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By XE Market Analysis July 11, 2013 2:20 pm
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    XE Market Analysis: Asia - Jul 11, 2013

    After steep post-Bernanke losses, the dollar more or less stabilized in N.Y. trade on Thursday. Liquidity was thin, as many traders remained sidelined following the extreme volatility seen the past couple of days. Dollar selling on renewed Fed dovishness appeared to have about run its course, and in the bigger picture, the Fed may be the central bank closest to a tightening policy shift. When? Who knows, but we don't think the dollar has a lot more downside room left in it. On the economic front, weekly jobless claims rose, while import prices were a touch softer than forecast. Friday's U.S. calendar will bring June PPI, and the preliminary U. of Michigan sentiment survey.

    [EUR, USD]
    EUR-USD ranges between 1.3077 and 1.3005 in N.Y., after peaking at 1.3207 in Asia. Post-Bernanke dollar selling ran its course, and bigger picture, it appears the market was given an opportunity to buy cheaper dollars over the past 24-hours. Macro fundamentals are still much better in the U.S. than the Eurozone and Bernanke may have provided better levels for long-term dollar bulls. EUR-USD support was seen into 1.3000, though a break there could see the recent euro rally unwind quickly.

    [USD, JPY]
    The dollar lost some ground after a USD-JPY sell order went through in mid-morning. A Japanese securities house sold from 99.30 into the options cut and losses accelerated on a break of 99.00 to reach near 98.50. The pairing continued to trade above good support from 98.20, where large bids put a floor in place overnight. Later, short covering resulted in a move back toward 99.30. Thin conditions exaggerated moves in low volume trade and price action didn't really provide concrete guidance on direction.

    [GBP, USD]
    Cable headed back to 1.5075 after the U.S. data. Initially Cable jumped from 1.5110 to 1.5135, but since the European open sovereign accounts have capped gains. Intra-day accounts were still happy to buy dips. The first line of orders are noted into 1.5070, where a modest size option strike rolled off and better size demand is expected between 1.5050 and 1.5000. Meanwhile, EUR-GBP continues to correct the overnight rally and is now trading around 0.8630. Outstanding barriers are noted from 0.8700, which provided protective selling. Real money are also using the recent gains to cover unhedged positions.

    [USD, CHF]
    USD-CHF was in a holding pattern on either side of 0.9500. Dovish comments from Fed Chairman added momentum to the dollar sell-off on Wednesday, which started over the FOMC minutes. The dollar pairing fell from over 0.9650 to reach 0.9406 lows. Early European names could not overcome a strong bid from fund names, while the dollar corrected oversold levels. The USD-CHF move helped EUR-CHF to stabilises close to 1.2400 following the sharp pullback from 1.2450 to 1.2370 overnight. After the fallout from the FOMC and Bernanke the market will look to economic data in order to determine near-term direction.

    [USD, CAD]
    USD-CAD wasn't spared from the USD carnage overnight, as it fell under 1.0330 from North American closing levels around 1.0510. It recovered back over 1.0435, though fresh selling interest limited upside from there. With the Fed's freshly established dovish stance, risk appetite improved, as equities were buoyed by the prospects for ongoing Fed stimulus. The pairing later dipped to 1.0470, though activity was quiet overall, as traders licked their wounds after recent volatility.

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