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By XE Market Analysis December 2, 2013 2:10 pm
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    XE Market Analysis: Asia - Dec 02, 2013

    The dollar gained altitude in London morning trade, and for the most part maintained higher levels through the N.Y. session. A strong manufacturing ISM headline offset softer construction spending data, though equities took a break from their recent gains, falling modestly. EUR-USD traded to 1.3530 lows, down over 80 points from London morning highs, and was later capped around 1.3550. USD-JPY broke over 103.00, though gains over the figure were limited by Japanese selling interest. Cable settled into 1.6350, while USD-CHF traded over 0.9100, though was unable to hold it.

    [EUR, USD]
    EUR-USD tipped lower from levels just above 1.3600 to a six-day low of 1.3529, despite there being an upward revision to Eurozone final November PMI data, in a move that breached below the pair's 50-day moving average at 1.3571. Support is marked at 1.3490 (last week's low) and the 1.3500 level. N.Y. dealings were quiet, with the pairing stuck inside of 1.3530 to 1.3560. Holiday trade is gearing up now, though with 1.3600 not holding up, a shake out of stale longs may be in the cards this week into the ECB meeting and the U.S. jobs report.

    [USD, JPY]
    USD-JPY continued to struggle over 102.90 in early trade, with talk of 103.00 barrier option defense heard. Japanese exporters were on th offer from the figure according to sources. Reports of a BoJ contingency plan for more stimulus made the rounds, likely responsible for the move from 102.75 to 102.90. Later, the pairing managed highs 0f 103.13. The 2013 high of 103.73 will move to center-stage now that the 103.00 level gave way. Stops are seen from 103.10-20, while momentum players are expected to "stop in" to fresh long positions on a move over the figure. A N.Y. close over the figure should bring Asian buyers to the forefront, opening the door for a test of 2013 highs of 103.73.

    [GBP, USD]
    Sterling has dropped to a new low for the day having more than reversed the run to two-year high that was seen during the pre-London Asian session. EUR-GBP has also lifted from 11-month lows. The pound has rallied strongly over the last several weeks, which is fitting as the U.K. is currently the strongest growing economy out of the OECD grouping, but the market is settling now. Interbank and short-term traders in London and New York presently have little appetite to chase sterling higher amid the generally firmer USD environment and after Cable failed to extend to a fresh high following the much stronger than expected PMI report out of the U.K.

    [USD, CHF]
    The CHF has been steadily firming against the USD for about three weeks and we look for a a daily close below 0.9060 to confirm this. Friday's low at 0.9028 provides the initial target while trend support comes in at 0.8990. EUR-CHF looks to remain steady. The cross found a good bid under 1.2300 last week. USD-CHF managed to briefly trade over 0.9100 on Monday, though persistent offers kept a lid on the pairing. The highlight on the Swiss calendar this week is November CPI data, which we expect to tick back to a -0.1% y/y rate following the unexpected dip to -0.3% y/y in October. Continued cool inflation data, which is occurring despite the currency limit peg, will ensure that Swiss policymakers remain fully committed to ultra-easing monetary policy despite improving economic fundamentals.

    [USD, CAD]
    USD-CAD touched two-year highs of 1.0654 in London trade, before settling back into 1.0625 early in the North American session. The October, 2011 high of 1.0657 will provide strong initial resistance, though heavy stops are seen above the level. This said, more offers can be expected into 1.0675, which represents the August, 2010 peak. The CAD has been on a much softer footing following the most recent soft inflation data, which should keep the BoC in full dovish mode when they announce policy on Wednesday.

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