Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close Wellington open

USDJPY 118.778 118.65-67 | EURUSD 1.07982 1.0798-1.0801 | AUDUSD 0.70042 0.7001-05 | NZDUSD 0.64883 0.6471-99 | USDCAD 1.41265 1.4148-53 | USDCHF 1.0162 1.0153-68 | GBPUSD 1.42644 1.4272-77 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               118.855 | 118.43

EUR/USD             1.0816 | 1.0789

EUR/JPY               128.495 | 127.86

AUD/USD            0.7031 | 0.6981

NZD/USD             0.6532 | 0.6462

USD/CAD             1.4170 | 1.4127

EUR/CHF              1.0988 | 1.0961

USD/CHF             1.0164 | 1.0140

GBP/USD             1.4310 | 1.4255

EUR/GBP             0.7575 | 0.75555

For today

• EUR: Opening unchanged the market moved quietly through into the Tokyo session with the market basing for the most part on the 1.0790 levels, the move deeper into Tokyo eventually saw light EURJPY buying moving into the market and the Euro moved steadily to above the 1.0815 areas having seen the cross make early lows through the 128.00 levels on the cross. Topside light offers into the 1.0880-1.0900 areas with those offers possibly extending to the 1.0920 before the weakness starts to appear, even so the 1.0980 level provides a much stronger area and the move through the 1.1000 level could see and extension of offers to the 1.1050 areas, Downside bids through to the 1.0780 levels are not really expected to be that strong and a move through the 1.0770 areas are likely to then show weak stops on the move towards 1.0730-1.0680 were likely strong bids appear, however, while the area was strong over a week above it is likely to be a little weaker given draghi’s comments on easing last week, a push through that areas does leave the years lows vulnerable.
• GBP: Cable has seen a steady rise higher pushing through from the opening 1.4260 levels and edging gently through the 1.4300 levels in lacklustre trading through the session, Topside offers limited through the 1.4320 areas and the market would need to push through the 1.4360 levels to open the topside 1.4400 level for a test, and then congestion through to the 1.4450 is likely to be present but light and then a similar story over the next big figure of movement. Downside bids are light through the 1.42 handle and only once you move to the 1.4200 level do the bids start to increase however, it is light until a break below 1.4150 where the better bids are likely to appear.
• JPY: A very quiet session with the USDJPY unable to progress beyond Friday’s highs and the market trading from the opening lower into the Tokyo session before regaining the 118.80 levels from those lows into the 118.40 areas, the move into the grey hour sees the market holding around the 118.70 level. Topside offers as you’d expect from the 118.80 areas and into the 119.00 however, a strong push beyond the 119.50 areas will open the 120.00 levels for a test and although the 119.80 areas are likely to see offers they could become overwhelmed as the market moves quickly to negate the move down from the 120. Handle. Downside bids for the moment light through the 118.00 areas and then picking up as the market moves into the 117.50 areas with less likelihood of weak stops in the USDJPY and more cross driven on the downside, a push through the 117.00 level will again see light stops on the move through however, I would suspect a stronger mixture of bids and stops as the market approaches the 116.50 areas.
• AUD: Quiet opening through to Tokyo with the NZ on holiday and only the Sydney session, the move into the Tokyo session saw light AUDJPY profit taking in the market however the market was unable to push through the 0.6980 areas and from those lows steadily pushed back through the 0.7005 opening to trade to the 0.7030 before running out of steam and settling back to 0.7010 for the run into the London session. Topside offers likely from the 0.7040-60 area with a push through the 0.7100 area likely to see some light stops appearing and the market open to a test of the 0.7150 levels. Downside has now plenty of congestion below the 70 cent level and into 0.6950 in particular and likely to struggle before opening the 0.6850-0.6900 areas with strong bids likely to continue below those levels.

Overnight News

JPY:

Japan’s Cabinet Approval Rating Falls 1 Ppt to 47%: Nikkei Poll

Japan Dec exports fall 8.0 pct yr/yr, down for 3rd month -MOF RTRS

Japan’s Crude Imports in 2015 Fall to Lowest Since 1988

Japan’s National Debt To Rise to 1,191.4t Yen at End-FY2016

CNY:

PBOC Prioritizes Strong Yuan in Managing Liquidity: WSJ

Ex-China FX Official Urges Narrowing of Yuan Spread: Observer

China Financial System Liquidity to Be Ample: Sec. Journal

China May Soon Approve More Natl Free Trade Zones: Sec. Journal

AUD:

Australia Dec. Business Confidence Falls 2 Pts M/m to 3

Australian FX Market Turnover Rose 4% in October vs. April

SGD:

Singapore December Consumer Prices -0.6% Y/y; Est. -0.7%

GBP:

Rose Says Brexit Supporters’ Single Market Claims a ‘Fantasy’

Today’s data

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

JPY         Trade Balance Total (JPY) Dec A 0.04T | C 0.08T | P 0.00T | R 0.02T

AUD       NAB Business Confidence Dec A 3 | P 5

09:00     EUR        German IFO – Business Climate Jan C 108.5 | P 108.7

09:00     EUR        German IFO – Current Assessment Jan C 112.8 | P 112.8

09:00     EUR        German IFO – Expectations Jan C 104 | P 104.7

11:00     GBP       CBI Trends Total Orders Jan C -10 | P -7

Weekend News

JPY:

Kuroda Sees Limited Impact of Turmoil on Japan’s Outlook
Amari Says Will Respond Within Next Week to Allegations
Japan Opposition Urges Economy Minister to Clarify Graft Claims
JPY/CNY:

Kuroda Advises China to Impose Capital Controls to Defend Yuan
CNY:

Shanghai to Pioneer Yuan Capital Account Convertibility: Yang
HKD:

Hong Kong Doesn’t Plan to Change HKD-Dollar Peg System: Tsang
Hong Kong’s Chan Says City’s Economic Growth to Slow From 2015
HK’s Chan Says IMF Growth Estimate Challenging: RTHK
SGD:

Singapore Supports Lagarde Nomination for Second Term at IMF
AUD:

Morrison: Tax Changes to Be Taken to Australians before Election
EUR:

Belgium Could Drop Out of EU Transaction-Tax Effort; L’Echo Says
Portuguese Voters Head to Polls to Pick Country’s Next President
SEK:

Swedish Social Democrats’ Support Falls to Record Low: SVD/Sifo

 

Harry Hindsight

• EUR: A steady drift lower over the course of the day with the market opening around the 1.0875 areas and then steady selling across the board with general selling across the board as the market heeds another round of warnings on easing from the ECB, the move into the grey hours saw the Euro trading to the 1.0810 areas before early London started limited buying to take the market to the 1.0860 levels through the opening, disappointing numbers saw all the major PMI numbers lower than expected and the Euro again started a steady drift lower through the London session and into NYK, with the market eventually holding just below the 1.0800 levels, NYK although light buyers soon found itself again testing the lows and the market struggled just below the 1.0800 areas into the close.
• GBP: Cable traded for the most part from the 1.4220 levels and into the 1.4210 through the Asian session lifting off the lows as the market moved into the grey hours as light EURGBP selling moved into the session, from the Opening in London the Cable caught the bid as everything Euro was steadily sold through the session and particular once the release of the PMI numbers showing less than was expected and Cable managed to push to the 1.4300 levels into mid-morning in London, the move into the NYK session saw a similar pattern with early buyers steadily pushing through the 1.4300 level and before the London close the market had made brief highs above the 1.4360 level as the cross selling continued, as London closed for the day so did the GBP buying and the market started to slip back with the market retracing to the 1.4260 levels into the end of the day. UK retail sales did very little for the market however, the number was counterbalanced to some degree by a better than expected PSBR number.
• JPY: Talk of the need for further easing after last week’s talk of not needing further easing has seen the USDJPY slowly turn around and edge slowly back higher and the USDJPY after a faltering start with EURJPY selling setting the lows just below 117.60 in the USDJPY saw the market steadily rise from that point, moving into the grey hours testing above the 118.00 levels and holding into the European numbers before again moving up to the 118.20 levels, brief selling in NYK took the market back through the 118.00 level in a quick move before again moving back through 118.00 and triggering weak stops on the push through the 118.20 levels, the market then continued through the 118.40 levels and steadily moved to the 118.80 areas into the later stages of the day.
• AUD: A quiet day for the Oz with EURAUD selling driving the market for the most part as it moved off the lows around the 0.6990 levels and traded steadily to the 0.7030 into the grey hours, and although the NYK session made the Highs around the 0.7045 areas the market spent much of the time trading quietly around the 0.7020 areas before seeing late selling in London pushing the Oz back to base along the 70 cent level to the close.

Friday’s premiership results

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

JPY         Japan PMI Manufacturing Jan (P) A 52.4 | C 52.8 | P 52.6

EUR        France Manufacturing PMI Jan (P) A 50 | C 51.6 | P 51.4

EUR        France Services PMI Jan (P) A 50.6 | C 50.4 | P 49.8

EUR        Germany Manufacturing PMI Jan (P) A 52.1 | C 53 | P 53.2

EUR        Germany Services PMI Jan (P) A 55.4 | C 55.6 | P 56

EUR        Eurozone Manufacturing PMI Jan (P) A 52.3 | C 53 | P 53.2

EUR        Eurozone Services PMI Jan (P) A 53.6 | C 54.2 | P 54.2

GBP       Retail Sales M/M Dec A -1.00% | C -0.10% | C 1.70% | R 1.30%

GBP       Public Sector Net Borrowing (GBP) Dec A 6.9B | C 10.4B | P 13.6B | R 12.9B

CAD       Retail Sales M/M Nov A 1.70% | C 0.20% | P 0.10%

CAD       Retail Sales Less Autos M/M Nov A 1.10% | C 0.40% | P 0.00%

CAD       CPI M/M Dec A -0.50% | C -0.40% | P -0.10%

CAD       CPI Y/Y Dec A 1.60% | C 1.70% | P 1.40%

CAD       BoC CPI Core M/M Dec A -0.40% | C -0.30% | P -0.30%

CAD       BoC CPI Core Y/Y Dec A 1.90% | C 2.10% | P 2.00%

USD       Existing Home Sales Dec A 5.46M | C 5.21M | P 4.76M

USD       Leading Indicators Dec A -0.20% | C 0.00% | P 0.40%

Stay lucky

Andy

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