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By XE Market Analysis December 13, 2013 3:07 pm
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    XE Market Analysis: Asia - Dec 13, 2013

    The dollar settled in at or very near session highs versus all major currencies in N.Y. trade on Thursday. This saw the USD index rally back over 80.20 from session lows of 79.85. EUR-USD found support around 1.3750, after failing over 1.3800 in London. USD-JPY meanwhile, seemed to have turned the corner, able to hold the 103 handle into the close. The commodity bloc was soft, as USD-CAD moved over 1.0650, and AUD-USD dropped to three-plus month lows under 0.8920, within striking distance of August lows of 0.8849. It remains to be seen, though with recent U.S. data improving, U.S. yields edging higher, and Dectaper still on the table for some, further USD short covering may be in the cards into next week's FOMC announcement.

    [EUR, USD]
    EUR-USD got a boost from U.S. short covering interest early in the session, taking the pairing from 1.3715 to highs near 1.3755. From there though, the euro settled back into 1.3225 through much of the morning, before printing 1.3713 lows. Overall, the euro's technical picture could deteriorate significantly should the week low of 1.3694 be taken out. The market will likely be nervous ahead of the FOMC, while the time of year will likely result in thin liquidity, a recipe for choppy price action.

    [USD, JPY]
    The JPY dove to fresh major-trend lows in Asia, with USD-JPY leading the charge as yield differentials and the associated contrasting stances of the Fed and BoJ underpinned. In N.Y. dealings, USD-JPY gave up a lot of ground however, printing 103.00, though quickly bouncing. The pairing's move higher of late has been of the two-steps forward, one step back variety, though today's sell-off could be chalked up to pre-weekend position paring. Multi-year highs of 103.92 appeared to be enough to pull the profit taking trigger. Dip-buyers will likely keep further downside limited for now.

    [GBP, USD]
    Cable extended to a two-week low of 1.6263 . Stops were triggered through the former support area at 1.6320-25 and then though 1.6300 and the Dec-6 low of 1.6293. These levels defined a key support zone, and the technical picture now looks geared for an extension to 1.6175. The action spilt over to GBP-JPY, which has recently been very well bid, and saw the cross turn lower as weaker speculative long positions were stampeded out. The move in Cable reflected a broader USD move, with the U.S. currency encountering a stronger bid following the successful passage of the bipartisan budget deal in the House of Reps, as it has firmed up the odds for the Fed announce QE tapering at next week's FOMC.

    [USD, CHF]
    We expect the safe haven Swiss currency to remain broadly underpinned into next week's FOMC meeting in the U.S. as a significant portion of market participants are anticipating the Fed to commence QE tapering, which in the event has the potential to trigger a more sustained period of risk aversion in global financial markets. USD-CHF resistance is marked at 0.8835 and 0.8900. EUR-CHF support is at 1.2200-1.2205. The breach of the Jun-24 low of 1.2218 on Wednesday was a bearish development. Initial target is the Apr-21 low of 1.2179. Resistance shows up at 1.2250 ahead of the 20-day moving average at 1.2274.

    [USD, CAD]
    USD-CAD slipped to session lows of 1.0592, after peaking near 1.0670 in London. Activity was reportedly on the light side, though some option related selling was noted following the 10:00 EST N.Y. expiry. The pairing pressed through bids noted from 1.0620 to 1.0600, on its way to 10592 lows. Following sharp gains seen on Thursday, and ahead of Fed risk next week, position paring appeared to be behind Friday's move.

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