Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 108.628 | EURUSD 1.2430 | AUDUSD 0.81098 | NZDUSD 0.73588 | USDCAD 1.23182 | USDCHF 0.93368 | GBPUSD 1.41623 |

 

LMAX Ranges 6am London time

Highs    Lows

EURUSD               1.24324 | 1.23851

USDJPY                 108.990 | 108.515

GBPUSD               1.41583 | 1.41102

AUDUSD              0.81184 | 0.80791

USDCHF               0.93806 | 0.93311

USDCAD               1.23536 | 1.23107

NZDUSD               0.73637 | 0.73173

EURGBP               0.87924 | 0.8772

EURCHF                1.16206 | 1.15947

EURJPY                 135.095 | 134.837

For today

• EUR: A quiet opening considering the ramifications of some of the comments running around the markets from the weekend Davos talks, opening around the 1.2425 levels the market was unable to push beyond the 1.2430 level and drifted off as further issues started to arise, comments from Trump and Brexit news likely to be stumbling blocks, while the UK is unable to start trade deals outside of the EU, the EU and its member states can continue to negotiate to grab as many deals away from the UK with Minister of European and foreign affairs for France telling Japan that the UK’s presence with the EU is over, and Japanese companies must become aware of the consequences, the market dipped back through the 1.2400 level to test the 1.2385 areas for a limited period before rising slowly back above the 1.24 area to hold quietly through to the grey hours, Topside offers light through to the 1.2500 levels before stronger offers start to appear with congestion likely through the level and limited sellers looking to fade the move higher, with Trump and Brexit contending with German negotiations the quick comments about Mnuchin comments last week now look to be a little untimely, a push through the 1.2560 areas could see stops appearing and the market likely to find a weak 1.27 handle with stronger congestion likely on any attempt to push beyond that level. Downside bids are likely to be weak with some light bids through the 1.2380 level quickly seeing weak stops and the market opening to a test through slightly better bids into the 1.2340 areas, any push through this level will likely see a deeper move and the 1.2200 area limited.
• GBP: Cable saw the same movement as the Euro, with the market opening a little lower before rising through the 1.4150 areas and holding into the mid-session before dipping back to the 1.4115 levels only to recover steadily through to the 1.4140 level and hold quietly through to the grey hours, comments in the independent would suggest a strong power struggle going on within Government over Brexit and the ever increasing demands of the EU pushing the Brexit faction close to rebellion, which now leaves Europe looking to the future with some trepidation, topside offers light through the 1.4250 levels and only increasing as the market moves towards the 1.4300 levels with those offers likely to increase on any move towards the 1.4340 level, weak stops on a break through the 1.4350-60 areas will quickly see the 1.4400 areas tested with congestion likely to be limited above that level. Downside bids into the 1.4150 areas remain with some light congestion through to the 1.4100 levels and possibly stronger bids in the area with weak stops behind the area. Beware of Brexit chatter getting out of control or power plays.
• JPY: A quiet session for the USDJPY with the market dipping a little in the morning session of Tokyo before rising from the 108.50 areas to test lightly towards the 109.00 area, ramifications from the weekend and the denial of Kuroda’s Davos comments saw the market trading on cross movement more than anything else and the market holding through to the grey hours around the 108.75 levels. Topside offers light through to the 109.00 areas with some limited congestion likely through to the 109.35-40 areas and possible stops appearing for a retest to the stronger offers above 109.80 into 110.00 however, through that level sees very little either offers or stops with the 110.50 level likely to provide stronger offers with weak stops on a push through the 110.60 areas and a short squeeze limited to the 111.00 areas. Downside bids limited through the 108.00 sentimental areas with stronger bids likely to appear on any attempt of the 107.50 areas however, with the market there the downside is likely to see further weakness with the level opening the 105 handle for the future.
• AUD: Oz was a little lower on the opening and moved through to the 0.8115 before dropping back in early morning in Tokyo with some light cross selling testing the market to the 0.8080 areas before slowly rising back to the figure areas for the move into the grey hours, Topside offers into the 0.8140 areas with weak stops on a push through the 0.8160 area and only limited space before hitting stronger sentimental levels into the 82 cent, a push here will likely see some congestion before opening for a further leg higher. Downside bids light with some congestion around the 80 cent areas however a strong test through the 0.7980 areas may squeeze out some weak longs and the market open to the key 79 cent levels.

Overnight News

USD:

Pres. Trump hints at retaliation against EU for unfair trade policies

GBP:

May’s Brexit bill is constitutionally unacceptable and will need to be substantially rewritten – IND

Brexit troubles mount for May as rivals in her party go to war IND

EUR:

UK presence in EU is over, French Foreign minister tells Japanese business

Today’s data

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

07:00     EUR        German Import Price Index M/M Dec C 0.20% | P 0.80%

13:30     USD       Personal Income Dec C 0.30% | P 0.30%

13:30     USD       Personal Spending Dec C 0.40% | P 0.60%

13:30     USD       PCE Deflator M/M Dec C 0.10% | P 0.20%

13:30     USD       PCE Deflator Y/Y Dec C 1.70% | P 1.80%

13:30     USD       PCE Core M/M Dec C 0.20% | P 0.10%

13:30     USD       PCE Core Y/Y Dec C 1.50% | P 1.50%

21:45     NZD       Trade Balance Dec C -125M | P -1193M

23:30     JPY         Jobless Rate Dec C 2.70% | P 2.70%

23:30     JPY         Household Spending Y/Y Dec C 1.50% | P 1.70%

23:50     JPY         Retail Trade Y/Y Dec C 2.10% | P 2.20%

Weekend News

EUR:

Spain’s top court blocks Puigdemont’s Catalan comeback bid

ECB’s Knot says QE program needs to end as soon as possible

ECB’s Coeure says long awaited wages tipping point may be here

Distrust and anger inside Germany’s rocky coalition talks Spiegel

EUR/USD:

Europe closes in on fresh trade deal as Trump puts up barriers – BBG

JPY:

BoJ say’s Kuroda didn’t revise price outlook in Davos remark

Davos comment: Kuroda sees indications of rising wages, prices in Japan

Davos comment: Japan finally close to 2% inflation target

USD:

Trump deepens May’s Brexit crises as she faces Tory revolt

Trump suggests May should be tougher in negotiations with EU

Treasury doesn’t need a Dollar policy BBG

Mnuchin says Dollar reflects our, others interest rates CNBC

Mnuchin says he wasn’t trying to move USDD with his comment

Mnuchin says where USD is in short term not a concern

State of Union more likely to raise eyebrows than stocks

Russia probe dominates ahead of Trump’s first State of Union address

US farmers have mush to lose if NAFTA deal collapses

NAFTA:

US Congressman Levin: after receiving briefing on NAFTA talks from Ustr Lighthizer, says Major issues remain

Levin: US will stay in talks

Levin: US ways and means trade subcommittee Chair Reichert says sees signs of optimism due to discussions of additional rounds, closure of some chapters

Reichert: Ustr Lighthizer recognizes that there is a great deal of work to be done, but is hopeful

GBP:

BoE’s Carney says 80% of G& recovery led by investment, trade BBG

CNY:

China will join first Japan, S. Korea summit since 2015

Harry Hindsight

• EUR: Opening just below the 1.2400 level the market initially dipped in the bank holiday Sydney session before pushing off the 1.2375 areas to test steadily through into the Tokyo session pushing the 1.2430 areas and holding this area through to the grey hours, early London bought through to the limited data and the market pushed through in an attempt to test the 1.2500 areas faltering above the 1.2490 level before drifting back for the move into the NYK session holding around 1.2460 level with NYK continuing the drift through to the end of NYK holding around the 1.2420 level, Kuroda supposed comments saw the Euro push through to the 1.2450 level before the denials filtered through for the close.
• GBP: After a weak opening slipping to the 1.4115 levels and moving into the Tokyo session bouncing off the level the market moved to the 1.4150 level before slowly grinding higher through to the 1.4190 levels before pausing and ranging in the 1.4170-90 level through to the grey hours, early buying saw the Cable push through to the 1.4250 levels with very little defence and then ranging through into the NYK session testing the 1.4290 areas before returning to the 1.4250 level and slipping with good durable goods numbers with the annualized GDP figure slipping from previous releases, the USD continued to slowly rise and the Cable dipped back to the 1.4150 in a long steady decline with only minor weak stops appearing before basing along the 1.4150 areas with the market ranging in a wide range with GBPJPY selling particularly strong in the move to the close dropping back from the 1.42 level to trade again around the 1.4150 level for the move into the close.
• JPY: USDJPY opened with a steady push through to the 109.75 levels before moving into early morning and dropping back to negate the rise and hold around the opening levels and basing along the 109.35 areas through into the grey hours, the move into the grey hours saw the market steadily drop to the 109.00 areas into the official opening period in London and basing along the level through early morning with the market ranging in the 108.90-109.00 area, the move through to the NYK session saw the market rising and the market took heart from the durable goods numbers to push quickly to the 109.60 areas before dropping back quickly on the comments from Davos from several delegates quickly pushing to the 108.30 areas and basing around that level before denials of Kuroda comments and the market quickly sparked higher to the 109.00 level and slipping to a quiet close around the 108.65 area.
• AUD: As with the other currencies USD saw a minor rally in the new session before grinding back from the low 0.8005 areas and traded through to the 0.8060 level before holding through into the grey hours, with London moving in a gradual climb through to the 0.8090 areas and again sitting in a holding pattern through to the NYK session minor fluctuations through the numbers and rising steadily through to the latter comments saw the Oz rise to the 0.8135 before the close before dropping back from the highs and then drifting quietly to the close.

Yesterday’s premiership results

JPY         National CPI Core Y/Y Dec A 0.90% | C 0.90% | P 0.90%

JPY         Tokyo CPI Core Y/Y Jan A 0.70% | C 0.80% | P 0.80%

JPY         Corporate Service Price Y/Y Dec A 0.80% | C 0.80% | P 0.80%

JPY         BOJ Minutes

EUR        Eurozone M3 Money Supply Y/Y Dec A 4.60% | C 4.90% | P 4.90%

GBP       Index of Services 3M/3M Nov A 0.40% | C 0.40% | P 0.30%

GBP       GDP Q/Q Q4 (A) A 0.50% | C 0.40% | P 0.40%

CAD       CPI M/M Dec A -0.40% | C -0.30% | P 0.30%

CAD       CPI Y/Y Dec A 1.90% | C 1.90% | P 2.10%

CAD       CPI Core – Trimmed Y/Y Dec A 1.90% | P 1.80%

CAD       CPI Core – Common Y/Y Dec A 1.60% | P 1.50%

CAD       CPI Core – Median Y/Y Dec A 1.90% | P 1.90%

USD       GDP Annualized Q/Q Q4 (A) A 2.60% | C 3.00% | P 3.20%

USD       GDP Price Index Q4 (A) A 2.40% | C 2.30% | P 2.10%

USD       Durable Goods Orders Dec (P) A 2.90% | C 0.90% | P 1.30%

USD       Durables Ex Transportation Dec (P) A 0.60% | C 0.60% | P -0.10%

USD       Advance Goods Trade Balance Dec A -71.6B | C -68.6B | P -70.0B

USD       Wholesale Inventories M/M Dec (P) A 0.20% | C 0.30% | P 0.80%

Stay lucky

Andy

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