Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 106.142 | EURUSD 1.13844 | AUDUSD 0.76127 | NZDUSD 0.72434 | USDCAD 1.27724 | USDCHF 0.9588 | GBPUSD 1.48744 |

LMAX Highs and Lows 5am GMT

                                High | Low

EURUSD               1.14291 | 1.09112

USDJPY                 106.916 | 0.98976

GBPUSD               1.50200 | 1.3229

AUDUSD              0.76502 | 0.73077

USDCHF               0.98003 | 0.95364

USDCAD               1.30961 | 1.27075

NZDUSD               0.73018 | 0.69765

EURGBP               0.83169 | 0.76000

EURJPY                 122.124 | 109.366

EURCHF                1.09933 | 1.06541

 

For Today

• EUR: Early gains in the Euro as it pushed through the 1.1400 levels look promising that is until the results in the UK started to see a bias to the leave side and Euro’s started a drift lower and although we saw spikes and the points where the GBP was sold sharply the move lower was limited through to the 1.1300 levels and mid-session, the break through the level quickly saw the market dropping hard as GBP selling increased, Euro’s hit the 1.1200 levels in a short period and bounced as EURGBP buying moved in a little however, the rally was short lived and the market was unable to push back through the 1.1300 areas, as the results continued arriving and the Leave option gained a greater lead the Euro followed the Cable even more closely and the market saw moves to the 1.1150 level then through the 1.1100 with each level showing limited support and ever stronger moves, while liquidity was an issue at least there were limited consistent bids coming in but it was too little and too late and the push through 1.1100 saw the market quickly through 1.1050 and then a struggle through 1.1000, the final push lower saw the Euro dragged lower testing through to the low 1.09 handle the market has still not assessed the potential damaged done to the European area once the details are finalised and while the supposed exit may take 2yrs to move through some laws within the UK could quickly be changed to the detriment of the European Union and one can expect some harsh criticism from the federalist types, Topside offers are limited at best and there is a potential for a short squeeze higher however, this is likely to be tempered as equity markets move lower and funds start move, for the moment the market looks to be holding the 1.1000 areas and pushing into really nothing and the prospects of offers appearing is likely to be into the 1.1200 levels and the volatility likely to continue through the day. Downside bids likely to be into the 1.0900 areas, however, a push through the 1.0870 area could see some light stops appearing and the downside then seeing light congestion but the 1.0800 levels from the beginning of the year open to testing.
• GBP: Early trading with just exit polls to go on saw the market rising through the 1.5000 areas with little resistance however, as the first result started to come in with Newcastle expected to be comfortably in the remain camp was barely on side and this set the market up for the vote across the Tyne and Sunderland expected to be marginal see a strong leave vote, the market having drifted to the 1.4850 areas dropped quickly back, a deep move as the market saw little in the way of support and dipping through the 1.4300 areas before bouncing as light remain numbers started to drift in pushing back to 1.4750 and all in an hours period, there were rumours of the BoJ entering the market below the 1.4400 levels while entering the USDJPY market simultaneously, whether this was a smoothing operation on behalf of the BoE remains to be seen but could well have been the BoJ taking advantage of a situation however, that was unconfirmed for the moment. The market then traded in a better range and more in line with continuing results filtering through the Cable again rising to the 1.4700 areas as the remain results looked to be pulling ahead, expected remain areas though continued to come in with wins but limited while the marginal areas continued to show greater losses to the leave voters and the percentages started to shift further towards the leave as the results continued, over an hour later and the leave voters showed strong gains and Cable again started to drop sharply the first move down to through the 1.4000 levels to set new lows then rallying to the 1.4600 level for a brief period before again seeing the Cable drop further and this time the Leave votes started to build a marginal lead as we moved past the half way results and holding a 2% margin deep into the session the selling this time continued through to the 1.3500 levels with speeches from some already starting to talk about Brexit on a fact, with the numbers continuing to add up to leave during the course of the morning with the lead stretching to 1mio and the 16.8mio target almost reached the Cable continued its push lower with the move through the 1.3500 level attracting some attention and although the market pushed back to the level the final hour into the grey one saw the market again dropping this time into the 1.32 handle and the game is over, with the London market to open one assumes the moves could be a little more muted with London practically being open for the past 24hrs however, while the exporters will be happy for the moment one assumes that Mr Jean Claude Junker wishes he’d kept quiet as my vote was cast with his commentary in mind. Now normally I’d put topside and downside levels however, for the moment this is not an option with the topside well and truly cleared and the downside likely to be open to further losses, equity markets are likely to be painted red as the world watches
• JPY: USDJPY opened with GBPJPY early buying and the USDJPY moving closer to the resistance around the 106.80 areas before holding through into the Tokyo session holding above the 106.50 areas before the first dip in Cable occurred, the resultant GBP selling sent the USDJPY back through the 105.00 levels with the weak stops triggered and the market shifting quickly to close to the 103.00 levels, talk of intervention in the markets saw the market back to the 105.00 areas in short order and the market traded for a couple of hours through to the next set of large UK results and the market again dipping through to the 104.00 levels, with the market tracking the GBP the increase in margin to leave and a shift in the spread betting on the result saw the USDJPY drop back quickly to push to the 99.00 level with plenty of stops triggered on the move lower before bouncing quickly back to the 101.50 areas and then slowly pushing to the 102.00 areas however continuing selling of GBP weighted on the market in general. The move lower didn’t go uncontested and I only mention this again as it is uncertain whether it was official BoE liquidity injection or whether the BoJ took advantage of the situation in either case the liquidity supply had a limited reaction and the market once it dropped to the 103.50 areas quickly dived down to the 99.00 areas surprising the market and quickly bouncing off the area to the 102 levels, even so the push through the 100 level opened up potentials for further losses and the market having struggled still gravitated towards the 100 level and has since ranged widely with the 101 at the centre, Downside bids into the 100 are now likely to be present and with all the stops likely to have been cleared below the area is likely to be more supportive and deeper in depth with stops only likely to appear through the 99.00 areas. Topside is likely to have potential and a strong push through the 102.00 areas could see a squeeze through to the 104.00 areas and some overhanging offers and then a build of stronger offers as the market tests back through that topside.
• AUD: Early optimism saw the Oz testing towards the 0.7650 areas before the market started to shake as the Remain voters lagged the Brexit voters in the UK referendum, the drag of GBP pulled the Oz lower through the session and while the market in Oz saw good gains against the GBP the drag still pulled the Oz lower as the GBP/AUD cross was sold clearing plenty of bids on the way, the initial move took the Oz towards the 75 cent levels and held deep into the session with the action of possible BoJ spiking the market before the selling resumed and forcing the Oz down through the levels to test the 73 cent levels before finding sufficient support to hold its levels. Topside offers likely to be light and the potential for a short squeeze is there if the market can find some downside stability however, any move higher could see liquidity issues again, with the stronger offers likely to only appear above the 75 cent levels and then increasing the closer the market moves to the 76 cent areas. Downside bids are likely into the 73 cent levels however, the downside is likely to be less stable if the rout in GBP continues and only a strong move through 72 cents is likely to attract strength and bids appearing through to the 0.7050 areas.

Overnight News

GBP:

Brexit win and the disengagement of the UK from Europe begins

Cable hits lowest levels since 1985

Gold:

Safe haven flows into the Gold see the market extend gains for the biggest move since 2008

Equities:

Several futures indexes hit limit down in the turmoil of the Brexit vote

Today’s data

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

JPY         Corporate Service Price Y/Y May A 0.20% | C 0.10% | P 0.20% | R 0.30%

08:00     EUR        German IFO – Business Climate Jun C 107.6 | P 107.7

08:00     EUR        German IFO – Current Assessment Jun C 114 | P 114.2

08:00     EUR        German IFO – Expectations Jun C 101.2 | P 101.6

08:30     GBP       BBA Mortgage Approvals May C 37.9K | P 40.1K

12:30     USD       Durable Goods Orders May (P) C -0.80% | P 3.40%

12:30     USD       Durables Ex Transportation May (P) C 0.30% | P 0.50%

14:00    USD       U. of Michigan Confidence Jun (F) C 94.2 | P 94.3

Harry Hindsight              

• EUR: A nervous day overall with the Asian session being fairly quiet through the early part and rising from the opening 1.1310 areas after another poll suggesting a lead increasing for the remain camp in the UK dragging the Euro to the 1.1340 areas before drifting around the level into the London session with one or two attempts to the 1.1350 level, through into the London session saw the market drifting lower as the UK voting got underway and the PMI numbers showing mixed results with a general worse than expected overall and the market testing to the 1.1320 areas with stronger volume coming through, the move from then was helped by further polls through the day with the market moving up quickly to the 1.1400 areas in some strong buying through to the NYK session with the market holding just off the 1.1420 highs, with the market becoming a little more edgy into the back end of the day the market drifted back away from the highs and slowly gravitated to the 1.1350 areas to hold deep into the session before the rumours and exit polls started to impact the markets and a push to the close back to the 1.1400 areas on weak volume as the market pared back its positioning short term.
• GBP: Strong poll from the opening saw the Cable gap higher into the opening with the market quickly testing through the 1.4800 levels to touch 1.4840 before slipping a little back to trade around the 1.4800 levels through into the London session, weak selling on position squaring as the market moved to the opening of the voting began and the market then started to rise again as early exit polls started to move into the market, testing higher on light volume the topside was eventually cleared all the way to the 1.4940 areas into the pre-NYK session, the move into NYK saw the market holding just below the 1.4900 areas the move to the London close saw the market moving quickly back to the 1.4800 areas as day traders cut there positions with discretion being the best part of valour, the late session saw the market trading steadily around that area before seeing fresh buying enter the market as the odds of a Brexit receded to the close.
• JPY: After moving quickly higher with Cross GBPJPY buying moving in and a little bit of a squeeze in the pair the USDJPY tested quickly to the 105.00 levels before drifting back through the Asian session in slow trading through to the London session, the Opening in London saw strong selling as the safe haven flow renewed itself and this saw the downside cleared again to the 104 area with very weak bids through to the level before bouncing back to the 104.40 areas and then a steady rise to the 105 areas again, the move through towards the NYK session saw the topside offers continually tested and eventually the market broke through and quickly tested to the 105.20 areas, the offers were far weaker than expected and once through weak stops opened the market to the move to the 106.00 area and a ranging market through the NYK session between the 105.60-106.00 levels with only a brief peek through that figure area.
• AUD: A steady rise through the session with some strong AUDJPY buying moving into the market, Asia was caught below the 0.7530 areas for much of the session with the gap to the 0.7510 areas from the closing figure area triggering buying towards the 30 levels however, the market took the grey hours before pushing through the level and the move into the London session then saw continuing buying through to the 0.7560 areas as a steady grind before weak stops triggered a move through to test towards the 76 cent level and then holding through to the NYK session in the 0.7580-0.7600 areas, light selling through to the 0.7560 areas before the market saw slow rising through the session back to the 76 cent level in quiet trading before pushing lightly through into the close.

Yesterday’s premiership results

JPY      PMI Manufacturing Jun (P) A 47.8 | C 48.2 | P 47.7

EUR        France Manufacturing PMI Jun (P) A 47.9 | C 48.8 | P 48.4

EUR        France Services PMI Jun (P) A 49.9 | C 51.5 | P 51.6

EUR        Germany Manufacturing PMI Jun (P) A 54.4 | C 52.1 | P 52.1

EUR        Germany Services PMI Jun (P) A 53.2 | C 55 | P 55.2

EUR        Eurozone Manufacturing PMI Jun (P) A 52.6 | C 51.4 | P 51.5

EUR        Eurozone Services PMI Jun (P) A 52.4 | C 53.2 | P 53.3

USD       Initial Jobless Claims (JUN 18) A 259K | C 271K | P 277K

USD       New Home Sales May A 551K | C 560K | P 619K | R 586K

USD       Leading Indicators May A -0.20% | C 0.20% | P 0.60%

USD       Natural Gas Storage A 62B | C 59B | P 69B

Good Luck,

Andy

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