Daily FX Market Commentary

Andy Harrison

Andy Harrison

Good Morning,

LMAX Close
USDJPY 109.993 | EURUSD 1.09806 | AUDUSD 0.67308 | NZDUSD 0.64605 | USDCAD 1.32846 | USDCHF 0.97308 | GBPUSD 1.2929

LMAX highs and Lows 06.00 GMT
Highs | Lows
EURUSD 1.09850 | 1.09781
USDJPY 1.10026 | 109.815
GBPUSD 1.29440 | 1.29248
USDCHF 0.97509 | 0.97404
AUDUSD 0.67344 | 0.67123
USDCAD 1.32941 | 1.32858
NZDUSD 0.64641 | 0.64483
EURCHF 1.07043 | 1.06972
EURGBP 0.84981 | 0.84858
EURJPY 120.815 | 120.603

For Today
• GBP: A slow narrow move through into the Tokyo session holding the 1.2930 opening levels to then quietly rise through to the 1.2945 area before drifting back a little to head into the grey hours, Topside offers light back through the 1.3000 level with some limited congestion on a test to the 1.3050 area but the market only lightly defended then through to the 1.3150 area with limited stops through the 1.3100 areas, downside bids strong through into the 1.2900 level however, weak stops growing behind the level and limited congestion through to the 1.2850 level and increasing only once the market moves through the area to head for the 1.2800 area.
• JPY: Opening with a push above the 110.00 level to make the highs around the 110.02 area the market then started a slow drift as the market safe haven mechanism started to kick in and the market pushed into the Tokyo session quickly dropping back to the 109.80 area before stabilizing and starting a slow recovery into the 109.90 areas in reasonably quiet trading, Topside offers 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: Slowly pushing a little higher from the opening the market pushed only to the 0.6738 area before early Tokyo sellers started to appear and the opening saw a quick move through to the 0.6715 area and a long run to the grey hours holding quietly around that level, 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: A very quiet session for the Euro, holding the opening 1.0980 area through into the Tokyo session dipping through for a short period before slowly rising through to the 1.0985 area before heading to the grey hours barely holding the opening level, downside bids into the 1.0940-60 areas and probably sufficient congestion around the sentimental level to hold however, failing that the market is likely to see stronger bids appearing on any push through to the 1.0900 level where any weakness will likely see a deeper move. Topside offers light through to the 1.1040 area with limited congestion then appearing through to the 1.1070 level where stronger offers are suspected.

Overnight News
S&P:
S&P Drops China GDP Est. to 5% Assumes virus contained by March – BBG
AUD:
Aussie rates futures curve gearing up for QE – BBG
RBA: Monetary policy board has been discussing case for further easing
RBA: Need to balance benefits of easing with risks of very low rates
RBA: Risks include fuelling more borrowing when home prices already in strong upswing
RBA: Increasing concerns internationally about the effects of low interest rates.
BRA Balance of risks might shift if unemployment rate were to be moving materially higher
RBA: If there was no further progress being made on lifting inflation
RBA: Very uncertain how long impact of Coronavirus will last
RBA: Policy expected to remain accommodative for some time
RBA: Cuts GDP forecast for Q4 2019 to 2.0% vs. 2.3% June 2020 to 1.9% vs.2.9%
RBA: GDP seen 2.7% Dec 2020, 3.1% June 2021, 3% Dec 2021, 2.9% June 2022
RBA: Trimmed mean inflation seen 1.8% Dec 2020, 1.9% Dec 2021, 2.0% Jun 2022
RBA: Unemployment seen 5.1% Dec 2020, 4.9% Dec 2021, 4.8% Jun 2022
RBA: Wage growth seen 2.3% DEC 2020, 2.2% DEC 2021, 2.2% Jun 2022
RBA: Forecasts based on technical assumption of one 25bps rate cut in mid 2020
CNY:
China Steelhome Iron ore stockpiles rise 3.2% to 131.1m Tons WoW – BBG
Wartime conditions as China plans tougher steps in lockdown Wuhan – NS6
China’s death toll soars as Wuhan plans roundup of infected – SMH

Today’s Data
Actual – A | Consensus – C | Previous – P | Revised R | all timings GMT/UTC
AUD AiG Performance of Service Index (JAN) A 46.6 | P 48.7
AUD RBA’s Lowe Semi-annual Testimony to Parliament Committee
JPY Labour Cash Earnings YoY (DEC) A 0.0% | C -0.2% | P -0.2% | R 0.1%
JPY Overall Household Spending YoY (DEC) A -4.8% | C -1.6% | P -2.0%
JPY Real Cash Earnings YoY (DEC) A -0.9% | C -0.9% | P -0.9% | R -0.6%
AUD RBA Statement on Monetary Policy
NZD RBNZ 2 year inflation expectation A 1.93% | P 1.8%
JPY Coincident Index (DEC P) A | C 94.7 | P 94.7
JPY Leading Index CI (DEC P) A | C 91.3 | P 90.8
EUR Italy Sovereign debt to be rated by Fitch
0700 EUR German Industrial Production n.s.a. and w.d.a. YoY (DEC) C -3.7% | P -2.6%
0700 EUR German Trade Balance (DEC) C 15b | P 18.3b
1200 MXN CPI YoY (JAN) C 3.28% | P 2.83%
1200 MXN CPI MoM (JAN) C 0.53% | P 0.56%
1330 CAD Net Change In Employment (JAN) C 17.5k | P 35.2k
1330 CAD Unemployment rate (JAN) C 5.7% | P 5.6%
1330 CAD Full Time Employment Change (JAN) P 38.4k
1330 CAD Hourly Wage Rate Permanent Employees YoY (JAN) P 3.8%
1330 USD Change in Non-Farm Payrolls (JAN) C 160k | P 145k
1330 USD Unemployment Rate (JAN) C 3.5% | P 3.5%
1330 USD Average Hourly Earnings YoY (JAN) C 3.0% | P 2.9%
1330 USD Average Weekly Hours all Employees (JAN) C 34.3 | P 34.3
1330 USD Change in Private Payrolls C 150k | P 139k
1600 USD Fed releases semi-annual Monetary Policy Report
1800 USD Baker Hughes US Rig Count (FEB 7) P 790
2000 USD Consumer Credit (DEC) C 15.000b | P 12.513b

Harry Hindsight

• GBP: A slow drift from the opening around the 1.3000 level to hold through to late in the session around the 1.2985 area, the move through to just before the grey hours saw the market dip through to the 1.2970 level before recovering for the move into the London session, trading steadily through to the opening levels, the continuing back and forth between the EU and UK negotiators continues with rhetoric sparking up and the early stages see no way forward other than a no deal, the market again dipped on the back of one of these comments and the Cable again dipped through to the 1.2970 level but this time drifting through to the 1.2950 level on determined selling through into the NYK session, US numbers came out healthily and the USD rallied through to the end of London with the Cable forced down into the 1.2925 areas to range in a long run to the close.
• JPY: Opening around the 109.80 levels the UDJPY held in a tight range posting the early low for the day around the 109.76 area before moving into the Tokyo session and quickly pushing through to the 109.90 level to hold deep into the session before finally taking a run towards the 110.00 level failing just short of the level and moving into the grey hours retracing its steps for the move into the London opening, a minor attempt for the highs failed and the fall back was a little deeper testing through the 109.80 level and back to the opening to hold and refresh, the move through to the NYK session saw the market again pushing higher initially through to the 109.90 level and then a steady rise through to the close pushing at the 110.00 with one spike through before finishing the day just under the figure level.
• AUD: Rising in early Tokyo AUDJPY cross buying the Oz pushed through to the 0.6760 level on the back of a less dovish RBA however, it was short lived and didn’t really capitalize on the announcements drifting back to hold the 0.6750 level through to late in the session before running for a second attempt and making the high around the 0.6765 area before plateauing and holding into the grey hours, Early London sold through to the 0.6740 area before recovering into the NYK session on what seemed to be a quiet session however, once the US numbers were fully released the Oz started a steady decline through to the 0.6730 area with very little to help it.
• EUR: A quiet Asian session and for all intents and purposes as was the bulk of London with the market holding quietly around the 1.1000 level, a little run higher on the back of the Lagarde commentary however, the German numbers put paid to that and the market returned to the holding pattern around the figure having spiked above the 1.1010 level to touch 1.1014, the market continued to run quietly through to the NYK numbers and then broke lower triggering options along the way and the defenders then forced to cover their buying sending the market to a quick test into the mid 1.0960’s before bouncing and holding around the 1.0980 level for the run to the close.

Yesterday’s Premiership results
AUD NAB Business Confidence (4Q) A -1 | P -2
AUD Retail Sales Ex Inflation QoQ (4Q) A 0.5% | C 0.3% | P -0.1%
AUD Trade Balance (DEC) A 5223m | C 5600m | P 5800m
0700 CHF UBS Real Estate Bubble Index (4Q) A 0.95 | P 0.93
0700 EUR German Factory Orders n.s.a. YoY (DEC) A -8.7% | C -6.6% | P -6.5% | R -6.0%
0800 EUR ECB President Lagarde Speaks in Brussels
0830 EUR Markit Germany Construction PMI (JAN) A 54.9 | P 53.8
0900 EUR ECB Publishes Economic bulletin
1330 USD Continuing Claims (JAN 25) A 1751k | P 1703k
1330 USD Initial Jobless Claims (FEB 1) A 202k | C 215k | P 216k | R 217k

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