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By XE Market Analysis December 31, 2013 11:27 am
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    XE Market Analysis: Asia - Dec 31, 2013

    FX trade slowed to a crawl on the last day of the year in N.Y. dealings, leaving major dollar pairings overall just slightly lower through the session. EUR-USD was pushed back from the 1.3800 level, as USD-JPY gave back the 105 handle. Cable was firm under 1.6550, as USD-CHF slipped back under 0.8900. The economic calendar revealed firmer housing prices in October, a slightly softer December Chicago PMI outcome, and stronger consumer confidence in December.

    [EUR, USD]
    EUR-USD popped to near 1.3795 from around 1.3775 early on, reportedly as London accounts waited to buy into the added liquidity of N.Y. desks. London players were on their way out of the office for the year, and conditions wound down quickly following the last U.S. data release. The 1.3800 mark remained a tough level, and given the differing growth and central bank prospects between the U.S. and the EU, we look for some euro erosion early in the New Year.

    [USD, JPY]
    USD-JPY did not stray too far under 105.00 in N.Y. on Tuesday, with the FX market overall, directionless on the final day of the year. USD-JPY posted its biggest annual gain in 2013 since 1979, driven by yen weakness as a consequence of the 'Abenomics' drive to steer CPI from deflation to a 2% target. Japanese markets are now closed until next Monday. We expect the yen to remain on a weakening path during the early part of 2014.

    [GBP, USD]
    N.Y. dealings saw cable move over 1.6565 into noon-time, though once London had left early for the year-end, there was very little liquidity. The big test for cable will come next week, as the New Year kicks off in earnest. There remains a strong fundamental case in favor of sterling, while U.K. yields have recently been rising quicker than other G7 yields.

    [USD, CHF]
    EUR-CHF has remained comfortably above 1.2200. The cross had breached above 1.2200 ahead of the Christmas/new year holiday period, recovering from pre-Fed tapering decision low of 1.2166, which was the lowest level seen in eight months. The gain had reflected an unwinding in the Swiss currency's safe haven premium as the period of Fed policy uncertainty ended with its decision to commencement QE tapering. Resistance comes in at 1.2280, marks a series of former lows seen between October and November. Support is at 1.2220 and 1.2200.

    [USD, CAD]
    USD-CAD touched fresh intra day lows, moving under 1.0620 in very light trade. The mostly better U.S. data appeared to have helped the CAD, though its movement under support at 1.0650 on Monday likely helped weigh on the pairing. Improving U.S. and Canadian economies may see further USD-CAD downside early in the New Year.

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