Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 115.845 | EURUSD 1.11931 | AUDUSD 0.70863 | NZDUSD 0.66341 | USDCAD 1.39276 | USDCHF 0.98701 | GBPUSD 1.44322 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               115.85 | 114.205

EUR/USD             1.12375 | 1.1185

EUR/JPY               129.65 | 128.315

AUD/USD            0.7088 | 0.7019

NZD/USD             0.6628 | 0.6577

USD/CAD             1.3952 | 1.3923

EUR/CHF              1.1050 | 1.1034

USD/CHF             0.9874 | 0.98245

GBP/USD             1.4436 | 1.4411

EUR/GBP             0.7785 | 0.7757

 

For Today

• EUR: Equities again seemed to be the catalyst for further USD weakness the Euro started the session reasonably quiet, however, once the market moved into the Tokyo session the equity markets again came under pressure and the Euro started to move higher pushing from the early lows just below the 1.1190 levels to trade to the 1.1210 areas, as the day progressed JPY strengthened across the board as the fall in the USDJPY went through the 115.00 level and continued dropping squeezing the Euro towards the 1.1240 levels before dipping back quickly on comments from Aso MoF FinMin and the Euro dipped back to the 1.1210 areas to trade slowly towards the grey hours holding the 1.1200 areas. Topside offers into the 1.1240-60 with only slight weakness before again running into offers around the 1.1280-1.1320 levels however, a strong break through the level will likely open the 1.1400 as the next target and possible weakness into the 1.1500 levels from Oct last year, downside bids light through to the 1.1120 areas where it’s likely bids have started to appear however, they are to be a little weak and stronger bids are not likely until the 1.1050 areas.
• GBP: A very quiet session for the Cable with the market drifting for the most part in the 1.4420-40 areas before starting a steady drift lower as the market approached the grey hours and pressing the 1.4410 levels, limited direct GBP trading with only light EURGBP fluctuations. Light topside offers through the 1.4450 and a tired looking market around the 1.4500 areas and the market not really that strong until the 1.4550, through that level though the market is likely to see more sellers appearing on the approach to the 1.4600 and for the moment Euro’s seems to be the dominant motivator for moves, Downside bids light into the 1.4400 levels and likely to increase as the market begins to approach the 1.4350 areas with possible weak stops on a strong move through the level and exposing the 1.4250 area again.
• JPY: The move into the Tokyo session saw the USDJPY drifting a little moving off the opening 115.80 areas and pushing through 115.50, the equity markets continued to weaken once the Tokyo session opened and USDJPY then followed suit with a steep decline through the 115.00 levels triggering weak stops and pushing to lows just above the 114.20 areas, FinMin Aso spoke early in the session and while it initially had little impact the market did eventually find a base and move steadily higher to push towards the 115.00 levels late into the session towards the grey hours, Topside offers likely into the 115.20 areas and the topside is likely to find offers continuing through to the 116.00 levels and possibly further comments over the coming days from various BoJ and MoF officials after 6 big figure drop since the BoJ negative rate introduction, bids likely into the 114.00 level however, a strong push through the level could leave the market with a quick move lower and the 110.00 becoming a target however, a stronger Yen at this stage is not what the BoJ wants so one would expect some strong commentary to deflect any move towards those areas during the next few days.
• AUD: The Oz for the moment seems to have decoupled itself from the JPY and the carry trade selling is impacting the JPY leg rather than the Oz, so having openined around the 0.7090 level the early selling through into Tokyo tested down into the 0.7030-40 areas before bids seemed to hold the market, it attempted a couple of times to probe lower however, once the USDJPY had stopped sliding the Oz traded in the 0.7020-40 range for the bulk of the session with very little independent movement, Topside offers into the 71 cent levels are likely to have been reset and the market through the level is likely to be weak beyond the 0.7120 areas and open to another test of the 72 cent levels however, with no independent movement and a reliance on CNY data which we will see on the 10^th the Oz is probably side-lined a little, downside is limited with bids into the 70cent level and likely to increase on a move through the 0.6950 level and into the 69 cent area.

Overnight News

JPY:

FinMin Aso: Yen’s movement clearly rough

Aso: will continue to watch the FX market movements closely

EconMin Ishihara: looking for annual wage negotiations to lead to rise in real wages

Ishihara: recent gains in JPY due to external factors, bought on safe-haven flows

Ishihara: rate of inflation rising toward the end of deflation

Ishihara: Negative rates show BoJ’s determination to end deflation

Ishihara: Falling interest rates will result in a rise in Capex, but this will take time

Ishihara: will go ahead with next sales tax hike unless there is an economic shock

NZD:

NZ south island was hit by a 5.7 magnitude earthquake

CNY:

Speculation rife over China’s apparent willingness to let CNY fall

EUR:

EU aims at deal on multinationals tax disclosures in March
Today’s data

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

JPY         Japan Money Stock M2+CD Y/Y Jan A 3.20% | C 3.10% | P 3.00% | R 3.10%

GBP       BRC Retail Sales Monitor Y/Y Jan A 2.60% | P 0.10%

AUD       NAB Business Confidence Jan A 2 | P 3 | R 2

JPY         Machine Tool Orders Y/Y Jan (P) A -17.2% | P -25.70%

06:45     CHF        Unemployment Rate Jan C 3.50% | P 3.40%

07:00     EUR        German Trade Balance (EUR) Dec C 19.4B | P 19.7B

09:30     GBP       Visible Trade Balance (GBP) Dec C -10.4B | P -10.6B

15:00     USD       Wholesale Inventories Dec C -0.20% | P -0.30%

Harry Hindsight              

• EUR: Through the Asian session the market was fairly quiet with the Euro opening around the 1.1145 areas and drifting in the 1.1130-50 range for the move into London, London were steady buyers pushing the market to the 1.1180 levels and into awaiting offers however, what was a steady equity market in the Euro area soon started to deteriorate and with it went the Euro followed and having tested the offers was quickly pushing through to test the downside bids through 1.1120 and eventually pushing to the 1.1090 levels before holding into the NYK session, as with the European session the US session saw equity market deteriorating and the USD moving with it, Euro’s quickly regained the topside squeezing through the 1.1140-50 area and triggering weak stops and quickly pushing through the near offers and pushing just above the 1.1210 areas before dipping into the close.
• GBP: Cable moved slowly higher through the Asian session with light EURGBP selling the motivator through the session, moving from the 1.4500 areas the market moved into the grey hours pushing at the 1.4520 levels, early London were quick buyers and the market moved above the 1.4540 levels before the turn in the equity markets appeared with the Cable dropping back to the opening levels, the 1.4500 level broadly held for a short period and with the FTSE in full retreat Cable quickly moved to the 1.4400 level and from the opening in NYK a choppy session as the selling continued however, this was in the face of a weakening USD and although the Cable hit the 1.4355 area the market was eventually forced higher and into the 1.4420-40 range to the close.
• JPY: The Asian market opened around the 116.90 levels and then gradually moved higher into the 117.50 in a gradual rise through into the grey hours, the opening of London started to JPY buying against EUR, GBP impacted on the USDJPY and it was gradually forced lower into the NYK session where the decline increased in the first few hours as the equity drop continued into midsession, USDJPY eventually began to hold having hit the 115.20 levels recovering as profit taking moved in and finished in the 115.80 levels.
• AUD: The Oz had a rangy day escaping for the most part the strong selling, the market opened around the 0.7070 levels and moving higher from the opening the market was still fresh into the Tokyo session when the 71 cent level was breached for the first time however, the move was halted and the market then drifted back before starting a fresh rally continuing through into the London session and pushing this time to the 0.7130 areas before the equity fallout across the markets started to impact the Oz, this was more a case of retail selling of the carry trade as margin limits started to be put under pressure initially holding the 0.7080 before moving into the NYK session and a quick drop in line with the USDJPY fall and dipping to the 0.7050 levels, the initial NYK selling though soon started to see the Oz begin to rise against the USD and pushed slowly back above the 71 cent levels before finishing the day above the opening levels.

Yesterday’s premiership results

JPY         Current Account (JPY) Dec A 1.64T | C 1.59T | P 1.42T

JPY         Labour Cash Earnings Y/Y Dec A 0.10% | C 0.70% | P 0.00%

JPY         Eco Watchers Survey: Current Jan A 46.6 | C 48.5 | P 48.7

EUR        Eurozone Sentix Investor Confidence Feb A 6 | C 7.2 | P 9.6

CAD       Building Permits M/M Dec A 11.30% | C 5.60% | P -19.60% | R -19.90%

USD       Labour Market Conditions Index Change Jan A 0.4 | P 2.9 | R 2.3

Good Luck,

Andy

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