Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 117.023 117.05-08 | EURUSD 1.09136 1.0909-16 | AUDUSD 0.68615 0.6849-61 | NZDUSD 0.64636 6421-65 | USDCAD 1.45342 1.4510-54 | USDCHF 1.00161 1.0009-25 | GBPUSD 1.42575 1.4259-64 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               117.385 | 116.56

EUR/USD             1.0943 | 1.0887

EUR/JPY               127.92 | 127.45

AUD/USD            0.6930 | 0.6830

NZD/USD             0.6479 | 0.6405

USD/CAD             1.4650 | 1.4508

EUR/CHF              1.0952 | 1.09395

USD/CHF             1.0056 | 1.0009

GBP/USD             1.4283 | 1.4251

EUR/GBP             0.7670 | 0.7625

For today

• EUR: USDCAD was the big move in the pre-market from the opening in Sydney with what looked like a large single ticket in a less than liquid market running from the opening to the 1.4650 level before opening around the 1.4600 level and trading back to Fridays levels, Euro’s opened quietly around the 1.0920 levels and struggled into the Tokyo session unable to improve on the 1.0928 area before slowly drifting through the session to test to the 1.0890 levels in the run to the grey hours, as with the USDCAD there was some movement in Euro’s above the highs during the Sydney opening period but this could not be replicated once liquidity was added for the official openings, Topside offers light through the 1.0920 areas and likely to continue like that until light congestion into 1.0950 areas gives way to better offers from the 1.0980-1.1000 areas, downside bids into the 1.0880 levels are likely to continue through the 1.0860 areas a push through here is likely to meet only token support
• GBP: A steady rise in the Cable as the EURGBP edged further away from the 0.7700 level and traded to the 0.7620’s having opened on its highs around the 0.7660 areas, Cable found limited buyers opening around the 1.4250 areas and slowly gaining through the session to struggle above the 1.4280 levels on a couple of occasions before listing a little back into the 1.4270’s for the move into the grey hours. Light offers through the 1.4300 levels and then possibly slightly better offers into the 1.4350 areas, however, the 1.4400 is likely to be a stronger point having spent so much time dithering around the level and several days of congestion are likely to continue in the area. Downside bids into the lows with historical levels coming from 2008 and limited with the 1.4000 levels now a realistic target for the medium term. With bids through the current lows and likely into 1.4200 areas any likely bids are possibly only sentimental bids on those 00-50 levels.
• JPY: USDJPY dipped on the opening as the fallout of the rally in USDCAD caused some minor CADJPY selling moving in and the dip to just below the 116.80 levels soon started to reverse and buy the time the Tokyo session got underway the market was again at the opening levels and pushing through, the market continued rising until above the 117.30 level before running into sufficient offers and a quieter market then ensued through to the grey hours with the market moving around the 117.20 levels, Topside offers light through the 117.40 areas and the market without the US is likely to struggle from there too the stronger offers into the 118.20 levels. Downside bids into the 116.80-60 levels are likely to be strong again and only a solid push through will open up a test through the 116.00 levels and opening the longer term idea of 110.00.
• AUD: As the WTI improved so did the Oz with the market initially opening below Fridays close and pushing off the lows to test the 0.6860 level into Tokyo, Oil rallied and AUDJPY buying moved back into the market and it was all one way traffic for the most part with the Oz topping into the 0.6930 levels in mid-session before drifting a little as the market moved to the grey hours and testing the 69 cent level again. Downside bids into the 0.6820-00 area are likely to be dominated by Option barriers and only once that is cleared with the downside potential open with 65 cents quickly achievable and 2008 lows. Topside offers light through the 0.6930 areas and the topside quickly becomes vulnerable to further tests of 70 cent.

Overnight News

USD/CNY:

U.S., China Officials Discuss Clear Communications to Markets

JPY:

Kuroda: BOJ Will Check Risks, Make Policy Adjustments as Needed

BOJ Keeps Economic Assessment of Seven of Nine Regions Unchanged

Abe: Reduced Sales-Tax Would Cut Individual Burden by 4,800 Yen

Japan FSA Website Down; Anonymous Account Claims Responsibility

CNY:

PBOC Strengthens Yuan Fixing by 0.07%, Most Since Dec. 21

China State Researcher Sees 2016 GDP at About 6.5%: Fin. News

China PBOC to Monitor Internet Finance Statistics: Sec. Journal

China Dec. New Home Prices Rise M/m in 39 Cities

HKD:

HKMA’s Chan Says No Plans to Change Hong Kong Dollar’s Peg

JPY/RUB:

Japan, Russia May Share State Visits, Abe Tells FT/Nikkei

KRW/USD:

1. Korea Wealth Fund to Invest 400b Won in U.S. Hotels: Chosun

AUD:

Australia’s Dec. TD Monthly Inflation Gauge Rises 0.2% M/m

Morrison Says Low Oil, Gasoline Prices Mean Inflation in Check

NZD/JPY/GBP:

Japan, U.K. Investors Cut Holdings of N.Z. Govt Bonds in Dec.

NZD:

New Zealand Employment Index Rises From Three-Year Low: Westpac

SGD:

Singapore Dec. Non-Oil Domestic Exports -7.2% Y/y; Est. -4.4%

GBP:

U.K. January House Prices Rise 0.5% M/m, Rightmove Says

Today’s data

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

AUD       TD Securities Inflation M/M Dec A 0.20% | P 0.10%

GBP       Rightmove House Prices M/M Jan A 0.50% | P -1.10%

JPY         Industrial Production M/M Nov (F) A -0.90% | C 1.40% | P 1.40% | R -1.00%

JPY         Tertiary Industry Index M/M Nov A -0.80% | C -0.60% | P 0.90% | 0.70%

Weekend News

CNY:

China’s Economy Grew Around 7% Last Year, Premier Li Says
China Stock Regulator Admits Mistakes, Promises to Get Better
Xi Jinping Says AIIB to Boost Asia Infrastructure Investment
AIIB Will Mainly Use U.S. Dollar for Settlement: Caijin
UN:

Iran Sheds Economic Sanctions Yoke as Nuclear Deal Ratified
USD:

Iran Frees U.S. Prisoners in Swap After Lengthy Secret Talks
JPY:

Panasonic Union to Seek at Least 3,000-Yen Wage Boost: Nikkei
AUD: Australia Positioned to Withstand Resources Drop, Minister Says
Australia Considering Two Options in Tax Review, Newspaper Says
CHF:

Swiss Capital Buffer May Have Side Effects, SNB’s Jordan Says
PLN:

Morawiecki Sees Zloty Stabilizing After Polish Rating Cut
Zloty to Recover After Knee-Jerk Reaction to S&P: Szalamacha
RUB:

Main Changes Affecting Ruble Rate Happened: Siluanov to Vesti
IDR:

Jakarta Attack Death Toll Rises to Eight, Police Say on Elshinta

 

Harry Hindsight

• EUR: After a quiet start the market slowly edged higher through the Asian session with the market moving off the lows around the 1.0855 area and gradually pushing into the 1.0880 level into the grey hours, the move through the grey hours saw early strong selling with the market dipping back into the low 1.0860’s before the official opening in London returned the market to the highs and eventually pushing through the 1.0900 levels with a better than expected, the market then held the 1.0920 levels through to the NYK opening and only as the US data started to hit did the Euro gain ground with US retail sales for Dec disappointing the market, Euro’s broke through quickly triggering some light stops and traded quickly to the 1.0980 levels before settling back for a steady move through to the end of London holding around the 1.0950 levels, the close in London saw a final attempt to the topside and again the market pushed to the 1.0980 levels before finding the same resistance and the market sliding back and then dropping quickly once through the 1.0950 levels as the weak longs took limited profits and the market dipped back to trade around the 1.0910 levels to the close.
• GBP: The strength of the Euro through the day was enough to pressurize the Cable significantly lower, with the market opening just below the 1.4420 levels the market managed only meagre gains into the Tokyo session to push through that level before a long and steady drift lower and into the grey hours, where for the first time in the day the market broke below the 1.4400 levels, the move to the London opening saw the market flirting with the 1.4380 levels and a dull UK construction number was sufficient to push through that level and to the 1.4350 levels where sentimental bids supported the market for awhile and the Euro was stuck in its little bubble, US numbers and a quickly rising Euro eventually saw the EURGBP pushing steadily through the 0.7600 levels after a slow climb through Asia and then ever increasing buying in the Euro pushing through and the market for the cross never looked back trading steadily higher through to the end of the London session closing on the 0.7700 levels before slipping back to the 0.7660 areas to the close. Cable on the push higher of the cross suffered with Cable pushed ever lover and moving through the 1.4320 levels easily and steadily to a close only just off the lows around the 1.4260 levels and the lowest its been since 2008.
• JPY: A steady decline for the USDJPY through the first half of the day with the session pushing briefly above the 118.20 levels in early trading before starting to drift ever lower, with each wave pushing through the minor support with the 117.80 levels giving way to 117.60 and so on by the time the market moved deep into the London session the market was holding around the 117.40 levels and the move into NYK saw the weak retail sales numbers and the market quickly moving to 117.00 and triggering weak stops through to the 116.60 levels before bouncing, having already pushed through the level though the market was not finished and ran again at the level to set the low just through and into the 116.50’s before slowly rising from the lows to finish the day only just above the 117.00 levels.
• AUD: Crude weighed on the Oz through the session and having made an early attempt to break through the 70 cent level as with the USDJPY struggled from that point on with a steady decline through to the London session holding the 0.6910 support levels before breaking quickly through with weak stops triggering to the 0.6880 levels, the move into the NYK session saw a brief period where the Oz was able to regain the 69 cent level however it was short lived with the Oz broadly mirroring the move in Oil with WTI slipping below the USD31 level and then testing into the low 30.20 areas, the Oz on the final dip in WTI moved from the recovering 69 cent level to trade steadily to 0.6820 areas before bouncing a little to finish around the 0.6880 levels.

Friday’s premiership results

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

AUD       Home Loans Nov A 1.80% | C -0.40% | P -0.50% | R -0.30%

GBP       Construction Output M/M Nov A -0.50% | C 0.50% | P 0.20%

EUR        Eurozone Trade Balance (EUR) Nov A 22.7B | C 21.1B | P 19.9B | R 19.8B

USD       Advance Retail Sales Dec A -0.10% | C 0.20% | P 0.20%

USD       Retail Sales Less Autos Dec A -0.10% | C 0.30% | P 0.40%

USD       PPI M/M Dec A -0.20% | C -0.10% | P 0.30%

USD       PPI Y/Y Dec A -1.00% | C -1.00% | P -1.10%

USD       PPI Core M/M Dec A 0.10% | C 0.10% | P 0.30%

USD       PPI Core Y/Y Dec A 0.30% | C 0.30% | P 0.50%

USD       Empire State Manufacturing Index Jan A -19.4 | C -4 | P -4.6

USD       Industrial Production Dec A -0.40% | C -0.10% | P -0.60%

USD       Capacity Utilization Dec A 76.50% | C 76.90% | P 77.00%

USD       Business Inventories Nov A -0.20% | C 0.00% | P 0.00%

USD       U. of Michigan Confidence Jan (P) A 93.3 | C 93 | P 92.6

Stay lucky

Andy

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