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By XE Market Analysis July 9, 2013 2:55 pm
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    XE Market Analysis: Asia - Jul 09, 2013

    The dollar rallied on N.Y. trade on Tuesday, taking EUR-USD toward 1.2755 on the back of dovish ECB speak, and an Italy downgrade. USD-JPY held over 101.00 through the morning session, though dipped to 100.83 on a round of weak longs trimming positions. Cable stayed on the 1.48 handle following soft U.K. production data, while USD-CHF touched the 97.50 level. The CAD and AUD were rangebound. Wall Street was higher again, while Treasury yields dipped a touch. A lack of U.S. data kept FX trade fairly light overall. Wednesday's calendar is minimal as well, with just wholesale data, and petroleum inventory data due.

    [EUR, USD]
    EUR-USD broke to intra day lows near 1.2760, with sellers emerging on the move under Asia's 1.2845 low. Comments from ECB's Asmussen contributed to the move, with Reuters headlines quoting him as saying markets are not putting too much faith in central bank verbal guidance. In other words, easy policy for the foreseeable future. Defense of 1.2800 barrier options was absent, as the pairing blew right through the figure. Stops below 1.2790 were noted. Later, the euro touched 1.2755 lows, following Moody's Italy downgrade. While the ratings cut was not a huge surprise, the market needs little encouragement to sell euros these days. We look for an eventual test of 2013 lows at 1.2745, with a break there opening up a move to November 2012 lows of 1.2660.

    [USD, JPY]
    USD-JPY options restricted price action in very quiet morning trade. Today's maturities effectively tied USD-JPY to a 30 pip range since the European open. Plain vanilla strikes roll edoff at 101.00 and 101.50, along with the well telegraphed 102 barriers. Speculative longs positioned into the top of the Ichimoku cloud overnight around 100.75 in the hope that today's expiries will free up the topside. Light selling stepped in on the break of 101.00 in afternoon trade, though the pairing pulled back to 101.00 into the close. Perhaps longs are primed for non-specific rhetoric from Bernanke tomorrow, while the BoJ should not deviate too far from the recent policy stance on Thursday.

    [GBP, USD]
    Cable is drifting lower on the coattails of EUR-USD heaviness. Intra-day stops gave way below 1.2850, which gave the FX market some traction. The IMF's latest report focused more on the negatives rather than the positives, although U.K. managed to avoid criticism and even saw an upward revision in growth. Cable barely flickered on the report, with impetus coming from a pick up in the dollar. Cable dipped under 1.4815 before recovering back over 1.4860.

    [USD, CHF]
    The CHF recovered some European morning losses. There was a marked pick up in hedge fund activity via EUR-CHF following yesterday's close above 1.2400. Traders said that with Eurozone risks now on the back burner speculative demand picked up. There was also a macro influence through 1.2450-60 amid conjecture out of Zurich that forward policy guidance from the ECB could encourage the SNB to take a more aggressive stance on policy. USD-CHF managed highs over 1.2750, levels last seen a month ago.

    [USD, CAD]
    USD-CAD eased to session lows under 1.0515, tripping light stops at 1.0520 early in the session. Follow through was limited however, with good bidding interest seen into 1.0500. Solid Canadian housing data, along with a perky risk backdrop aided the CAD, but quiet conditions were not favorable for a breakout on Tuesday. Short covering took the pairing over 1.0560 in late morning trade, though congestion from 1.0550 to 1.0580 saw gains called. USD-CAD then eased back to 1.0525 in light dealings.

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