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By XE Market Analysis August 15, 2014 3:58 pm
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    XE Market Analysis: Asia - Aug 15, 2014

    U.S. data was mixed on Friday, though the in-line PPI, softer N.Y. Fed index, and better industrial production had little impact on FX trade. Geopolitics was the main driver, as events in Russia/Ukraine ultimately turned a moderate stock rally upside down, and sent risk levels, and USD-JPY lower. EUR-USD again traded above 1.3400, though reports of Ukraine forces shooting at Russian military units on the Ukraine side of the border, saw the euro move back under 1.3380. USD-JPY meanwhile, sank to 102.14 lows after touching 102.71 highs, as Wall Street turned red, and as Treasury yields fell out of bed on safe-haven buying. Cable firmed up some, but ran into resistance at 1.6700, as USD-CAD initially fell on the re-release of repaired Canadian employment data, which was much improved over the initial report.

    [EUR, USD]
    EUR-USD moved up from 1.3380 following the mix of U.S. data, eventually peaking over 1.3400. Once again however, the pairing was unable to hold the figure, and later was on the move lower again, as reports of Ukraine units firing on Russian military equipment crossing into the Ukraine from Russia made the rounds. Euro gains stalled at 1.3411, before falling back to 1.3378. In the face of potential for further sanctions should the shooting war heat up, the euro continues to be remarkably resilient. We continue to target 1.3300 and lower.

    [USD, JPY]
    USD-JPY eased to intra day lows just above 102.14, with longs bailing out of positions into the weekend on the break of 102.55. Not a major move from 102.71 highs to the lows, but the biggest move of the session nonetheless. Potential weekend event-risk the likely justification, with traders not wanting to be short of yen as Ukraine/Russia heated up, with reports of Ukraine forces taking out a Russian column inside of Ukraine territory. The resultant sell off on Wall Street, and tanking Treasury yields didn't help either.

    [GBP, USD]
    Cable has continued to hold below 1.6700 despite the upward drift in EUR-USD, which been accompanied by gains in EUR-GBP and other euro crosses. The upward revision in U.K. Q2 GDP to 3.2% y/y from 3.1% hasn't proved to be a bullish cue as it won't change the BoE's wait-and-see-stance with regard to the timing of a rate hike following data this week showing the first negative change in household wages in June since 2009.

    [USD, CHF]
    EUR-CHF moved to new trend lows under 1.2090. The combination of soft EU GDP, and Russian meddling has seen safe-haven flows into the CHF continue. Traders will however, be reluctant to push the cross much further, with SNB warning shots expected on a move under the figure. The Bank has assured markets it will defend its 1.2000 line in the sand.

    [USD, CAD]
    USD-CAD fell to 1.0861 from near 1.0900 after the upwardly revised Canadian employment report, though later steadied somewhat on either side of 1.0875. The market had largely been positioned short of USD-CAD, in anticipation of an improved labor report, so initial reaction was tempered. The pairing managed only a 27 point drop from Thursday's low. Later, USD-CAD raced back over 1.0915, as risk taking levels fell sharply following Ukraine/Russia shooting report. The market was largely thought to be net short of USD-CAD going into this morning's re-release of the jobs report, though with that event largely priced in, shorts weree on the run to square up positions into the weekend.

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