Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 118.28 | EURUSD 1.13192 | EURJPY 133.88 | AUDUSD 0.77632 | NZDUSD 0.72385 | USDCAD 1.26183 | EURCHF 1.04569 | USDCHF 0.92379 | GBPUSD 1.5066 | EURGBP 0.75129 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               118.47 | 117.795

EUR/USD             1.13395 | 1.13165

EUR/JPY               134.195 | 133.56

AUD/USD            0.7798 | 0.7762

NZD/USD             0.7295 | 0.7264

USD/CAD             1.2634 | 1.2608

EUR/CHF              1.0465 | 1.04265

USD/CHF             0.9240 | 0.9205

GBP/USD             1.5083 | 1.5065

EUR/GBP             0.7518 | 0.7512
For today

• EUR: The Euro moved quietly higher from the opening 1.1320 areas and pushed into the Tokyo session towards the 1.1340 level however, Tokyo had other ideas and EUJPY selling saw the market back towards the opening levels, from there the market has moved quietly around the 1.1330 area for most of the session with limited trading going through the market. Topside with the Greek situation tucked away for the moment and the market awaiting the first signs of QE see’s 1.1380-1.1400 as a strong selling opportunity a strong push through the 1.1430 levels will see the market open for a higher move however, this will still be contrary to real expectations for the Euro but technically possible. Downside bids into the 1.1300 levels are likely to be light and 1.1250 holds better bids for the moment however, any move below the 1.1150 levels runs into bids but is possibly more vulnerable to deeper moves and a very good 1.10 sentimental level becoming attractive.
• GBP: The Cable remained quiet through the session holding just below the 1.5080 areas and only slightly above the opening 1.5070 areas, volumes have been very poor in the pair and EURGBP has been little different trading quietly as the market tries to make its mind up whether the UK economies fundamentals are more complicated than the layman expects, so is the recovery likely to remain unbalanced with services increasing while manufacturing continues to dip, the good news is with manufacturing costs likely to dip on the energy side of the equation and production remaining in check for the moment will manufacturing start to fill the gap or will the slowdown in the Eurozone check UK exports? Obviously this is over simplified with a lot more factors on the side line that could spike either side. For the moment the topside remains dominated by offers into the 1.5200 levels and with short term players keeping the market in a tight area, a push through the 1.5220-30 areas is likely to see the next move to the 1.5300 levels quickly before looking for that final breakout through that level. Downside bids from the 1.5000 areas are deep and into the 1.4950 levels and has proven fairly strong in the short term however, the level is yet to be tested fully and one would expect a USD move to do the damage as the UK data still remains supportive. A push through the level though does open up a larger move lower with a double bottom technical level through the 1.4850’s.
• JPY: The market opened around the 118.30 levels and headed higher to the 118.45 areas before early Japanese moved into the market and the selling in front of the advanced GDP figures for the US. Someone a long time ago once told me that the difference between (P) preliminary and (A) advanced is 50% correlation of relevant data. This in mind the nervousness of the Japanese moving into the weekend may be worth noting as the market drifted steadily back into the 117.90 levels before testing the 117.80 supportive areas as the market moved towards the grey hours, with most of the other currencies holding quietly. A move through the 117.80 level will possibly see stops through the 117.70-60 areas and the market running to the 117.20 areas where the market has stalled the past couple of weeks, a push through the 117.00 opens up possibilities of a test through the 116.00 areas again and a deeper move if it can break that level. Topside offers into the 118.80-119.00 are likely to see only a light mixture to the 119.20-30 area a clear break here would likely see the market rallying strongly for a test of the next level from 119.80-120.00 areas.
• AUD: As with the rest of the complex the Oz has been dead in the water having moved initially from the 0.7760 areas to above the 0.7780 level in early trading since then the market has been in a very tight range and while the USDJPY dropped the AUDJPY followed and the usual effect of driving the Oz higher was missing from the market pushing only into the 0.7790’s. Offers likely from the 0.7820 areas onwards with only light offers every 10-20 pips and nothing to strong until the 0.7880 area, a push through the 79 cent level will likely see weak stops appear before opening for a move back to the 80 cent resistance levels, downside has bids into the 77 cent level with some option barriers likely to make an appearance however, talk in the market of possible interest cuts over the coming year downside pressure is likely to continue.

Overnight News

JPY:

Japan Inflation Slows More Than Forecast in Challenge to BOJ

Japan Dec. Unemployment Rate at 3.4%; Est. 3.5%

Japan Dec. Industrial Production Rises 1% M/m; Est. +1.2%

Japanese Nominal Disposable Income Climbs Most in 19 Months

USD/JPY:

Ford CFO Says Toyota Gains $10 Billion Advantage From Weak Yen

CNY/EUR:

China Supports ‘Strong’ Euro, Vice Finance Minister Says

EUR:

German Recovery to Continue at Start of Year: Finance Ministry

Greek Government’s Signals Are ‘Very Mixed,’ ECB’s Jazbec Says

EUR/VND:

EU Might Recognize Vietnam as Market Economy, Saigon Times Says

IMF:

U.S. Veto Power at IMF Said to Face Threat in Rift on Governance

NZD:

NZ’s Key Taking Advice on By-Election After MP Resigns

N.Z. Green Party Co-Leader Russel Norman to Step Down

GBP:

U.K. Jan. GfK Consumer Confidence +1 vs Est. -2

Today’s data

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

NZD       Building Permits M/M Dec A -2.10% | P 10.00% | R 10.50%

JPY         Unemployment Rate Dec A 3.40% | C 3.50% | P 3.50%

JPY         Household Spending Y/Y Dec A -3.40% | C -2.30% | P -2.50%

JPY         National CPI Core Y/Y Dec A 2.50% | C 2.60% | P 2.70%

JPY         Tokyo CPI Core Y/Y Jan A 2.20% | C 2.20% | P 2.30%

JPY         Industrial Production M/M Dec (P) A 1.00% | C 1.20% | P -0.50%

GBP       GfK Consumer Sentiment Jan A 1 | C -2 | P -4

AUD       PPI Q/Q Q4 A 0.10% | C 0.30% | P 0.20%

JPY         Housing Starts Y/Y Dec A -14.70% | C -14.80% | P -14.30%

08:00     CHF        KOF Leading Indicator Jan C 94.7 | P 98.7

09:00     EUR        Italian Unemployment Rate Dec (P) C 13.50% | P 13.40%

09:30     GBP       Mortgage Approvals Dec C 59.0K | P 59.0K

09:30     GBP       M4 Money Supply M/M Dec C 0.50% | P 0.00%

10:00     EUR        Eurozone Unemployment Rate Dec C 11.50% | P 11.50%

10:00     EUR        Eurozone CPI Estimate Y/Y Jan C -0.50% | P -0.20%

10:00     EUR        Eurozone CPI – Core Y/Y Jan (A) C 0.70% | P 0.70%

13:30     USD       Employment Cost Index Q4 C 0.70% | P 0.70%

13:30     CAD       GDP M/M Nov C 0.10% | P 0.30%

13:30     USD       GDP (Annualized) Q4 (A) C 3.10% | P 5.00%

13:30    USD       GDP Price Index Q4 (A) C 0.90% | P 1.40%

14:45     USD       Chicago PMI Jan C 58 | P 58.3

15:00    USD       U. of Michigan Confidence Jan (F) C 98.2 | P 98.2

Harry Hindsight              

• EUR: The Euro opened in the Asian session around the 1.1280 levels and traded quietly in the early part of the session managing meagre gains to above the 1.1290 area before slipping to below the 1.1270 level late on as EURJPY selling entered the market, the move into the grey hours saw the market recover before London official opening tested the downside for the last time, and a steady rise ensued ignoring the poor numbers released in the Eurozone. The market moved into the NYK session testing towards the 1.1370 areas, the release of the US initial claims numbers showing a multi-year low of 265k saw the USD come alive and the Euro was quickly lower through the NYK options expiries in NYK to test to the 1.1280 again and then a quiet slow bounce to the close back above the 1.1320. With the media making noises on the Greeks not to default the Euro’s bid tone could be best called limited at best and the market has still yet to see the first testing of the waters with QE.
• GBP: Cable was left behind by the movement in the Euro with Cable holding the 1.5140 levels through Asia and dipping a little to test the 1.5120 areas into the London opening, with no tier 1 data and little to impact the market it remained in the 1.5120-40 levels until the NYK session opened and the EURGBP broke through to the 75.00 level triggering some light stops on the move to the mid 0.7525 areas, EURGBP ran out just off its highs however, this EURGBP buying supressed the GBP market and the Cable dropped around a big figure to move into the 1.5020 areas and into a supportive area. Late trading eventually saw light buying and profit taking from the lows and the market moved into the 1.5070 areas into the close on a quiet day for the Cable.
• JPY: The USDJPY moved from the 117.60 areas and immediately tested lower to the 117.40 levels before quickly reversing on the opening of the Tokyo session, the market moved to the 117.80 levels and expectation of offers from exporters saw the market dip back from the fix to the 117.60 levels, with no sign of the said offers the market quickly moved to the 118.10 levels and ran immediately into the offers someone thought were lower, this held the market held the 117.90 areas before dropping off towards the later part of the session as EURJPY selling moved in and the market was back on the 117.60 levels. London were steady buyers and a push through 117.90 saw weak stops through the level and 118.20 was quickly tested. NYK trading was initially quiet before the initial claims before quickly moving higher on the release to push to the 118.50 areas and closing just short of the levels.
• AUD: The Oz opened around the 79 cent levels and traded quietly into the Tokyo session holding close to the levels, early movements in AUDJPY and USDJPY kept the market holding quietly however, the strong EURJPY selling started the selling, the selling was light pushing to the 0.7860 areas however, the opening of the London session saw the downside bids tested and they broke easily, from that point on you would have expected some fireworks however, the market saw steady selling and completed its move into the 75-79 cent trading areas from pre-Lehman’s and the eventual credit crash. The market recovered a little from the 0.7720 areas as profit taking came in from long term shorts and finished just above the 0.7760. Talk in the market now is for interest rates likely to be lowered over the coming year with some calling for a possible two fold movement with bias towards easing likely to be muted on the next meeting.

Yesterday’s premiership results

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

NZD       RBNZ Rate Decision A 3.50% | C 3.50% | P 3.50%

NZD       Trade Balance (NZD) Dec A -159M | C 75M | P -213M | R -285M

AUD       Conference Board Leading Index Nov A 0.10% | P -0.20%

JPY         Retail Trade Y/Y Dec A 0.20% | C 1.00% | P 0.40%

AUD       Import Price Index Q/Q Q4 A 0.90% | C 1.40% | P -0.80%

EUR        German Unemployment Change Jan A -9K | C -10K | P -27K | R -25K

EUR        German Unemployment Rate Jan A 6.50% | C 6.50% | P 6.50%

EUR        Eurozone M3 Y/Y Dec A 3.60% | C 3.50% | P 3.10%

EUR        Eurozone Business Climate Indicator Jan  A 0.16 | C 0.12 | P 0.04 | R 0.15

EUR        Eurozone Industrial Confidence Jan A -5 | C -4.5 | P -5.2

EUR        Eurozone Consumer Confidence Jan (F) A -8.5 | C -8.5 | P -8.5

EUR        Eurozone Economic Confidence Jan A 101.2 | C 101.6 | P 100.7 | R 100.6

EUR        Eurozone Services Confidence Jan A 4.8 | C 6 | P 5.6

GBP       CBI Reported Sales Jan A 39 | C 34 | P 61

EUR        German CPI M/M Jan (P) A -1.00% | C -0.80% | P 0.00%

EUR        German CPI Y/Y Jan (P) A -0.30% | C -0.10% | P 0.20%

USD       Initial Jobless Claims (JAN 24) A 265K | C 300K | P 307K | R 308K

USD       Pending Home Sales M/M Dec A -3.70% | C 0.50% | P 0.80% | R 0.60%

Good Luck,

Andy