Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 119.968 | EURUSD 1.09197 | AUDUSD 0.70384 | NZDUSD 0.64969 | USDCAD 1.40547 | USDCHF 1.0185 | GBPUSD 1.44098 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               119.99 | 119.42

EUR/USD             1.09365 | 1.09125

EUR/JPY               130.93 | 130.41

AUD/USD            0.7053 | 0.7003

NZD/USD             0.6550 | 0.6509

USD/CAD             1.4103 | 1.4046

EUR/CHF              1.11355 | 1.11125

USD/CHF             1.01915 | 1.0175

GBP/USD             1.4418 | 1.4391

EUR/GBP             0.7592 | 0.7574

 

For Today

• EUR: Early trading saw the market holding around the 1.0930 areas with a minor dip on the opening in Tokyo before a quick rise higher to test through the 1.0935 areas, with the weaker than expected Oz trade balance seeing EURAUD buying moving through however, once the data was absorbed into the market the Euro again started to drift lower and pushed steadily towards the 1.0912 area before finding a base. The move into the grey hours saw a quick bounce back as early eastern Europeans moved in, Topside offers through the 1.0940-60 areas are likely to give way to a stronger set of offerings from the 1.0980-1.1000 levels, PMI numbers and retail sales for the Eurozone are a possible influence on the day and more so the retail sales and having seen -0.30% for November expectations of 0.40% for a Christmas period are not likely to surprise if they are right however, the 1.1000 level is likely to be a tough one to crack and one would suspect only strong numbers will push through the level and weak stops above 1.1000 are likely to see a stab higher, downside bids light through to the 1.0800 areas and stronger bids start to make an appearance into the 1.0820 areas, even through the level the market continues to be fairly well bids from the 1.0760 area and the downside is only threatened by poor numbers.
• GBP: Cable remained fairly quiet through the session with the market drifting a little from the opening and testing into the Tokyo session through the 1.4400 areas before slowly rising once the Oz trade numbers were out of the way, the market then continued to hold in the 1.4410 areas for the most part and staying above the 1.4400 level to the grey hours. Topside offers into the 1.4450 levels are likely to be fairly light and although the market held the level yesterday a push through the level would suggest the topside opening up for a larger move however, this would be against the fundamentals that initially drove the market lower and although stops are likely through the 1.4450 areas and offers into the 1.4500 todays media and comments from various politicians and hangers on is likely to dominate the market, Downside bids light through the 1.4400 levels and with only light bids into the 1.4320-00 areas is likely to give way to light stops and the market pushing back into the 1.4200 areas before finding sufficient interest to hold the market.
• JPY: The USDJPY saw commentary from Kuroda with those comments having little effect on the USDJPY slipping further lower through the session, opening around the 120.00 levels the early market tested through to the 119.70 levels and although there was light buying into the Tokyo opening that selling continued through and the market eventually tested into the 119.40 areas before finding sufficient bids to hold it up, from there it traded around the 119.60 areas into the grey hours and back to the pre interest rate cut areas, bids likely into the 119.20 areas and possibly strong enough to hold the market however, with US numbers late into the session that is not a given and a weak ADP employment change number could cause some movement. A push through the 118.80 areas is likely to see light stops and a run to the 118.50 and possibly stronger bids from that point into the 118.00 areas. Topside offers light into the 120.00 areas with the market needing to clear the 120.10 level again in any vain hope of pushing back above the 120.50 areas and onwards.
• AUD: The Oz opened around the 0.7040 levels and was quickly under pressure in the lead up to the Trade numbers, the market continued to drift into the Tokyo session and the release saw a spike to the 0.7050 areas on what I assume was the better Building approvals before the weaker trade balance number came out and the market dropped quickly into the 70 cent level and then quietly traded around the 0.7010 to the grey hours, Topside offers now into the 0.7050 areas and likely to be very light with the market only opening up on a push through the 0.7140 areas where stronger offers are likely, downside weak stops are likely through the 0.6990 areas and once those are cleared the chance of stronger bids improves the closer the market moves towards the 0.6950 areas and through to 69 cent and while there will be weak stops appearing below there for the most part they are likely to be evenly matched early in the move through by bids before the market is likely to see very strong bids into the years lows.

Overnight News

JPY:

Kuroda Says BOJ Can Reduce Negative Rates Further If Needed

BOJ Kuroda says can ease more, devise new tools

Japan to Cancel 10-Year Bond Sale to Individuals, Nikkei Says

Mitsubishi UFJ May Charge Companies Fees on Deposits: Nikkei

Some BOJ Members: Firms’ Inflation Expectations Decreasing

Nikkei Japan Jan. Services PMI 52.4 vs 51.5 in Dec.

BOJ Will Look Into Media Report Foreshadowing Negative Rates

NZD:

Wheeler: RBNZ Will Avoid Mechanistic Response to Low Inflation

New Zealand 4Q Jobless Rate 5.3%; Est. 6.1%

AUD:

Australia Posts Biggest Annual Trade Deficit on Record

Australia Dec Building Approvals Rise 9.2% M/M; Est. 4.5% Rise

Australia Jan. Services Index Rises 2.1 Pts M/m to 48.4

CNY:

Caixin China Jan. Services PMI 52.4 vs 50.2 in Dec.

China Plans Check on State Assets Held by Govt. Backed Agencies

GBP:

U.K. Jan. BRC Shop Price Index -1.8% Y/y vs Dec. -2% Y/y
Today’s data

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

NZD       Unemployment Rate A 5.30% | C 6.10% | P 6.00%

NZD       Employment Change Q/Q A 0.90% | C 0.80% | P -0.40% | R -0.50%

GBP       BRC Shop Price Index Y/Y Jan A -1.80% | P -2.00%

AUD       Trade Balance (AUD) Dec A -3.54B | C -2.45B | P -2.91B | R -2.73B

AUD       Building Approvals M/M Dec A 9.20% | C 4.60% | P -12.70% | R -12.40%

CNY        Caixin PMI Services Jan A 52.4 | C 50.5 | R 50.2

JPY         Consumer Confidence Jan A 42.5 | C 43.8 | P 42.7

08:45     EUR        Italy Services PMI Jan C 54.2 | P 55.3

08:50     EUR        France Services PMI Jan (F) C 50.6 | P 50.6

08:55     EUR        Germany Services PMI Jan (F) C 55.4 | P 55.4

09:00     EUR        Eurozone Services PMI Jan (F) C 53.6 | P 53.6

09:30     GBP       Services PMI Jan C 55.4 | P 55.5

10:00     EUR        Eurozone Retail Sales M/M Dec C 0.40% | P -0.30%

13:15     USD       ADP Employment Change Jan C 191K | P 257K

15:00     USD       ISM Non-Manufacturing Composite Jan C 55.2 | P 55.3

15:30     USD       Crude Oil Inventories P 8.4M

Harry Hindsight              

• EUR: Euro’s spent the first half of the day rising, with the market moving off the 1.0890 levels and gradually tested higher through the Asian session, nothing dramatic just a steady rise testing through the 1.0900 levels initially and then attempting to push beyond the 1.0920 levels, the initial attempt in Asia failed and the market fell back towards the figure area and into the grey hours, better than expected employment numbers in Germany helped the market higher once again and although the market still was unable to break the 1.0920 levels this time it didn’t back so far away and remained close to the level through the NYK session, NYK bought from the opening and the move through the 1.0920 levels triggered weak stops but not as much as you’d expected and the market pushed to the 1.0935 areas before a final move to the 1.0940 areas before slipping back from those highs and the reverse trip was quicker once the market moved back through the 1.0920 levels it dropped quickly through to below the 1.0900 and into the those opening levels, from there it was a slow and gentle rise higher and the market did push back to the 1.0920 levels into the close.
• GBP: Mixed day for Cable with the market opening around the 1.4430 levels and slowly trading around that level deep into the session, the release of an unchanged RBA announcement was sufficient for Cable to start drifting lower and by the time the market moved into the grey hours it was testing the 1.4380 levels, EURGBP buying seemed to be the focus of the day with PM Cameron and discussions with the European Union over changes required for the UK to have a chance of remaining as part of the European Union, as yet that is to be decided by the UK electorate and while Euro moved higher the Cable dropped back in London to test the lows of 1.4330 areas as speculation increased, when Cameron did speak he imparted only parts and those parts fell well short of the mark as far as the media was concerned however, it was a strong enough beginning for the markets to reverse the selling and the Cable pushed back through the 1.4400 levels and then pushed to the 1.4450 areas before running out of steam and into the NYK session, NYK was a little more pragmatic and for them little has changed from yesterday and the market continued to bounce around a little, centring on the 1.4400 areas before heading back to the opening levels and a steady drift to the close.
• JPY: A quiet session for the USDJPY in reality with the market opening around the 121.00 levels and then steadily slipping lower through Asia to test the 120.40 areas, and above the 120.10 areas that looked technically weak, London moved the market steadily higher again and the test back to above the 120.80 was weak at best and seemed to be limited, the move into the NYK session saw the market for USD’s weaken that is all but the GBP, and the market traded in a tight channel through the session to trigger some weak stops through the 120.00 level but finishing the day around those lows.
• AUD: The Oz saw minor adjustments into the run to the release of the RBA decision, opening around the 0.7110 levels the market tested only slightly lower before returning to the opening levels, the release of no change saw the Oz rise quickly to the 0.7130 levels before the communique hit the wires, and while the content was little different to previously it was worded slightly differently and the bias to easing continues with data watching the name of the game, needless to say this saw the Oz dropping quickly through the opening levels and trading below the 0.7090 level then starting a steady drift until the market tested the 0.7070 levels and then slowed into the London session, early buyers in the grey hours saw the market quickly drop again from the official opening in London and this triggered weak stops on the move to the 0.7040 areas, and this was more or less the low with the market then trading around the 0.7050 areas to the close.

Yesterday’s premiership results

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

JPY         Monetary Base Y/Y Jan A 28.90% | C 28.30% | P 29.50%

AUD       RBA Rate Decision A 2.00% | C 2.00% | P 2.00%

CHF        Retail Sales (Real) Y/Y Dec A -1.60% | C -1.30% | P -2.10%

EUR        German Unemployment Change Jan A -20K | C -10K | P -14K | R -16K

EUR        German Unemployment Rate Jan A 6.20% | C 6.30% | P 6.30%

GBP       Construction PMI Jan A 55 | C 57.6 | P 57.8

EUR        Eurozone PPI M/M Dec A -0.80% | C -0.40% | P -0.20%

EUR        Eurozone PPI Y/Y Dec A -3.00% | C -2.80% | P -3.20%

EUR        Eurozone Unemployment Rate Dec A 10.40% | C 10.50% | P 10.50%

Good Luck,

Andy

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