Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 113.353 | EURUSD 1.12923 | AUDUSD 0.70954 | NZDUSD 0.6654 | USDCAD 1.39283 | USDCHF 0.9733 | GBPUSD 1.45247 |

LMAX Highs and Lows 6am

                                High                       Low

EURUSD               1.13205 | 1.12741

USDJPY                 113.59  | 112.536

GBPUSD               1.45632 | 1.45213

AUDUSD              0.71531 | 0.70834

USDCHF               0.97406 | 0.97053

USDCAD               1.39642 | 1.3884

NZDUSD               0.67341 | 0.66647

EURGBP               0.77737 | 0.77578

EURJPY                 128.118 | 127.175

EURCHF                1.09884 | 1.09715

 

For Today

• EUR: The opening saw the Euro drifting to its lows and testing into the mid 1.1270’s before a strong rise back through the 1.1300 level as the USDJPY again dropped for the third day in the same way, Euro’s managed to touch above the 1.1320’s before slowly bleeding lower and back to the opening levels however, apart from this move in early Tokyo the market has again been fairly quiet, Topside offers through the 1.1340-50 level will opens up the 1.1400 and possibly stronger offers from the 1.1380-1.1420 areas before possible stops appearing and the market opening to test through to the 1.1600 levels from August last year, downside has possible weak stops on a strong push through the 1.1270-60 areas with the possibility of only light bids, stronger bids are beginning to form around the 1.1220-1.1180 levels however a break here does leave only weak bids around the 1.1100 areas and below until the market breaks back below the 1.1000 level which is likely to be more sentimental than anything else.
• GBP: Opening around the 1.4530 levels the market moved into the Tokyo session pushing off its lows and rising quickly to push through the 1.4560 levels with Cable seemingly benefiting from a weaker EURGBP however, it wasn’t long before the Euro caught up and the cross ranged in a fairly tight pattern through to the grey hours, Cable drifted from its early highs and again settled back to the 1.4530 opening levels into the grey hours. Topside offers reasonably strong through from the 1.4580 areas and into the 1.4600 level however, once through the level there is an opening for further gains once the 1.4650 level is cleared and one would expect those offers to be weaker but not really tested, from there the topside does open with only limited interest likely to appear until the 1.4800 levels. Downside bids light through the 1.4500 level and possibly better bids now are only likely into the 1.4400 levels and a break here would possibly kill the current rally and the 1.4250 level becomes the downside target again.
• JPY: USDJPY and 3 day repeat, steady from the opening and as soon as Tokyo opens the market is slammed lower, HSi suffered losses from the opening and speculation of flows to safe havens seems more appropriate than anything else for the moment however, the move into Tokyo saw the market again drop from those highs and the market quickly pushed from 113.50 area to the 112.80 level and light bids eventually cleared away for the market again to test the 112.55 areas before finding some bids capable of holding the market, so while the market since that early selloff has been active it has been contained in a narrow band for the most part 112.60-113.00. Topside likely to see light offers through the 113.30 levels and possibly weak stops however, the topside is now a little weak and as long as safe haven flows this weakness is not likely to be tested however, light offers through the 114.00 levels and not until the 115.00 are the offers likely to be a little stronger, downside bids are congregated in the normal pattern and these are likely to continue to be weak until the market moves towards the 110.00 areas but with a JPY bank holiday today the fact exporters were seen in the market is surprising and there must be some concern on their part.
• AUD: USDJPY selling from the opening in Tokyo’s bank holiday period saw the Oz quickly rise from the 71 cent levels and push through the 0.7150 level if only briefly before slipping back over the course of the session to trade through the opening 0.7095 areas to trade into the mid 0.7080’s before drifting to the grey hours, Topside offers remain in the 0.7150-60 areas and then its likely to again be slow going as the market moves into the 72 cent level with offer possibly continuing for a good distance and possibly strong from the 0.7240-60 level. Downside bids light through the 0.7050 areas and then stronger as the market moves to the 70 cent level and through with those bids increasing below 0.6950 and into 69 cent.

Overnight News

USD:

WTI oil makes new lows after the fifth straight day of loses testing the $29 levels

Yellen signals a slowing on rates path in a dovish commentary

Yellen warns of rising risks to US economy

Yellen “Uncertainty” over China’s Yuan fuels market turmoil

Kyle Bass the hedge fund manager says China bank losses may top 400% of subprime losses

AUD:

Turnbull’s Cabinet dilemma grows as trade minister retires

EUR:

EU pushes Greece on migrant crisis

Italian PM Renzi compares EU to sinking ship

NZD:

NZ comfortable with AAA rating, outlook stable Moody’s

GBP:

Brexit vote is clouding the UK’s growth outlook, CBI says

USD/KRW/JPY:

Boost data-sharing in response to N.Korean Threat
Today’s data

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

NZD       Business NZ Manufacturing Index Jan A 57.9 | P 56.7

AUD       Consumer Inflation Expectation Feb A 3.60% | P 3.60%

GBP       RICS House Price Balance Jan A 49% | C 52% | P 50%

08:15     CHF        CPI M/M Jan C -0.40% | P -0.40%

08:15     CHF        CPI Y/Y Jan C -1.30% | P -1.30%

13:30     USD       Initial Jobless Claims (FEB 6) C 287K | P 285K

13:30     CAD       New Housing Price Index M/M Dec C 0.30% | P 0.20%

15:00     USD       Fed Chair Yellen Testifies

Harry Hindsight              

• EUR: A quiet session for the Euro through the Asian session with the previous days pattern repeated however, with less movement, Euro’s opened around the 1.1290 levels and slowly moved to the 1.1310 levels into early Tokyo before the market drifted quietly to the grey hours holding the 1.1290 opening levels, early hours saw the market push to the 1.1280 areas before again testing 1.1300 on the official opening, the rally was short lived as EURGBP selling moved in from the opening with upcoming numbers in the UK unnerving some of the longs in the market, Euros slipped to the 1.1260 levels and gradually moved through the levels and to the 1.1240 area over the next 2 hours, the market then held a tight range around the 1.1260-50 areas into the NYK session, NYK saw the market moving a little and the downside was again tested this time to the 1.1230 levels as weak Euro longs again exited in front of the Yellen commentary, initially the market started to move lower as the commentary before the full import was in the market with Euro’s testing to the 1.1160 levels, this was the low for the day and the market rose higher pushing through the session to reach the opening levels in a tight channel.
• GBP: Cable opened around the 1.4470 levels and although was kept in a tight 1.4460-70 range for the most part the move into the grey hours saw the market start to increase in range and volatility dipping into the London opening around the 1.4450 level and then driving for the first time for the day above the 1.4510 areas, the release of very poor Industrial and manufacturing numbers saw the market test below the lows and into the 1.4440 levels however, EURGBP selling bought more focus to the market and this quickly bought the market back to the 1.4500 levels and a strong rally towards the 1.4580 areas with weak stops through the 1.4550 areas and into NYK, while the London session seemed to be dominated by weak Euro longs cutting their positions early NYK was also interested in covering USD shorts into the Yellen testimony and  Cable fell all the way back from the highs to again test the 1.4450 areas, the commentary released saw the Cable again start to rise as weakness in Crude started to filter through and the Yellen comments sank into the market, Cable moved steadily higher through the course of the session eventually moving towards the 1.4550 levels before closing around the 1.4520 levels.
• JPY: A quiet session through Asia with sellers appearing as soon as Tokyo opened dipping from the 115.20 highs to test the 114.20 in the first couple of hours, while the Japanese PM was speaking to Parliament the market saw a quick move higher which was more reminiscent of market spoofs you used to see when the BoJ were open interventionists and while the market nearly hit the 115.20 the return trip lower was only slightly slower to the 114.60 level, a few hours of holding in the area before again testing the downside, the move into the grey hours saw a steady rise to 115.00 levels and the market then remained in that range through to the Yellen testimony, 115.20 traded at the beginning of the speech and the market then started a deep controlled move lower and traded through to the 113.80 levels with support stopping the move for a period before late selling kicked in and the market turned lower again this time clearing the market down to the 113.20 levels after being above the 115.00 level for over a year, with the market eventually settling to a close around the 113.35 area.
• AUD: A steady day for the Oz with the AUDJPY cross off the board and having little effect on the wellbeing of the Oz, dipping in early trading through to the 0.7040 levels with the JPY buying forcing out any remaining AUDJPY carry trades and then the move into the grey hours saw the market rise steadily into the London session testing through the opening 0.7070 levels and then continuing through the 71 cent level after a brief stutter and holding through the day into the NYK session with a 20 pip range of 0.7100-20 areas, early selling as the market pared back positions into the Yellen testimony and back to the opening levels from there the market traded choppily for awhile and once the commentary was out of the way moving back to 71 cents and trading around the level to the close.

Yesterday’s premiership results

AUD       Westpac Consumer Confidence Feb A 4.20% | P -3.50%

JPY         Domestic CGPI Y/Y Jan A -3.10% | C -2.80% | P -3.40% | R -3.50%

GBP       Industrial Production M/M Dec A -1.10% | C -0.20% | P -0.70% | R -0.80%

GBP       Industrial Production Y/Y Dec A -0.40% | C 1.00% | P 0.90% | R 0.70%

GBP       Manufacturing Production M/M Dec A -0.20% | C 0.10% | P -0.40% | R -0.30%

GBP       Manufacturing Production Y/Y Dec A -1.70% | C -1.40% | P -1.20%

GBP       NIESR GDP Estimate Jan A 0.40% | P 0.60%

USD       Fed Chair Yellen Testifies

USD       Crude Oil Inventories A -0.8M | C 3.1M | P 7.8M

USD       Monthly Budget Statement Jan A $55.2B | C $22.8B | P -$17.5B

Good Luck,

Andy

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