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By XE Market Analysis January 9, 2014 3:06 pm
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    XE Market Analysis: Asia - Jan 09, 2014

    The dollar rallied against the euro in the aftermath of decent U.S. initial claims data, though more so on the back of a dovish sounding Draghi. The ECB chief said that the central bank would keep rates at current or lower levels for an extended period. EUR-USD moved from 1.3633 highs to lows of 1.3549, a six-week trough. USD-JPY meanwhile ran out of steam again over 105.00, before testing 104.60. A brief recovery on Wall Street supported the pairing, though it settled into the 104.70 level at the close. Trade should be light overnight, as the markets brace for Friday's U.S. employment report, where NFP estimates have moved up over the 200k mark following the better ADP report on Wednesday.

    [EUR, USD]
    EUR-USD fell to 1.3568 lows from near 1.3595 after the ADP jobs data, though found support from Asian sovereign bidding interest from there. The subsequent rally was capped under 1.3620, and the pairing again gave back the 1.36 handle. As was the case in December with the 1.3800 level, the euro now looks to be having trouble maintaining 1.3600. The euro touched session lows under 1.3555 following the FOMC minutes, though into tomorrow's ECB meeting, we look for EUR-USD to maintain recent trading bands. Looking ahead, improving U.S. data, along with at best, an unchanged ECB dovish stance, should keep pressure on the euro for now.

    [USD, JPY]
    USD-JPY settled to consolidation around 105.00, not far from its five-year peak of 105.44, which we expect to fall in the not distance future. The pairing eased back from 105.03 highs early on, though found buyers under 1.0460. As Wall Street improved briefly from its worst levels, dollar yen moved higher as well. The 105 mark has been difficult this week, though we suspect a better U.S. jobs report on Friday could bring trend highs back into view.

    [GBP, USD]
    The BoE MPC left policy unchanged as widely expected following its January monetary policy meeting. This leaves the repo rate at 0.5% and the QE total at GBP 375 bln. Cable moved in relatively narrow ranges through the N.Y. session, finding support into 1.6450, after pushing back from just under 1.6500 early on. Trade will likely be quiet into Friday's U.S. jobs report.

    [USD, CHF]
    EUR-CHF eased under 1.2350 after the dovish ECB resulted in an underperforming euro. USD-CHF remained supported above 0.9080 through the session, touching 0.9125 highs after the U.S. claims data and ECB press conference. We look for the cross to remain at levels above the SNB's worry zone for now, unless the euro turns significantly weaker as a result of central bank action.

    [USD, CAD]
    USD-CAD maintained altitude, touching new trend highs over 1.0870. Domestic names were reportedly been on the offer into the highs, and we suspect some profit taking was underway ahead of key employment reports on both sides of the border on Friday. More barrier options are noted at 1.0900, with new bids in place from 1.0820.

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