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By XE Market Analysis August 2, 2013 2:15 pm
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    XE Market Analysis: Asia - Aug 02, 2013

    The dollar ended on a weaker footing after a series of U.S. data misses, which included the key NFP release. The headline number increased 162k in July from a downwardly revised 188k outturn in June, which compared with the 183k median. Expectations were inflated ahead of the release after a series of upbeat job reports earlier in the week and compounded market disappointment. EUR was boosted from 1.3190 and ended close to 1.3300, while USD-JPY dropped from just shy of 100.00 just under 99.00. Today's releases didn't dramatically change the U.S. outlook, but market participants will hope there is enough doubt over the outlook to leave the current pace of QE intact.

    [EUR, USD]
    EUR-USD surged from 1.3190 to 1.3280 on the weaker NFP report. Macro funds offers capped for a brief period and fueled a move back to the 1.3230-35 region. There was no appetite to add further to dollar longs though ahead of the weekend and further U.S. data weakness eventually took EUR towards the 1.3300 region by the London close. Today's data has not changed the long-term U.S. outlook. However, near-term Fed policy expectations have shifted a touch, while momentum indicators are also pointing to a higher EUR. Note, large offers from Asian accounts have been in place at 1.3300 since Thursday.

    [USD, JPY]
    USD-JPY topped out ahead of 100.00 early on in the N.Y. session and headed back below 99.00. Dollar longs were stopped out after the NFP data disappointed, along with a series of other weaker than expected U.S. releases. There were dollar buyers tipped via U.S. names around 99.00 for a brief time, but eventually the pair succumbed to long liquidation ahead of the week, leaving it in the middle of the recent range. Next week the BoJ will meet on policy. However, it is also expected to leave policy unchanged. Japan is still going through a period of transition. PM Abe is expected to discuss reform plans in the coming weeks before he announces more concrete details in September. BoJ are expected to hold off from shifting policy until it has more idea on Abe's plans, according to sources.

    [GBP, USD]
    GBP found support in the European morning, which helped Cable off the 1.5100 region. U.K. construction PMI data came in much stronger than expected at 57.0 in July versus 51.5 in June and also provided GBP with a modicum of support. Short term accounts that were positioning for losses were stopped out over the NFP release as Cable surged from 1.5160 to 1.5277 highs. A light period of position adjustment saw it ease off to 1.5215, though it remained supported into the weekend. Next week, GBP could come back under pressure as the BoE are expected to add details to the formal policy guidance when it releases the quarterly Inflation Report on Wednesday.

    [USD, CHF]
    EUR-CHF failed to break 1.2400. An early push higher during the European morning ran out of steam due to an overhang of offers. USD-CHF made an early move up to 0.9390, but drifted lower into the N.Y. open. A weaker than expected NFP release drove USD-CHF back to 0.9300 and this forced EUR-CHF to 1.2350. As the N.Y. session persisted more dollar selling went through and stops triggered a USD-CHF move through 0.9280 and EUR-CHF moved into 1.2330. The CHF continued to focus on external factors rather than domestic leads despite further evidence that the Swiss economy is performing relatively well. The latest Swiss manufacturing PMI reading came in at 57.4 in July from 51.9 previously and was much stronger than market expectations.

    [USD, CAD]
    USD-CAD is still in good shape. Apart from a brief flush out of weak longs USD-CAD recovered quickly from the U.S. NFP miss. It topped out just over 1.0400 in early trade and printed 1.0339 lows, but is trading just a short distance from 1.0400. The move over 1.0350 reinforced bullish expectations overnight after several sessions of base building around 1.0250. Fund selling of CAD was prevalent in the European morning. A mixture of position reduction and fresh interest from system fund types went through and it has scope for sustained period of movement over 1.0400.

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