Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 115.117 | EURUSD 1.12929 | AUDUSD 0.70705 | NZDUSD 0.66545 | USDCAD 1.38661 | USDCHF 0.9728 | GBPUSD 1.44715 |

 

For Today

• EUR: Less volatile so far than yesterday however, with a similar pattern, with early gains in equities quickly turned and the USD again under pressure, Euro opened around the 1.1290 areas and moved through into Tokyo little changed, as equities started to turn lower into Tokyo so did the USD and Euros pushed through the 1.1300 areas and towards the 1.1310 areas before drifting for the rest of the session in a slow market, Topside offers into the 1.1340-60 areas are likely to be light and with little in the way of data today one would expect the ECB officials to be standing in front of camera’s somewhere, through the level a push through the 1.1380 areas is likely to the be the key point for the protection of the highs from September with a push through the 1.1430 areas likely to leave the 1.1500 area very vulnerable, downside bids light through to the 1.1220 levels and through to the 1.1150 areas from that point on there is a likely to be a little more support and the market would need to push through the 1.1080 to start to reverse the recent gains with likely weakness to a move to the 1.1000 areas.
• GBP: Cable held steady through the session with the market trading in a narrow range through the grey hours, dipping slightly below the 1.4460 levels and pushing above 1.4475 into the later part of the session, Topside light offers through the 1.4500 levels with similar on a move to 1.4550 however, from then on the market starts to show more resistance and the offers are likely to increase as the market pushes for the 1.4600 levels with a move through exposing the 1.4650 and the highs of the year and possible gains from there, of course todays IP and MP numbers are of significant interest with both needing to show some sort of improvement to offlay concerns about a service led recovery continuing to cause imbalances in the economy. Downside bids light through to the 1.4400 levels and while there is support one would be surprised if its anything but token and the likelihood of better bids forming through to the 1.4350-00 areas.
• JPY: USDJPY was again busy however, not so much as yesterday but the downside 114.20 areas were again under threat as the market initially pushed slightly higher from the opening testing the 115.20 areas before the equity markets again started to slump and with it the USD, the market traded into the Tokyo session dropping steadily to the lows however, while Japanese PM was speaking to Parliament on the subject of global factors effecting the equity markets the USDJPY jumped back above the 115.10 level with nothing really news worthy and more a nervous reaction and something not seen in a while, having moved so quickly it dipped back a little more cautiously but still attempted those lows again before running out of steam and drifting a little higher to the grey hours. Topside offers through the 115.20 areas and into the 115.40 levels are likely to be light however, given the move lower those offers are likely to continue in the same manner towards the 116.00 areas, a push through here though could cause a short squeeze and the market would suddenly be vulnerable to a move through the 117.50 levels if caught unaware, downside bids into the 114.20 levels are likely to be firm however, a push through the 113.80 areas does leave the downside open to further losses with target area into the 110.00 areas and the ranges from Oct where the market pushed higher from in a quick move.
• AUD: A very quiet day for the Oz with one assumes most of the market side-lined after yesterday’s movements in AUDJPY, the Oz opened on its highs around the 0.7070 levels and drifted steadily lower to test through 0.7040 briefly with little conviction before ranging for much of the session around the 0.7050 levels, a brief test above the 0.7065 areas was all it could manage into the last half of the session before moving into the grey hour around that 0.7050 level. Topside offers into the 0.7100 levels likely to continue a short way through before some weakness appears however, the mid 71 cent handle is likely to contain some minor offers before stronger offers start to appear into the 72 cent level and through to 0.7240 area. Downside weakness to the 0.7000 areas and then stronger bids through onto the 69 cent level and increasing as the market moves below 0.6950-0.6900.

Overnight News

INR:

Default risk at State Bank of India surges on bad debt concerns

CNY:

China likely saw capital outflows of $113B in Jan

AUD:

Australia jobs growth may be overstated, Treasury’s Fraser says

Consumenr sentiment rebounds in Feb: survey

USD:

White house budget sees modest 2.6% growth in US for 2016-2017

EUR:

EU’s founding members back two-speed Europe
Today’s data

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

AUD       Westpac Consumer Confidence Feb A 4.20% | P -3.50%

JPY         Domestic CGPI Y/Y Jan A -3.10% | C -2.80% | P -3.40% | R -3.50%

09:30     GBP       Industrial Production M/M Dec C -0.20% | P -0.70%

09:30     GBP       Industrial Production Y/Y Dec C 1.00% | P 0.90%

09:30     GBP       Manufacturing Production M/M Dec C 0.10% | P -0.40%

09:30     GBP       Manufacturing Production Y/Y Dec C -1.40% | P -1.20%

15:00     GBP       NIESR GDP Estimate Jan P 0.60%

15:00     USD       Fed Chair Yellen Testifies

15:30     USD       Crude Oil Inventories P 7.8M

19:00     USD       Monthly Budget Statement Jan C 10.3B | P -14.4B

Harry Hindsight              

• EUR: After a quiet opening the JPY strength drove the Euro higher through the early part of the session in Tokyo, moving the Euro from its lows around the 1.1190 levels to push gradually into the 1.1235 areas, comments from some BoJ and MoF officials eventually saw the USDJPY turning and the rally for the Euro was over with and a steady drift back to the opening levels into the grey hours, early London bought off the lows however, with very little to go on the market comments from ECB’s Weidmann set the market lower with a run into the 1.1160 levels before sufficient bids were able to hold the market, the move was a steady grind from then on into the NYK session however, that soon became a strong move through the 1.1260 level and pushed quickly into the 1.1300 as the USD again lost ground on a gyrating equity market and nervous trading, US inventories did little to deflect the rally in the Euro and the market again pushed to the topside trading gradually just short of the 1.1340 levels with only light stops triggered through the 1.1320 before quickly dipping back to beneath the 1.1300 for the run to the close.
• GBP: After a quiet start to the day with the Cable opening around the 1.4430 levels and drifting steadily lower through the Asian session grey hours selling eventually took the market to through the 1.4400 levels several times before the official opening saw the Cable quickly bounce back to the 1.4450 areas with strong buying from the opening, the market was then buffeted by the Euro and the USD, initially moving higher as EURGBP came under pressure then losing those gains but continuing its rally as the Euro headed to the topside, EURGBP cross initially dropped to the 0.7730 into the London session however, the steady move higher was too much for the GBP and once the EURGBP broke through the 0.7800 levels Cable dropped back trading quickly to the 1.4400 levels again and the move into the NYK session saw the lows extended to the 1.4380 areas, the release of the Wholesale inventories was sufficient to draw a line under the lows of the day and the Cable quickly started to rise pushing through the 1.4430 opening areas and triggering weak stops on the way to push quickly to the 1.4480 highs from earlier in the session and gradually pushing through the 1.4500 areas and testing above the 1.4510 before running out of steam and drifting back to the 1.4450 levels and a quiet range to finish the day around 1.4470.
• JPY: The opening saw the market drifting off the opening 115.80 levels and into the 115.50 level before recovering a little into the Tokyo opening, from the first mutterings from FinMin Aso the market was in trouble and although several officials in several countries tried to verbally intervene the consequence on the day generally had the opposite effect and just highlighted the nervousness of the market, and while some comments were made on the subject of safe haven flows, the market just see’s the economic problems highlighted by the comments and indeed the recent interest rate cut to negative and so the market continues to press the downside with the market trading through the first 3 hours of Tokyo down through into the low 114.20’s before finding some bids and further comments which helped to stabilise the movement and a gradual grind higher into the grey hours, London were quick buyers and although the move looked to be overdone the market was never able to regain its losses and the move above the 115.40 level ran into offers which had obviously come lower into the market after the move, the move into the NYK session again saw USD weakness rather than Yen strength this time and again the market tested towards the lows, with wholesale inventories having a beneficial effect for the USDJPY and moving again back to the 115.40 levels in a short period, the market did seem to calm a little from that point settling down to the 114.80 areas before picking its way to the 115.20 levels into the final couple of hours on a choppy day.
• AUD: The Oz saw AUDJPY selling from the opening and although the Oz dropped from the opening 0.7090 levels to the 0.7040 areas the move seemed to be more comfortable and less panicky than a forced margin selloff and having pushed to the levels ranged through the 0.7020-40 range into the grey hours, light speculator buying into the London session saw the market briefly make its way back to the 0.7070 levels however, as with these early moves once the buying had finished those longs are quickly looking to get back out once the move fails and the market was quickly back to the lows, the move to the NYK session saw the Oz falling back as the JPY buying again increased, and the AUDJPY again came under pressure with the Oz pushing through the 70 cent level and into the suspected strong bids below that level, the market eventually held around the 0.6980 levels and the opening in NYK was a complete turnaround with both the AUDJPY carry being bought as well as the Oz in general and the market steadily made a recovery to test the highs of the day into the London close and then drifting to the close just below the opening.

Yesterday’s premiership results

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 -17.20% | P -25.70%

CHF        Unemployment Rate Jan A 3.40% | C 3.50% | P 3.40%

EUR        German Trade Balance (EUR) Dec A 18.8B | C 19.4B | P 19.7B

GBP       Visible Trade Balance (GBP) Dec A -9.9B | C -10.4B | P -10.6B

USD       Wholesale Inventories Dec A -0.10% | C -0.20% | P -0.30%

Good Luck,

Andy

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