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By XE Market Analysis August 12, 2013 2:46 pm
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    XE Market Analysis: Asia - Aug 12, 2013

    FX Trade was very quiet in N.Y. on Monday, leaving major dollar pairings inside of narrow ranges. A lack of data kept interest muted as well. Treasuries were a bit higher, while Wall Street recovered some from its worst levels. EUR-USD managed a 1.3277 to 1.3312 trading band, as USD-JPY idled inside of 96.90 to 96.40. The calendar picks up on Tuesday with July retail sales and import/export prices, along with June business inventories, though with summer doldrums in full effect, we suspect relative calm to prevail again on Tuesday.

    [EUR, USD]
    EUR-USD consolidated weaker levels into the London close. It edged out intra-day lows just under 1.3280. So far bids at 1.3265 have held without being seriously challenged. However, the daily chart is pointing to more sideways to lower action as last week's failure on 1.3400 and subsequent weakness indicates waning upside momentum. Last week's EUR gains came despite rising expectations that the Fed are moving closing to tapering policy, which on balance should be more favourable for the dollar in the medium term. However, thin summer markets saw the influence come from technical studies rather than fundamentals. We still anticipate EUR selling to continue on upticks, albeit at slightly higher levels than we initially expected pre-U.S. NFP data.

    [USD, JPY]
    The yen firmed up overnight after Japan Q2 GDP missed expectations and weighed on the equity market tone. The data raised concern over the economic outlook and the scope for economic reform. USD-JPY dropped from 96.30 to the 95.90 region initially, but then backed up on Japanese importer demand. The pairing opened near 96.90 in quiet N.Y. dealings, before heading back to 96.40, as a band of sellers materialized into 97.00. Over the coming sessions there may be flows related to repatriation, which is a potential weight on the downside. However, for now USD-JPY does look as if it has found a modicum of support ahead of the 95.50 area. PM Abe said that the economy is improving steadily and growth policies will be highlighted.

    [GBP, USD]
    Cable tripped stops early on as the dollar strengthened into the N.Y. open. A move under 1.5480 fueled follow through selling to the 1.5460 region, which held up through the session. Cable was perhaps due a correction given the outsized gains since last week's BoE Inflation Report, where the market was reacted to the contingencies in the new forward guidance. U.K. recovery expectations are still holding up on broadly firmer survey data and other anecdotal reports of increasing activity. In the near-term, unless Cable can sustain a close over the 200-dma at 1.5532 it could begin to see selling pressure on upticks.

    [USD, CHF]
    CHF traded on an easier footing in London, guided by broader USD movement. A USD-CHF upturn to 0.9280 enabled EUR-CHF to gain a foothold over 1.2300, though N.Y. dealings saw the dollar fade back to 0.9250. Recently, EUR-CHF has struggled amid underlying dollar heaviness, but a correction was underway in Europe today. EUR-CHF is still trading under near-term resistance levels at 1.2330 and 1.2350. The impact from the latest SNB comment was also negligible, though board member Danthine confirmed that the current policy mix would continue in the foreseeable future. Danthine also said it would not abolish the EUR-CHF floor until it started raising interest rates.

    [USD, CAD]
    USD-CAD reclaimed the 1.0300 handle in London trade, moving higher with the greenback in general. The pairing remains supported following the soft Canadian employment report last Friday, with bids seen layered down from 1.0265. Fund offers are noted from 1.0330, and with a lack of data on either side of the border this morning, tight trading ranges are liable to hold up.

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