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By XE Market Analysis August 18, 2014 2:02 pm
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    XE Market Analysis: Asia - Aug 18, 2014

    The dollar was mostly firmer in N.Y. trade on Monday, largely as a perceived improvement in the risk backdrop helped sentiment. Wall Street rallied strongly, as oil and gold prices fell, and Treasury yields inched a touch higher. Home builder sentiment improved in August, which helped the greenback as well. EUR-USD was sold early in the session, where it tested Friday's 1.3359 low before stabilizing. USD-JPY meanwhile, was perky, though struggled over 102.55 on reported Japanese export offers layered up to 103.00. Cable held the 1.6700 handle, while EUR-CHF reclaimed 1.2100 on the back of calmer Ukraine tensions.

    [EUR, USD]
    EUR-USD touched intra day lows of 1.3380, with U.S. names reportedly testing the downside early, after the pairing failed to make progress over 1.3400 overnight. A downbeat Bundesbank economic report, may have gotten the euro selling ball rolling. The euro later extended losses, touching 1.3354 lows, and apparently getting a small push from better home builder sentiment. Another round of sellers moved in on the break of 1.3380, the prior intra day low. The pairing settled in just above Friday's low after the London close. Good bidding interest remains in place down to the trend low of 1.3333, though stops are expected to be a factor under the 30 level. Defense of barrier options at 1.3300 can be expected as well, with a good chunk reportedly rolling of during the second half of the week.

    [USD, JPY]
    USD-JPY was supported by the better risk backdrop and equity market rally, though continued to struggle over 102.55-60. Pent up Japanese exporter offers remain in place, reportedly from 102.70 to 103.00. Barring fresh geopolitical shocks, USD-JPY remains on a broadly bullish path. Bloomberg reported last week that BoJ officials are considering cutting growth forecast for FY 2014, "according to people familiar with the central bank's discussions," and the JGB 10-year benchmark yield has dipped below 0.50% for the first time in 16 months, both supportive of the dollar.

    [GBP, USD]
    BoE Governor sounded hawkish in weekend remarks made in an interview with the Sunday Times, saying "we don't have to wait" for real wages to turn positive before hiking interest rates, though he also said that "we have to have the confidence that prospective real wages are going to be growing sustainably". These comments saw cable spike higher in Asian trade, and cable managed to hold the 1.67 handle through the N.Y. session, peaking near 1.6735.

    [USD, CHF]
    EUR-CHF edged back over 1.2110 in N.Y. on Monday, as geopolitical fears abated to a degree. This said, it will not take much in the way of new threats to bolster the CHF again. In the meantime, traders 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 was steady in early trade, holding over 1.0875, while running into sellers over 1.0890. Standing bids were seen from 1.0875 down to Friday's 1.0860 lows, though sell stops are rumored below the level. To the upside, option backed sellers are reported at 1.0900, with buy-stops at 1.0930, just over Friday's peak. The pairing peaked at 1.0899 before retreating slightly. Oil prices were lower again, perhaps weighing some on the CAD, though a strong risk backdrop appeared to have offset.

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