Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 116.947 | EURUSD 1.08901 | AUDUSD 0.6908 | NZDUSD 0.63969 | USDCAD 1.45041 | USDCHF 1.00417 | GBPUSD 1.41913 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               117.48 | 116.48

EUR/USD             1.08985 | 1.0867

EUR/JPY               127.695 | 127.315

AUD/USD            0.6959 | 0.6890

NZD/USD             0.6478 | 0.643

USD/CAD             1.4512 | 1.445

EUR/CHF              1.0943 | 1.0933

USD/CHF             1.00635 | 1.00445

GBP/USD             1.4202 | 1.4171

EUR/GBP             0.76845 | 0.7655

For Today

• EUR: Opening around the 1.0890 levels the market moved quietly through to just before the Tokyo opening and the opening of the WTI contract saw the market move from $28.60 and test though towards $29 this was sufficient to give the USD a little boost and the Euro moved into the Tokyo session testing the 1.0870 levels as the Oil stopped having tested the $29 level so did the USD’s movement and the Euro remained in a tight 1.0870-85 range until late into the session and a sagging Oil drifting back through the opening levels gave the Euro sufficient leeway to the 1.0895 areas before holding quietly, Topside offers light into the 1.0900 levels with light resistance likely to continue to the 1.0920-30 areas before the market opens a little with possible weak stops on a move through the level however, 1.0940-60 still remains with the likelihood of further resistance to a move higher and only a strong push the 1.1000 level will see the market move off the last couple of weeks ranges however, 1.1050 is now starting to shape up as the key levels to push through allowing the market to test the 1.1100 levels and the ranges beyond. Downside bids light through to the 1.0800 levels then some likelihood of support appearing and buying into the 1.0780 levels likely to dominate, through the level and the market could see some light stops however, the bids quickly return and any move through to the 1.0700 areas is likely to meet strong support through the 1.0760-40 area and then 1.0720-00 areas.
• GBP: Cable struggled through the session and while early gains in Oil and against the Euro inspired a rally to the 1.4200 level there was sufficient offers in the area to stymie any further gains and apart for a spike towards the 1.4205 level the sagging Oil eventually started to dominate the market and the squeeze on margins in the far east saw GBPJPY selling eventually weighing on the market sufficiently for Cable to ease back to the opening 1.4180 areas, the selling subsided for a short period before again resuming as the oil continued to fill the gap on the charts that appeared on the reopening in the Asian session and Cable drifted through to the 1.4170 levels before starting a limited recovery as the market moved towards the grey hours, While suspicion for the weakness in GBP is laid at the Brexit vote in June this year, I would feel that it’s too early for any thought of the vote until the discussions on membership continue in Brussels and as yet there is less contentious language than you would expect so much so that we hear next to nothing on the subject, but for the moment the topside would seem to be lightly defended however, as soon as Cable pushes something else in the market colludes to halt the progress, Oil for the moment remains the focus for the USD and GBP however, a push through to above the 1.4200-20 areas will likely clear the first hurdle and the appearance of weak stops through the area, and a similar story into the 1.4250 areas and 1.4300 all of which were easy enough to penetrate on the way down, this still leaves Cable with a lot to do though and for the moment any topside movement has a long way to go before the market becomes a little more stable, Downside bids into the 1.4150 areas and through seem to be reasonably strong having been tested over the past 3 days repeatedly and maybe I should revise whether there are strong option plays to the downside 1.4100 level if so they are deep and possibly strong and may well continue to slow the market on any attempt lower however, a push through the level will probably see stronger interest going into the 1.4000-50 areas.
• JPY: Late chatter by PM Abe on his Abenomics routine saw the USDJPY initially push strongly for the opening around the 117.00 levels to test through the opening to above the 117.40 area and hold for several hours into the session, good AUDJPY buying was seen and it wasn’t until the market started to see renewed weakness in the oil market that USDJPY turned lower and again as yesterday selling it was a tight channelled sell lower with hardly any bounces to mention to push into the grey hours testing back below the 117.00 levels. Topside offers light through the 117.50 areas and while you’re probably bored with hearing it better offers into the 117.80-118.00 areas with those offers likely to be mixed through the level with some weak stops possibly appearing however, the move to the 118.40 areas is where the possible stronger offers are and continue through to the 118.50 level, a push here though is likely to see a quick move higher and the 119 coming under threat however, at this stage in the game someone would have to hide a large oil producing country.
• AUD: Early buyers of AUDJPY after the Abe commentary on further easing conditions being in place, and the Oz moved off the opening 0.6910 level and as with USDJPY traded steadily through to the Tokyo opening to test to the 0.6960 areas before the movement in Oil started to take the focus of the market away, having drifted back to the 0.6930 levels the Oils move back from the $29 level again had USD and commodity currencies under pressure and the Oz moved in a tight channel back through 69 cent to touch briefly to below the 0.6890 levels into the grey hours. Topside offers light through the 69 cent levels and the market does seem to have plenty of interest through the 0.6940-60 area and again from 0.6980-0.7000, with very little in the way of stops I would imagine the market is caught for the moment in a reasonably tight longer term range with buyers into the 0.6800-50 areas and then profit taking on moves back through the 0.6960 areas, even a push through the 70 cent level will see resistance to the move to the 0.7040 areas and only a push above the 0.7050 has any chance of opening up a larger move higher. Downside bids into the 0.6830 cent levels has seen strong bids appearing and while these remain the market looks set to continue to trade in a reasonably tight range on a daily basis, a push through the 68 cent level will allow the market to move quickly into the next level and 67 cent is likely the only protective area before 65cent.

Overnight News

JPY:

Abe Aide Says Conditions for Further BOJ Easing in Place: WSJ

Abe Aide Says Still Too Early for BOJ to Decide on More Easing

BOJ Governor Kuroda: Won’t Hesitate to Adjust Policy If Needed

Japanese Sold Net 375.2 Billion Yen Overseas Debt Last Week

BOJ: Japan Home Loan Demand Drops to -4 From -2 in Jan.

Corporate Japan Wants Yen at 115-125 vs Dollar: Nikkei Poll

Japan’s Amari to Address Graft Allegations; News Report Details

Japan’s Amari Says ‘No Way’ That I Will Be Accused of a Crime

Suga Says He Thinks Amari Has Been Doing Good Job in His Post

JPY: Japan Nov. All Activity Index Falls 1% M/m; Est. -0.7%

JPY/TWD:

Foxconn Said to Offer $5.3b to Take Over Sharp: WSJ

CNY:

PBOC Economist Says Overuse of RRR Cut Bad for Forex Rate: News

CNY: Shanghai FTZ Steps Up Scrutiny on Outbound Investment: 21^st

CNY: China Faces Rising Possibility of Economic Risks: Info Daily

NZD:

Fonterra May Cut GDT Volumes if Prices Keep Falling: Spierings

NZD: N.Z. Consumer Confidence Gain Shows Economic Resilience: ANZ

AUD:

Australia’s Nov. Private New Home Sales Fall 2.7% M/m

GBP:

U.K. Dec. RICS House Price Index at 50 vs Est. 50

IMF:

IMF Says It Starts Selection Process for Next Managing Director

Today’s data

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

NZD       Business NZ Manufacturing Index Dec A 56.7 | P 54.7 | R 54.9

AUD       Consumer Inflation Expectation Jan A 3.60% | P 4.00%

GBP       RICS House Price Balance Dec A 50% | C 50% | P 49%

JPY         All Industry Activity Index M/M Nov A -1.00% | C -0.70% | P 1.00% | R 0.90%

12:45     EUR        ECB Rate Decision C 0.05% | P 0.05%

13:30     EUR        ECB Press Conference

13:30     USD       Philly Fed Manufacturing Index Jan C -0.9 | P -5.9

13:30     USD       Initial Jobless Claims (JAN 16) C 281K | P 284K

15:00     EUR        Eurozone Consumer Confidence Jan (A) C -6 | P -6

16:00     USD       Crude Oil Inventories P 0.2M

Harry Hindsight              

• EUR: The market continues to be dominated by the Oil price movements, Euro’s opened quietly holding the 1.0908 areas before moving higher into the Tokyo session as the Oil market again came under pressure and the Euro pushed to the 1.0920 areas and gradually moved through the levels to test above the 1.0930 areas, wit the oil testing through the $29 area and to $2860 before finding some buyers, Euro managed steady gains as the USD slipped lower and eventually pushed through the into the grey hours testing the 1.0960 levels and inflationary numbers from Germany disappointed dropping the Euro back to the 1.0940 levels before the London opening, London initially saw strong buying in the Euro as EURGBP cross again tested through the 0.7700 levels rising quickly to above the 0.7750 areas before holding into the UK numbers, the release of those numbers turned the cross and the Euro came under pressure with the cross dropping back to the 0.7700 levels and the Euro back to the 1.0920 areas, with early equities markets again under pressure the Euro found little to be joyful about and with the ECB decision tomorrow found little proactive interest for a period and the Euro slowly drifted into the NYK session testing through the opening levels and the 1.0900 level, for the bulk of the remaining period the Euro traded in a 30-40 pip range moving to the 1.0930 areas before always dipping back to successive deeper lows through the 1.0900 level, London finished for the day and the Euro rallied quickly to the up area of the range before strong selling again appeared with a tight channelled move taking the market from the mid 1.0930’s back through to make the lows just below the 1.0880 level, the move to the close saw limited gains from the lows to finish just off those levels.
• GBP: A choppy day for the Cable with the market moving off the opening 1.4145 area and swiftly moving to the Tokyo open testing the 1.4180 level more as a consequence of the drag of the Euro, the dip in the Oil market saw Cable dragged lower and to a greater extent than the USD’s move and lost ground in the EURGBP with the cross pushing firmly through the 0.7710 level and quickly testing 0.7730 with weak stops triggered, Cable was forced to below the opening levels and continued to test that low through the early part of Tokyo, as the market calmed a little the market was able to push gradually through to the 1.4160 areas and into the London session, pre-release of employment numbers again saw EURGBP moving to above the 0.7750 levels with strong selling in Cable reappearing and the market making new lows below 1.4130 however, the numbers saved the day for Cable with the unemployment rate again reduced to 5.10% and a dip in benefit claims add to which the average weekly earnings dipped slightly and Cable quickly moved to the 1.4190 triggering some stops along the way however, the market was unable to make any more gains at that point and the move towards the NYK market saw an empty downside again testing to the 1.4130 levels, NYK took a more fundamental view with a good set of numbers the GBP was the currency in view and it made steady gains through the 1.4200 levels before running out of steam into the 1.4220 area, US numbers had little impact and the Oil was again the deciding factor on a change of direction with the Oil dropping from the 29.20 levels to 27.80 Cable again was hurt badly with the market dropping back to the 1.4150 level and then chopping around the 1.4150-85 areas for the most part, the final rally caught some short term shorts holding and the market managed a slight squeeze into the close.
• JPY: USDJPY again came under pressure as the Oil price slipped to new lows through the day, with the market opening arouond the 117.65 levels the market once into Tokyo never saw those levels again trading in a tight channel through the session to the grey hours and testing into the 116.50 as early London entered the market, the Official opening in London saw the USDJPY drop back quickly to test the 116.00 levels and although it sneaked through it was not overly convincing and the market eventually snapped back to the 116.70 areas before trading through to the NYK session around the 116.50-70 area, fresh selling into the NYK session was limited and although the market tested to the 116.20 levels it was a steady movement with plenty of two way interest appearing and then a steady recovery from the close of London saw the USDJPY again rising to the 117.00 levels with carry trade buying doing a little work.
• AUD: A similar pattern to that of the USDJPY with the market opening above the 69 cent level and making steady headway into the Tokyo session and Oil selling, the Oz with the USDJPY slowly slipped lower through to the grey hours and tested to the 0.6850 levels, the quick drop of USDJPY saw AUDJPY selling entering the market with retail traders now being squeezed in AUDJPY, Equities and Oil leaving very tight margins and that sector closing out quickly, once the market had touched through to the 0.6830 level for the second time this week it recovered to the 0.6850-60 levels and made slow gains through the end of the session to finish almost unchanged and finishing slightly higher than the opening.

Yesterday’s premiership results

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

USD       Net Long-term TIC Flows Nov A 31.4B | P -16.6B | R -17.7B

NZD       CPI Q/Q Q4 A -0.50% | C -0.20% | P 0.30%

NZD       CPI Y/Y Q4 A 0.10% | C 0.40% | P 0.40%

AUD       Westpac Consumer Confidence Jan A -3.50% | P -0.80%

EUR        German PPI M/M Dec A -0.50% | C -0.20% | P -0.20%

EUR        German PPI Y/Y Dec A -2.30% | C -2.20% | P -2.50%

GBP       Jobless Claims Change Dec A -4.3K | C 2.0K | P 3.9K | R -2.2K

GBP       Claimant Count Rate Dec A 2.30% | P 2.30%

GBP       Average Weekly Earnings 3M/Y Nov A 2.00% | C 2.10% | P 2.40%

GBP       ILO Unemployment Rate (3M) Nov A 5.10% | C 5.20% | P 5.20%

CHF        ZEW (Expectations) Jan A -3 | P 16.6

CAD       Wholesale Sales M/M Nov A 1.80% | C 0.50% | P -0.60% | R -0.50%

CAD       Manufacturing Shipments M/M Nov A 1.00% | C 0.40% | P -1.10% | R -1.30%

USD       Housing Starts Dec A 1.15M | C 1.19M | P 1.17M | R 1.18M

USD       Building Permits Dec A 1.23% | C 1.20M | P 1.28M

USD       CPI M/M Dec A -0.10% | C 0.00% | P 0.00%

USD       CPI Y/Y Dec A 0.70% | C 0.80% | P 0.50%

USD       CPI Core M/M Dec A 0.10% | C 0.20% | P 0.20%

USD       CPI Core Y/Y Dec A 2.10% | C 2.10% | P 2.00%

CAD       BoC Rate Decision A 0.50% | C 0.50% | P 0.50%

Good Luck,

Andy

Any opinions, news, research, analyses, prices or other information contained on this Blog, whether by LMAX, its employees, partners or contributors, does not constitute investment advice nor has it been prepared in accordance with legal requirements designed to promote the independence of investment research. Further, the material contained within this Blog does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. Whilst information provided on this Blog may help with your investment research you must consider carefully whether you should make (or refrain from making) investment or other decisions based on what you see without doing further research on the investments you are interested in. Participating in this Blog cannot be a substitute for obtaining advice from an appropriate expert independent adviser who takes into account your circumstances and specific investment needs in selected investments that are appropriate for you. LMAX has not verified the accuracy or basis-in-fact of any claim or statement made by any third parties as comments for every Blog entry.

LMAX will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. No representation or warranty is given as to the accuracy or completeness of the above information. While the material produced in this Blog was obtained from sources deemed to be reliable, LMAX does not provide any guarantees about the reliability of such sources.

Consequently any person acting on it does so entirely at his or her own risk.

If you currently hold an account with LMAX for the purposes of trading FX and CFD’s, you are encouraged to use a different Username and Password to access the Blog or any other online systems. The Blog is a place to learn, discuss and share information and ideas with Blog followers. It is not a place to slander, use unacceptable language or to promote LMAX or any other FX, Spread Betting and CFD provider and any such postings, excessive or unjust comments and attacks will not be allowed and will be removed from the site immediately.