Daily FX Market Commentary

Andy Harrison

Good Morning,

LMAX Close

USDJPY 113.602 | EURUSD 1.13607 | AUDUSD 0.72262 | NZDUSD 6861 | USDCAD 1.33559 | USDCHF 0.99398 | GBPUSD 1.26586 |

LMAX highs and Lows 06.00 GMT

                                Highs | Lows

EURUSD               1.13699 | 1.13552

USDJPY                 113.705 | 113.422

GBPUSD               1.26701 | 1.26229

USDCHF               0.99484 | 0.99287

AUDUSD              0.72282 | 0.7179

USDCAD               1.33721 | 1.3349

NZDUSD               0.68619 | 0.67919

EURCHF                1.12955 | 1.12784

EURGBP               0.89974 | 0.8968

EURJPY                 129.192 | 128.848

For Today

• GBP: A choppy opening with limited liquidity causing problems and testing lightly above the 1.2665 area before settling down to drift lower through the session to test back to the 1.2625 area and range through in a long run to the grey hours, possibly bids into the 1.2600 level are likely to be weak with stops quickly appearing on a move through the level and the market then governed by sentimental level through to the 1.2500 level and possible stronger congestion in the area with stronger bids on a push through to the 1.2480 area, a break here will open a deeper move through to the 1.2300 levels however, this is all notwithstanding Brexit news, topside offers into the 1.2680-1.2700 level with congestion through the level and continuing in patches through to the stronger 1.2765 areas and increasing into the 1.2800 level.
• JPY: Mixed Tankan readings and general data in Japan saw the market limp to the 113.65 area to make the highs before Tokyo sold the market back through into the mid 113.45 and defining the range for the day with very quiet movement through to the grey hours, Topside offers into the 1.1380-114.00 areas with congestion above the level and weak stops hanging just above the area and opening the market to the stronger 114.40-60 areas, a push through the level will likely see weak offers through to the 115.00 area with limited congestion through the level and into the 115.50 area with a break here opening a stronger move through to the 117.00 level intraday. Downside bids light through to the 113.20 level with strong congestion likely to continue through the figure area and into the 112.50 levels however, even through this level the opportunity for yield buyers to continue buying opens and the any move to the 112.00 is likely to be a struggle.
• AUD: Harry hindsight comments suggest rate cuts closer than hikes for the Oz and the Oz opening around the 0.7225 area and moving into the Tokyo session seeing the high just above the opening and falling off quickly as AUDJPY sellers appeared in the market and the first two hours of trading seeing the 0.7180 area eventually, the market had a minor bounce off the level and pushed slowly through the session the grey hours to range above the 0.7190 level, downside is likely to see strong congestion into and through the 0.7150 those stronger bids are likely to be in depth and run through to the 71 cents level and while there maybe weak stops on a move through the level the congestion is likely to continue through to the stronger 0.7050 level which was last broke in October and quickly taken back to the 71 cents area, topside offers light through the 72 cent areas with congestion building into the 0.7250 areas and likely to see stronger offers just through the level and into 0.7280-0.7300 with strong stops on a push through.
• EUR: Very quiet with the market opening around the 1.1360 level and continuing around that level through to the grey hours, with the range just over 10 pips for the session and narrowing down to numbers you could count on one hand, Topside offers through the 1.1390 level and into the 1.1420 before weak stops begin to appear, a push through will likely see a two way battle between the stops and limited congestion however, a test into the 1.1440-60 area will likely see the offers containing the market with very little space between those offers and the stronger 1.1480 area. Downside bids through the 1.1320 levels and so far this month the level has been very supportive, however, given that the stops below the 1.1280 area are likely to have build sufficiently to cause a quick break lower if the momentum appeared on the downside and a push through the 1.260 areas could see the 1.1220 level quickly tested.

 

Overnight News

CAD:

Moody’s downgrades Ontario to Aa3 stable

USD:

The old US trade war with Japan looms over todays dispute with China WSJ

Trump is said to have been at enquirer hush money meeting BBG

White house said to officially delay China tariff hike to March

Trump inauguration spending under criminal investigation by federal prosecutors, probe partly arises out of material seized in investigation of Michael Cohen – CNBC

CNY:

China weak data adds to risk off in China

China sparks suspicion as it holds release of Guangdong province PMI data

JPY:

BoJ reduces purchases of 5-10yr bonds to 20B JPY

CAD/USD/AUD/GBP/NZD:

Secret meeting led to international effort to stop China’s cyber espionage AFR

NZD:

RBNZ consulting on proposal to raise capital banks must hold

RBNZ: Generally, bank capital level increase will be between 20-60%

AUD:

Markets signal a rate cut now looks less outlandish in Australia

EUR/GBP:

EU said to strengthen wording on Brexit backstop in summit document BBG

EU reiterates it doesn’t seek use of Brexit backstop statement

EU statement on Brexit reiterates importance of backstop

EU says if Brexit backstop triggered it would apply temporarily until better solution

EU reiterates it doesn’t seek use of Brexit backstop but its importance

EU says it will seek trade deal by end of 2020 to avoid backstop

GBP:

PM May’s attempts to save Brexit deal are phoney and she should test other options Cabinet ministers say in private Telegraph

OIL:

Saudi’s are said to target US with sharp oil export cut BBG

EUR:

BoF trims growth forecasts as protests drag on BBG

Italian bonds (BTP) get no favours from Draghi’s reinvestment plans – BBG

Today’s Data

Actual A | Consensus C | Previous P | Revised R | all timings GMT/UTC

NZD       BusinessNZ Manufacturing PMI Nov A 53.5 | P 53.5 | R 53.7

JPY         Tankan large manufacturing index Q4 A 19 | C 17 | P 19

JPY         Tankan large manufactures outlook Q4 A 15 | C 16 | P 19

JPY         Tankan large non-manufacturing index Q4 A 24 | C 21 | P 22

JPY         Tankan large non-manufactures outlook Q4 A 24 | C 20 | P 22

JPY         Tankan small manufacturing index Q4 A 14 | C 13 | P 14

JPY         Tankan small manufactures outlook Q4 A 8 | C 11 | P 11

JPY         Tankan small non-manufacturing index Q4 A 11 | C 9 | P 10

JPY         Tankan small non-manufacturers outlook Q4 A 5 | C 6 | P 5

JPY         Tankan large all industry Capex Q4 A 14.30% | C 12.70% | P 13.40%

JPY         PMI Manufacturing Dec (P) A 52.4 | C 52.3 | P 52.2

CNY        Retail sales YoY Nov A 8.10% | C 8.80% | P 8.60%

CNY        Industrial production YoY A 5.40% | C 5.90% | P 5.90%

CNY        Fixed assets Ex rural YTD YoY Nov A 5.90% | C 5.90% | P 5.70%

JPY         Industrial production YoY Oct (F) A 4.20% | C 5.90% | P 5.90%

0800       EUR        France Manufacturing PMI Dec (P) C 50.7 | P 50.8

0800       EUR        France Services PMI Dec (P) C 54.8 | P 55.1

0830       EUR        Germany Manufacturing PMI Dec (P) C 51.7 | P 51.8

0830       EUR        Germany Services PMI Dec (P) C 53.5 |P 53.3

0830       EUR        Eurozone Manufacturing PMI Dec (P) C 51.9 | P 51.8

0830       EUR        Eurozone Services C 53.4 | P 53.4

1330       USD       Retail sales advance MoM Nov C 0.40% | P 0.80%

1330       USD       Retail sales Ex auto MoM Nov C 0.50% | P 0.70%

1415       USD       Industrial production MoM Nov C 0.30% | P 0.10%

1415       USD       Capacity utilization Nov C 78.60% | P 78.40%

1445       USD       Manufacturing PMI Dec P C 55.1 | P 55.3

1445       USD       Services PMI Dec (P) C 55 | P 54.7

1500       USD       Business inventories Oct C 0.50% | P 0.30%

Harry Hindsight

• GBP: A quieter day now everything is back to where it was before 48 letters accumulated, Opening around the 1.2625 level after the vote the market made early gains to push the 1.2650 level before slowly slipping back through into the NYK session and pushing through the 1.2615 level however, it was unable to breach the 1.2610 areas and gradually edged to the 1.2620 areas for the move into the grey hours in slow trading, Early London were quick buyers and the market rose quickly through to the 1.2685 area into the official opening holding briefly on the highs before dipping slowly back to range in the 1.2650-60 areas through to the NYK open and a repeat performance, not quiet making the previous highs however, once it failed the second time the market dipped back quickly through to the Asian ranges and holding quietly through to the end of the London session, the market rose a little higher to trade the end of the session above the 1.2650 level testing to the 1.2670 area before drifting to a close just short of the area.
• JPY: Opening just off its lows the market dipped early to the 113.20 areas and then rallied through into the Tokyo session in a tight channelled push to the 113.50 areas before ranging through to the NYK session holding around the 113.45 areas unable to push the topside out of the way and limited to a minor dip through the 113.40 level, the move towards NYK eventually saw the 113.50 level giving way and some minor stops trigger on another tight channelled rally through to test the 113.70 areas into the London close and then slipping back to range around the 113.60 area to the close.
• AUD: Another limited day for the Oz with the opening levels holding quietly into the Tokyo session before testing from the early lows around the 0.7210 area to push through to 0.7230 however, although the market kept pushing the level and the move into the grey hours saw a push through the 0.7240 areas topping around the 0.7245 level to make the high for the day before slowly drifting through deep into the NYK session to test the 0.7215 area and a quiet range of 0.7220-30 area for the most part to the close.
• EUR: Euros very quiet through the Asian session drifting from the opening around the 1.1370 areas through to the grey hours holding the 1.1365 areas, the market saw a limited reaction for a push through to the highs of the day into the London opening period top test lightly above the 1.1390 level before slipping back again and holding quietly around the 1.1380 level to the NYK session, ECB rate discussion opened up some choppy selling with very little mentioned other that the market was not aware of testing to the highs again before dropping off quickly to test the 1.1340 level and eventually extending the lows to the 1.1330 area, the run to the London close saw limited buying back to the opening levels and then a quiet drift to the close with a small loss on the day.

Yesterday’s Premiership results

AUD       Consumer inflation expectation Dec A 4.00% | P 3.60%

GBP       RICS house price balance Nov A -11% | C -9% | P -10%

EUR        German CPI MoM Nov (F) A 0.10% | C 0.10% | P 0.10%

EUR        German CPI YoY Nov (F) A 2.30% | C 2.30% | P 2.30%

CHF        Producer & Import prices MoM Nov A -0.30% | C 0.00% | P 0.20%

CHF        Producer & Import prices YoY Nov A 1.40% | P 2.30%

CHF        SNB sight deposit interest rate A -0.75% | C -0.75% | P -0.75%

CHF        SNB 3-month Libor lower target range A -1.25% | C -1.25% | P -1.25%

CHF        SNB 3-Month Libor upper target range A -0.25% | C -0.25% | P -0.25%

EUR        ECB Bank rate decision A 0.00% | C 0.00% | P 0.00%

CAD       New Housing price index MoM Oct A 0.00% | C 0.00% | P 0.00%

USD       Import price index MoM Nov A -1.60% | C -1.00% | P 0.50%

USD        Initial jobless claims (Dec 8) A 206K | C 227K | P 231K | R 233K

USD       Natural Gas storage A -77B | C -81B | P -63B

USD       Monthly Budget statement Nov A -203.9B | P -100.5B

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