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By XE Market Analysis December 17, 2013 2:41 pm
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    XE Market Analysis: Asia - Dec 17, 2013

    The dollar started out on a stronger footing, though its gains faded through the session. USD-JPY was softer from the open, slipping to support into 102.50, as risk aversion set in in front of the FOMC. EUR-USD eased to lows under 1.3725, though subsequently recovered over 1.3770. Another sign of risk aversion was the firmer Swiss franc. EUR-CHF traded under 12170, levels last seen in April, which weighed on USD-CHF as well. On the economic calendar, headline CPI came in cooler at flat m/m, while the Q3 current account deficit narrowed slightly. Trade will likely be jittery overnight, and into Wednesday's Fed announcement, where it appears the market is close to a 50/50 split on December tapering.

    [EUR, USD]
    EUR-USD losses were contained to just under 1.3725, above Friday's base of 1.3710. Standing bids were reported from 1.3730 to 1.3710. Nervousness over the FOMC tomorrow kept follow through limited through the morning, though the latest downdraft on Wall Street appeared to prompt some general dollar selling. EUR-USD recovered back over 1.3770 into the close, near the upper end of the N.Y. range.

    [USD, JPY]
    USD-JPY was down testing London lows of 102.87, after failing to make much upside progress over 103.00 early in the session. Traders said volumes were quite heavy, though with the market seen as balanced, there had been little straying from the 103 region. The 102.70-60 region provided the next support level, though sellers stepped in on the move under London's 102.87 low, taking the pairing to intra day lows of 102.54. London names were reportedly the sellers of note. After a brief and shallow rally, the pairing eased back to touch 102.50.

    [GBP, USD]
    Sterling dipped on the U.K. CPI outcome as it unexpectedly dipped to 2.1% y/y in November, a four-year low and down from 2.2% y/y in October. Cable logged a new low for the week at 1.6285 as EUR-GBP lifted toward yesterday's one-month high of 0.8455.Cable eased further in N.Y. trade, touching 1.6217 before finding some traction. Cable turned higher from mid-morning, following the dollar's generally softer tone, peaking over 1.6280 into the close.

    [USD, CHF]
    EUR-CHF declines below 1.22 have caught the attention of some of our sources as a sign of increased risk aversion heading toward year-end, especially with European stocks back on the defensive and the ECB underscoring its dovish credentials of late. Next up is the 1.2173 Apr-26 low compared to 1.2186 lows today. There is also the implication that the well-subscribed 2-year Treasury auction today found some demand from this same quarter. EUR-CHF stops at 1.2195-90 were run through, resulting in a dip to 1.2167, levels last seen in April. Risk aversion appears to be the driver ahead of year end, and tomorrow's FOMC meeting (see our earlier alert). The cross action has dragged USD-CHF lower as well, with the dollar pairing touching 0.8850 lows. SNB members will be getting restless, and there is a good chance the markets hear some verbal intervention in Europe on Wednesday.

    [USD, CAD]
    USD-CAD continued to trade inside a narrow range overnight, with 1.0575-1.0590 prevailing through the London session. Bids were noted at 1.0560, with offers at 1.0600. These were eventually cleared out, as the pairing made its way to 1.0617 highs. Lower risk levels along with fading oil and gold prices weighed some on the CAD, though Wednesday's FOMC announcement likely helped on position paring action.

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