Daily FX Market Commentary

Andy Harrison

Andy Harrison

Good Morning,

LMAX Close
USDJPY 109.529 | EURUSD 1.10445 | AUDUSD 0.67381 | NZDUSD 0.64864 | USDCAD 1.32776 | USDCHF 0.96933 | GBPUSD 1.30312

LMAX highs and Lows 06.00 GMT
Highs | Lows
EURUSD 1.10465 | 1.10339
USDJPY 109.527 | 109.369
GBPUSD 1.30375 | 1.30122
USDCHF 0.96990 | 0.96901
AUDUSD 0.67450 | 0.6724
USDCAD 1.32946 | 1.32768
NZDUSD 0.65004 | 0.64791
EURCHF 1.07065 | 1.06996
EURGBP 0.84812 | 0.84683
EURJPY 120.943 | 120.727

For Today
• GBP: Opening widely the market traded the high for the day just above the 1.3040 level before resetting to the 1.3030 level and holding around the level through into the Tokyo session, a slow drift through the first half of the Tokyo session saw the market trade to just below the 1.3015 level before ranging around the 1.3020 areas into the grey hours, Downside bids through the 1.2980 level and increasing into the 1.2950 area before light congestive bids start to appear and likely to increase the closer the market moves towards the 1.2900 area with strong stops suspected below the level, topside offers light through to the 1.3050 with possibly minor congestion through the 1.3050 area and continuing into the same vein through to the 1.3100 areas, from there the market is likely to remain weak with very limited resistance to a good push and only as the market pushes through the 1.3150 level do the offers start to increase into the 1.3200 area.
• JPY: A very quiet drift for the USDJPY opening around the 109.50 area and pushing through into the Tokyo session testing lightly through the 109.40 areas before ranging mid-range through to the grey hours, Topside offers likely to be limited through to the 109.80 level and even there it is likely to be limited with weak stops on a push through the 110.20 area and opening up limited room through to the 110.50 and increasing resistance as the market approaches the 111.00 areas, downside bids light through to the 109.00 area with limited support and weak stops likely to be light for a move back to the stronger 108.50 area with good support likely to appear on any dips to the 108.00 levels.
• AUD: Slightly weaker from the opening with news that China shut down some trade due to the ongoing Coronavirus, Lowes commentary was slightly stronger than expected and the market recovered pushing through the opening 0.6740 area in a weak push to the 0.6745 level before drifting around the opening levels through to the grey hours, downside bids cleared through to the 0.6680 level opening up a deeper move over a long period with bids likely to appear around the sentimental 00/50 areas, topside offers light through to the 0.6780 level with strong offers likely to increase into the 0.6800/20 area with weak stops appearing through the level and 0.6840-60 likely to be stronger.
• EUR: Opening around the 1.1045 level the market moved quietly through into the Tokyo session before starting a slow drift lower pushing through to the 1.1035 level before finding some support and holding through to the grey hours slightly off those lows, Downside bids cleared into the 1.1000 level however, option barriers remain likely and not until the market break through the 1.0980 levels will it likely disappear with stops likely appearing if not option related sellers, opening a dip through to the 1.0950 level before stronger bids start to appear in the market, topside offers light through to the 1.1080 level with stronger offers beginning to build in the area with congestion through the 1.1100 areas and weak stops awaiting beyond the 1.1120 level for a run to the 1.1150 areas.

Overnight News
AUD:
RBA’s Lowe: Economy still passing through gentle turning point for the better
Lowe: Board continues to discuss merits of further monetary stimulus
Lowe: Board balancing risks of further cuts vs. costs of very low rates
Lowe: Would see stronger case for easing if unemployment trends higher, inflation stays low
Lowe: Recent inflation, jobs, data show things moving in right direction, if gradually
Lowe: Rates already very low, policy has long and variable lags
Lowe: Further rate cuts would have effect on AUD, boost demand for exports
Lowe: Rate cut would help households adjust to high debt levels
Lowe: But have concerns about effect of very low rates on resource allocation
Lowe: Risk low rates could encourage borrowing when home prices already rising
Lowe: Aware of risk of too much borrowing driving excessive asset valuations
Lowe: Will continue to watch borrowing in particular very carefully
Lowe: Bushfires to cut GDP growth by around 0.2% points across this quarter and last
Lowe: GDP growth for 2020 as a whole, will be largely unaffected by bushfires
Lowe: Too early to tell what overall impact of coronavirus will be, watching closely
Lowe: Low rates make it easier for public business sectors to contemplate long term investments
AUD/CNY:
China has temporarily shut down trade over coronavirus fears – 7NEWS
CNY:
Chinese LNG importers consider invoking force majeure, to halt contracts for LNG – FT
USD:
Key evidence for Coronavirus spread is flawed as public health decisions loom – WPT
New rule lets US companies fight currency manipulation
Trump administration moving forward with tariffs against currency manipulation plan
Trump mulls withdrawal from WTO’s $1.7t purchasing pact – BBG
CHF:
SNB’s Jordan: Coronavirus plays role in CHF rise
Jordan: Maintains intervention pledge, negative rate
Jordan: Switzerland, SNB are not currency manipulators
Jordan: Don’t intend to weaken CHF for advantage
Jordan: Negative rates will be around for some time
Jordan: Benefits outweigh side effects of negative rate
Jordan: Will reduce balance sheet when inflation risks appear
SGD:
MAS: Monetary policy stance remains unchanged
MAS: There’s insufficient room within policy band to accommodate easing of SGD in line with weakening economy due to virus
MAS: SGD nominal effective exchange rate has been fluctuating near upper bound of policy band in recent months

Today’s Data
Actual – A | Consensus – C | Previous – P | Revised R | all timings GMT/UTC
AUD AiG Performance of Construction Index A 41.3 | P 38.9
NZD Employment Change YoY (4Q) A 1.0% | C 1.2% | P 0.9%
NZD Unemployment Rate (4Q) A 4.0% | C 4.2% | P 4.2%
NZD Employment Change QoQ (4Q) A 0.0% | C 0.3% | P 0.2%
AUD RBA Governor Lowe gives Speech in Sydney
CNY Caixin PMI Composite (JAN) A 51.9 | P 52.6
CNY Caixin PMI Services (JAN) A 51.8 | C 52 | P 52.5
0645 CHF SECO Consumer Confidence (1Q) C -8.0 | P -10.4
1000 EUR Eurozone Retail Sales YoY (DEC) C 2.3% | P 2.2%
1200 USD MBA Mortgage Applications P 7.2%
1215 EUR ECB President Legarde Speaks in Paris
1315 USD ADP Employment Change (JAN) C 160k | P 202k
1330 USD Trade Balance (DEC) C 47.8b | P 43.1b
1500 USD ISM Non-Manufacturing/Services Composite (JAN) C 55.1 | P 55.0
1530 USD DOE US Crude Oil Inventories (JAN 31) P 3548k

Harry Hindsight

• GBP: Initially a little weakness with the market drifting off from the opening just below the 1.3000 level to test into early Tokyo pushing towards the 1.2980 level however, once the RBA announcement was through and done with the Cable started a steady rise grinding through to just above the 1.3020 level for the move into the grey hours, early sellers still favouring the doom and gloom news of the previous day and sharp selling saw the market push lightly through the 1.2950 level before bouncing off the level and helped along by a stronger Construction number recovering into mid-morning to the previous highs and holding the 1.3010 level for the move into the NYK session, the move through the NYK session saw the high extended with the market spiking to just below the 1.3050 level before drifting a little and heading through to the close holding around the 1.3030 areas.
• JPY: A quiet opening however, once into the Tokyo session the market saw steady USD buying and the USDJPY slowly rising through to the London session pushing above the 109.00 level and away from the downside low just above the 108.55 area, after a brief pause around the figure level in London the buying restarted and slowly pushed through to the end of London before pausing again as it pushed through the 109.35 level, NYK continued for a short period to push the market above the 109.50 level for the move into the close.
• AUD: A little weaker moving through to the rate announcement by the RBA with the market drifting and testing lightly through the 0.6680 area before moving steadily off the level to range around the 0.6690 area into the announcement itself, no change and a less dovish commentary seemed to gloss over some of pitfalls that await and so the market rallied quickly from the opening levels to just above the 0.6720 level before ranging around the level through into the grey hours and London, the opening saw the London market quickly take it above the 0.6730 area to clear a few weak stops before dipping back to hold around the 0.6710 area for the run into the NYK session in quiet trading, lifting from just above the figure level the Oz slowly ground through to the 0.6740 areas for the move to the close.
• EUR: Remained becalmed during Asia for the most part opening just below the 1.1060 level and trading tightly around the level through to the RBA announcement, some initial buying after the RBA saw the market spike to just below the 1.1065 area and the high for the day before dropping smartly off to the 1.1055 area and holding around the opening level through to the grey hours, early sellers appeared close to the highs in the grey hours and the market dropped back into the London opening to test the 1.1050 level before holding the level through into the NYK session, A steady drift through the 1.1050 level saw the market moving to the London close testing the low 1.1030 levels before recovering a little for the move into the close.

Yesterday’s Premiership results
NZD Building Permits MoM (DEC) A 9.9% | P -8.5%
JPY Monetary Base YoY (JAN) A 2.9% | P 3.2%
JPY Monetary Base End of Period (JAN) A 517.2t | P 518.2t
AUD RBA Cash rate Target (FEB 4) A 0.75% | C 0.75% | P 0.75%
GBP Markit/CiPS UK Construction PMI (JAN) A 48.4 | C 47.1 | P 44.4
USD Durable Goods Orders (DEC F) A 2.4% | C 2.4% | P 2.4%
USD Factory Orders (DEC) A 1.8% | C 1.1% | P -0.7%
MXN Markit PMI Manufacturing (JAN) A 49.0 | P 47.1

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