Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 102.007 | EURUSD 1.10226 | AUDUSD 0.73296 | NZDUSD 0.69903 | USDCAD 1.30742 | USDCHF 0.97853 | GBPUSD 1.32262 |

LMAX Highs and Lows 5am GMT

                                High | Low

EURUSD               1.10646 | 1.10101

USDJPY                 102.212 | 101.580

GBPUSD               1.33375 | 1.31988

AUDUSD              0.73995 | 0.73334

USDCHF               0.97888 | 0.97651

USDCAD               1.30863 | 1.30052

NZDUSD               0.70553 | 0.69868

EURGBP               0.83444 | 0.82903

EURJPY                 112.955 | 111.944

EURCHF                1.08086 | 1.07766

 

For Today

• EUR: Possibly some return to normality with the Euro opening around the 1.1020 levels and holding into the Tokyo session before starting a steady rise higher as the Cable led the way, the market pushed from the lows of 1.1010 levels and slowly rose through to the 1.1060 areas with reasonable volumes moving through the market, and this following downgrades to the UK sovereign ratings by two different rating agencies (maybe they believe the numbers pre-vote). Topside offers likely to be in the 1.1080-1.1100 areas with the possibility of stops lurking through the 1.1120 areas and the ability to quickly move through to the 1.1180 levels and possibly stronger offers however, limited data for the data will leave the market vulnerable to rumours and commentary on Brexit not envisioned to occur for some 2 years. Downside bids likely to be limited into the 1.1000 areas however, a move through the level notwithstanding commentary could see stronger bids moving into the market through the 1.0950 areas and into the lows from Friday and possibly even stronger at that point.
• GBP: Cable reacted to the news that Fitch and S&P had downgraded the sovereign debt of the UK and a third joined in marking it to negative outlook for the future however, profit taking and a more stable equity market around the world saw the market move off the opening 1.3220 areas to Pushto the 1.3260 areas before a small short squeeze appeared and the Cable pushed quickly to the 1.3320 areas as the various negotiating sides start to prepare for an exit or a change in relationship, either way life goes on for most of us, well that is except the England side who take on Tesco’s next week having failed to beat Iceland in the European 2016 competition, the market having made its way to above 1.3300 spent the rest of the session holding the level until close to the move into the grey hours, EURGBP slipped a little lower but generally held just below the 0.8300 areas for several hours before the Euro started to play catch up, Topside offers are likely to appear around the 1.3400 levels and into 1.3450 before the market has room and a possibility of a small squeeze however, whether the market has the tenacity to push through to fill the gap from the opening yesterday remains to be seen however, 1.3600 is likely to be a tougher area for the moment. Downside bids are likely through the 1.3200 levels with strong bids possibly moving in around the 1.3150 areas however, any attempt lower leaves those bids suspect and the market has the potential to still trade deeper over the course of the coming weeks.
• JPY: The early part of the session saw the market testing lower from the opening in Tokyo and moving back through the 102.00 levels to push to the 101.60 levels again, some quick commentary from Aso and more stringent commentary on the markets saw the USDJPY bounce quickly back to above 102. However, the market then drifted from that point with the market unwilling to seemingly test beyond the 102.20 levels and content to just play safe for the moment. Downside bids into the 101.50 levels seem to be reasonably strong however; a strong push through the 101.50 areas would see better bids likely to appear around the 101.00 levels for the short term. Topside offers are likely to be weak on a move through to the 103.00 levels with offers then starting to increase in the market, a push through the 103.30 areas could see a move quickly towards the 104.00 areas and then congestion from there to the 105.00 levels.
• AUD: The Oz was driven more by the movement in USDJPY with the market moving steadily higher as the USD dipped however, once the USDJPY rebounded and started to push higher with Aso’s comments the AUDJPY carry became a more focused help for the Oz and the steady rise continued with the market testing towards the 74 cent level with the market holding at the level for a short period of time before dipping as the Lunch periods saw liquidity lessen. Topside offers light around the 74 cent level with those offers increasing a little through the level and the 0.7430 areas possibly containing limited stops and then fresh offers around the 0.7450 levels and an open market to 75 cents again. Downside bids limited to the 0.7350 areas then likely to be plenty of interest on a move through to the 73 cent areas, some weak stops through the level and the market opening only to the next sentimental level with further bids appearing every 50 pips on any move lower with 0.7150 possibly key to further losses.

Overnight News

JPY:

Abe Says Japan to Continue Monitoring Markets Carefully

Japan’s Aso: FX Market Stable Compared to Worst-Case Scenario

Japan Ruling LDP’s Nikai Calls for 20t Yen Stimulus: Nikkei

Kuroda Declines to Comment on Any Emergency BOJ Meeting

Japan’s Government Bonds All Yield Less Than 0.1% for 1st Time

AUD:

Australia’s Treasurer: No Need for Fiscal Stimulus Post-Brexit

AUD:

Australia ANZ Weekly Consumer Confidence Falls 1.7% to 116.8

CNY:

PBOC Says Yuan Stable Against Currency Basket After Brexit

China Inflation Appears Quite Stable in 2H, Official Says: MNI

Chinese Academy Sees 2Q GDP Growth at About 6.7%: Beijing News

CNY/GBP:

China to Revisit London-Shanghai Stock Link Framework: SCMP

Today’s data

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

06:00     EUR        German Import Price Index M/M May C 0.60% | P -0.10%

10:00     GBP       CBI Retailing Reported Sales Jun P 7

12:30     USD       GDP (Annualized) Q1 (T) C 1.00% | P 0.80%

12:30     USD       GDP Price Index Q1 (T) C 0.60% | P 0.60%

13:00    USD       S&P/Case-Shiller Composite-20 Y/Y Apr C 5.46% | P 5.43%

Harry Hindsight              

• EUR: Opening lower than Friday’s close the market attempted in the early part of the session attempting to fill that gap however, the general drag of GBP after the Brexit vote saw the market unable to regain the 1.1100 areas in early trading and slumping back through the session to the 1.0990 areas before finding sufficient bids to hold the market through to the London session, the market again made slow in roads into the gap and this time the market pushed to the 1.1080 areas before running out of steam and the market again drifting as the recriminations and early calls from European politicians calling for the UK to issue article 50 and get out of the way. The market drifted through the London session with it again testing through the 1.1000 levels again as the equity markets struggled and GBP continued to move lower, the move into NYK saw the market testing the 1.0970 areas and although there were early attempts above the 1.1000 areas the market continued to press against those lows through to the London close before starting a limited recovery back through the 1.1000 areas and finishing the day around the 1.1020 areas.
• GBP: Cable opened some 200 pips lower with the weekend news seeing lots of commentary from Europe and the UK in fact the commentary was world wide, moving from the 1.3450 areas the market continued to test lower through the Asian session pushing through to just above the 1.3350 levels before finding some limited buying and a steady market through into the London session holding the 1.3400 areas, early London saw buyers to lift the market towards the highs of the day around 1.3480 before starting to see further selling as UK equity markets were hit pretty strongly with the opening in London and the Cable started a slow but steady drop back through the 1.3200 levels with minimal stops showing, one assumes that side is now devoid of stops, the market then held the 1.3150 levels for the most part with only a brief move through in the NYK session before returning to above the 1.3200 areas through to the close.
• JPY: USDJPY opened as with the other majors lower and immediately started rising as the market filled the gap on the charts from the 101.60 areas to push into the Tokyo session pushing through towards the 102.50 levels as light profit taking and discussions on the possibility of intervention filtered through the rumour machine, the market then dropped back quickly as the idea was squashed for the moment and the market was quickly back on its lows around the opening levels, before moving towards the London session again testing through the lows and into the 101.50 areas before holding, London were buyers however, the move through London saw the limited buying only able to move back above the 102 for a short period before again testing through to the NYK session and basing around the 101.50 areas deep into the session, London close started to see the USDJPY rising steadily through the NYK session to the close with the market back above 102.00
• AUD: The Oz was limited through the Asian session with a stronger NZ trade balance pressing the Oz lower in early trading with the Oz slipping from the low opening around the 0.7420 areas to push along the 74 cent levels through to London, the London session saw light buying and the market attempting to fill the gap on the chart however, the move was lacklustre and the drift from the highs around 0.7450 saw the market testing into the NYK session to the lows again and the push through saw weak stops triggered and the AUDJPY selling coming into play with the market dropping over a couple of hours to the 0.7340 levels before ranging around that level through to the end of the session with lows into the 0.7330 areas.

Yesterday’s premiership results

NZD       Trade Balance (NZD) May A 358M | C 185M | P 292M | R 326M

EUR        Eurozone M3 Y/Y May A 4.90% | C 4.80% | P 4.60%

USD       Advance Goods Trade Balance May C -60.6B | C -59.5B | P -57.5B

Good Luck,

Andy

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