Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 101.733 | EURUSD 1.1076 | AUDUSD 0.74627 | NZDUSD 0.71468 | USDCAD 1.29787 | USDCHF 0.97674 | GBPUSD 1.30218 |

LMAX Highs and Lows 5am GMT

                                High | Low

EURUSD               1.10757 | 1.1036

USDJPY                 101.767 | 100.578

GBPUSD               1.30292 | 1.27952

AUDUSD              0.74642 | 0.74077

USDCHF               0.97841 | 0.97674

USDCAD               1.30472 | 1.29799

NZDUSD               0.71575 | 0.70826

EURGBP               0.86325 | 0.84990

EURJPY                 112.694 | 111.051

EURCHF                1.08139 | 1.07938

 

For Today

• EUR: The drag of Cable pulled the Euro lower through the session against the USD with the market falling back from the 1.1070 areas to trade steadily through to the 1.1040 areas before finding a base for the market and the move through to London around the 1.1050 levels, Topside offers light through the 1.1080 areas and likely to see only light stops through the 1.1100 areas and the offers possibly into the 1.1120 level, a move through will likely see stronger offer from the 1.1140 areas and through to the 1.1160 before limited weakness on top. Downside bids likely through the current lows and increasing into the 1.1000 areas with possible weak stops on a break down below the 1.0980 areas and the market seeing only limited support until the 1.0900 areas.
• GBP: Cable continued its fall, with the market opening around the 1.3020 areas and holding into the Tokyo session before strong selling again appeared, EURGBP rose back to yesterday’s highs around the 0.8540 levels and once the level broke quickly moved to above the 0.8630 level before dropping back as the market started to stabilize, Cable was quickly lower as the market broke below the 1.2950 levels quickly taking out the 1.2900 area and after a limited pause through the 1.2880 areas dipped to the 1.2800 as the liquidity disappeared from the market, GBPJPY again played a major part as funds move back the JPY and once the lows were traded the market bounced back to the 1.2840 level and started a limited recovery to the 1.2900 areas as the market moves towards London, Downside bids are likely to be scant with the possibility of bids into the 1.2800 level and through to the 1.2760 area before fresh weakness appears and the market again opens to the downside, Topside offers into the 1.3000 areas are light and only just starting to build and would need some better news to deflect the current market expectations however, with any large move the market always leaves weakness behind it and a short squeeze through the level could see a similar move back to the stronger 1.3200 areas.
• JPY: Opening around the 101.70 areas the market traded quietly into the Tokyo session however, as the Cable started to give ground the GBPJPY saw a steady shift and selling increased the further into the session we moved with the USDJPY holding the 101.20 levels for several hours before breaking lower and eventually triggering stop through the 100.80 areas to dip to the 100.60 level, the market recovered a little with some buying returning the market to the 101.00 levels however the market was never really convincing on the move and has remained under the level for the most part, Topside offer light through to the 101.20 areas before the market opens to the topside with possibly better offers on a move through to the 101.80 areas with weak stops likely through the 102.20 areas and no real strong levels until the market tests into the 103. Levels again, Downside bids increasing through the current lows and while the safe haven flows continue those levels are vulnerable however, at this stage the BoJ and MoF are likely to be in contact and discussing the levels with the 100 area likely to be a line in the sand for Tokyo, a push through the level leaves the downside struggling with the levels having not been really tested since the Brexit vote but possibility of stronger bids into the 99.000 areas.
• AUD: AUDJPY selling dominated the session however, with safe haven flows into the JPY going through the market it had little impact on the Oz which opened around the 0.7460 areas and moved steadily through to the 0.7410 areas in quiet trading for the most part before holding just below the 0.7430 areas into London. Topside offers likely to be sparse until the market pushes back through the 0.7530areas were the market will see stronger offers moving through the 0.7550 levels and then weak stops likely on a push through the 0.7560 areas and the market pushing to 76 cents and further offers. Downside bids into the 74 cent level for the moment are likely to be light and a push through the 0.7380 areas is likely to see the 73 cent level tested quickly.

Overnight News

Equities:

Equity markets through the session all show red as concerns about Brexit see outflows

AUD:

Australian PM Turnbull edges ahead in poll count.

JPY:

Abe’s election campaign puts BoJ policy on the back seat

GBP:

Theresa May lead ballot to become British PM

GBP plunges through the past 24hrs as Brexit concerns trigger reactions from BoE’s Carney

UK banks say ready to lend more after capital requirements are cut

Property funds continue to suspend trading

Today’s data

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

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

06:00     EUR        German Factory Orders M/M May C 1.10% | P -2.00%

08:10     EUR        Eurozone Retail PMI Jun P 50.6

12:30     USD       Trade Balance May C -40.0B | P -37.4B

12:30    CAD       Trade Balance (CAD) May C -2.7B | P -2.9B

Harry Hindsight              

• EUR: A quiet drift through the Asian session with the market moving from the opening around the 1.1160 areas to trade quietly around the 1.1130 levels through into the London session, London were steady buyers of the Euro with a better than expected PMI services number after the media hyped the Standard life story calling a halt on withdrawals from property funds, this saw the EURGBP push through the 0.8400 levels in Asia and then a quick move through the 0.8420 levels and a gradual move for the cross to the 0.8480 areas, while Cable fell back the Euro quickly rose to the 1.1190 areas before meeting sufficient offers to hold the market and then ranged through into the NYK session around the 1.1150 areas, the demise of Cable dragged on the Euro eventually even as the cross tested higher through the 0.8540 levels and eventually the Euro saw weak stops through the day’s lows and tumbled quickly through to the 1.1100 level with only a limited stall before continuing through to the 1.1070 areas and continuing through the close in that areas unable to regain the 1.1100 level.
• GBP: As I commented above the move through the Asian session saw a limited movement with the Standard life story already in the domain the day before, holding around the 1.3250 areas having slipped through the session from the 1.3300 levels the market really started a deep and trend lower as the commentary from BoE Govn. Carney stirred the market up and the Cable drifted to the 1.3120 areas before moving into the NYK session and the trend continued falling steadily back to trade to the lowest levels since 1985 testing the 1.3000 before trading quietly through to the close around the 1.3025 areas for a long drawn out play. Whether this is all over done remains to be seen and given that Article 50 hasn’t been handed in yet bodes ill for the Cable for the time being however, the exporters are likely to be happy with the situation for the moment and that side of the market will at least improve add to which a rise in inflation caused by the weak GBP would benefit the economy again, so interest cuts a possibility for a short period one would suspect and then to the actual divorce from Europe still with plenty of question marks.
• JPY: The flee to a safe haven continues and not to the liking of the BoJ one would suspect, opening around the 102.55 areas the move into the Tokyo session saw the market move down to the 102.20 levels and eventually dipping through to test the 102.00 areas through the session and into London, GBPJPY cross selling featured throughout the session with the USDJPY drifting through to the 101.80 areas and running before breaking through the levels and falling into the 101.60 areas and holding for the most part through the session into NYK and continuing through the session around those lows.
• AUD: The Oz moved through from the opening 0.7540 areas drifting with the Oz election still not completely certain but for the most part looking like a majority government for Turnbull, the release of a worse than expected trade balance number saw the market move quickly to the 75 cent levels before rising a little into the release of the RBA announcement. No change saw the market spike above the opening levels before collapsing back towards the 75 cent areas as a dovish commentary followed the announcement, the move through to the London session was a little choppy however, it wasn’t until deep into the London session that the 75 cent levels were broken fully and the move into the NYK session saw the Oz trading quietly through to the 0.7460 areas and as with the other currencies a rather exhausted finish to the day with the market trading around that area for several hours.

Yesterday’s premiership results

AUD       Trade Balance (AUD) May A -2.22B | C -1.72B | P -1.58B | R -1.79B

AUD       Retail Sales M/M May A 0.20% | C 0.30% | P 0.20% | R 0.10%

CNY        Caixin China PMI Services Jun A 52.7 | P 51.2

AUD       RBA Rate Decision A 1.75% | C 1.75% | P 1.75%

EUR        Eurozone Services PMI Jun (F) A 52.8 | C 52.5 | P 52.4

GBP       Services PMI Jun A 52.3 | C 53.1 | P 53.5

EUR        Eurozone Retail Sales M/M May A 0.40% | C 0.60% | P 0.00% | R 0.20%

GBP       BoE Financial Stability Report

USD       Factory Orders May A -1.00% | C   1.90% | P 1.80%

Good Luck,

Andy

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