Initial Jobless Claims (JAN 9) C 278K | P 277K

Harry Hindsight              

• EUR: Opening around the 1.0850 levels the market traded steadily lower through the early part of the session, with the move into the Tokyo session seeing a better than expected CNY trade balance number helping the USD to recover somewhat through the session, and the Euro to slip back to test into the 1.0810 levels, the move through the bulk of the session though saw the market for the most part holding around the 1.0830 levels into the grey hours as the initial trading quietened, London official opening saw some further selling as the market attempted to trade through the 1.0800 levels poor IP for the Eurozone did little to help and although there were three separate attempts through the morning session in London the move into the NYK session again saw a weakening USD as the equity markets continued to weaken in the US, Euro pushed through the 1.0860 levels for the second time and weak stops helped the market to push slightly above the 1.0880 area and then drop back again however, Beige book report and again the Euro was pushing for the 1.0880 level and those light offers into the stronger 1.0900 levels came under fire, and then holding for the close.
• GBP: Will we, won’t we, to be honest I’ve no idea at the moment how I would vote, I see the benefits however, independence is ingrained on my soul for one reason or another, I would probably see a strong motivation for others like me will wait and see how the negotiations go before deciding however, the market seems to be fundamentally weak at the moment as Brexit weighs on the minds of the market, possibly to a far greater extent than it should this of course helps with the exports and should squeeze the imports better for the Trade balance one would assume if leaving the importers in distress, Cable traded in a 70 pip band through most of the day with early gains to push above the 1.4470 levels as the CNY number saw USD gains the Cable moved with it as the focus fell on the Euro and EURGBP selling moved into the market, once the movement after the CNY numbers was over Cable remained fairly strong and traded into the grey hours holding the 1.4460 levels, early European selling again saw the EURGBP running higher and the Cable was again under pressure and slipped back the 1.4430 level and weak stops triggered on the official opening to test to the 1.4420 levels, with the cross moving off the 0.7470 levels for the second time in the day to trade steadily higher and too the 0.7550 levels again, the strong EURGBP buying forced the Cable again from the highs above 1.4470 and this time a push through the 1.4430 levels saw weak stops triggered and the market dropping quickly back to the 1.4380 levels before steadily rising again as the NYK session moved into the markets, the Cable through the session seemed to be buffeted from one wave of buying to the next with the market seeing the same selling reappear towards those highs the market did eventually settle back into the close with the ubiquitous weak stops appearing on the drop below 1.4430 before settling just above the 1.4400 levels.
• JPY: The USDJPY had already started to move higher from the opening 117.60 areas and tested into the Tokyo session just short of the 118.00 levels the good CNY number awake the USD and the USDJPY quickly pushed through the level and struggled for a short period around the 118.10-20 areas before again pushing on, the topside offers held the market and although the market remained above the 118.00 level for the bulk of the session it was unable to break to far above the 118.35 level, having remained testing the topside for so long the close of the London session saw the USD buyers start to disappear and the market slowly drifted for several hours to finish the day surprisingly little changed from the opening.
• AUD: The catalyst for the move higher in USDJPY? Possibly so as the Oz was drifting through to the Tokyo opening with the market opening around the 0.6980 levels the release of the CNY data only confirmed the movement with the Oz already seeing good Carry trade buying moving through the market and a steady move to the 0.7020 levels, with the numbers released the market moved quickly towards the 0.7050 levels before running out of room and then as with the USDJPY held above 70 cents in a narrow range centred around the 0.7020 levels deep into the NYK session, the break down in the WTI crude from the 32.60 areas seemed to be the end of the Oz rally and as the market again approached the $31 USD level commodity currencies suffered the worst with the USD and Oz steady move lower ended the day around the 0.6950 levels and suffering as bad a fate as the Cable.

Yesterday’s premiership results

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

JPY         Japan Money Stock M2+CD Y/Y Dec A 3.00% | C 3.40% | P 3.30%

CNY        Trade Balance CNY Dec A 58.2B | C 52.2B | P 54.1B

EUR        Eurozone Industrial Production M/M Nov A -0.70% | C -0.20% | P 0.60% | R 0.80%

USD       Crude Oil Inventories A 234K | C 2.0M | P -5.1M

USD       Monthly Budget Statement Dec A -14.4B | C -10.0B | P 1.9B

USD       Federal Reserve Beige Book

Good Luck,

Andy

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