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By XE Market Analysis July 12, 2013 2:42 pm
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    XE Market Analysis: Asia - Jul 12, 2013

    FX trade was relatively quiet in N.Y. on Friday, as many dealers took a break from the extreme volatility seen Wednesday and Thursday. The greenback firmed some through the morning, though comments from Fed hawk Plosser later turned stocks and bonds lower, while firming up the dollar. He said the Fed should begin its taper in September, and end QE by the end of the year. On the economic front, headline PPI was firmer than expected, while Michigan sentiment pulled back a touch. EUR-USD dipped to test 1.3000 as rumors of a weekend France downgrade circulated (later, Fitch indeed downgraded France), while political woes in Portugal saw yields there blow out. The pairing later made its way back over 1.3060.

    [EUR, USD]
    EUR-USD traded at 1.3000 on Eurozone risks. Portugal 10-year yields spiked over 7.75% and equity markets in Southern Europe underperformed, triggering flight-to-quality ahead of the weekend. EUR tripped light stops under 1.3020 and made an immediate push on 1.3000, which coincided with rumors of a French downgrade. Later, EUR-USD strangely popped to N.Y. session highs of 1.3091 from near 1.3050 in the aftermath of the Fitch France downgrade. The pairing was quickly slammed back to 1.3032 lows however. Dealers gave a "shrug" on the brief rally, though said liquidity was very thin.

    [USD, JPY]
    USD-JPY broke away from 99.00 and reached 99.67 highs as dollar buying picked up into the N.Y. open. Real money selling in AUD-USD provided USD-JPY with the liquidity to make a push up through Asia highs of 99.32 and triggered a few light stops. It didn't take much activity to lift USD-JPY higher though as volumes were quite low today ahead of the Tokyo holiday on Monday. From there, as the dollar generally eased, USD-JPY pulled back briefly under 99.00. Both 99.00 and 99.50 expiries rolled off today. During yesterday's N.Y. session, the dollar came under reasonable selling pressure once USD-JPY expiries came out of the market, though on Friday, buyers took their place, taking the pair back over 99.50 from 99.00 at expiry.

    [GBP, USD]
    Cable traded into 1.5080, where it found buyers during in yesterday's session. Cable headed below 1.5100 after a good Asian fund sell order knocked it from 1.5175 during the European morning. Magnet stops on the downside exerted a downside pull late on in the European morning, but prices backed up with the N.Y. options cut in mind. Maturities at 1.5100 influenced, while EUR-GBP drifted lower, which ensured that Cable stayed elevated above bids lower down.

    [USD, CHF]
    EUR-CHF often comes under pressure when Eurozone risks rise, which was the case on Friday. The cross took out stops through 1.2370 on its way to 1.2843 lows. USD-CHF held 0.9500 through the options cut at 10:00 EDT, though sellers stepped in, paring positions in front of the weekend. The dollar pairing slipped to lows under 0.9450.

    [USD, CAD]
    USD-CAD recovered over 1.0380 in early North American trade, following the greenback's trend higher into the open. The pairing was supported above 1.0350 overnight, in very light trade, with standing bids noted at the level. Offers were parked from 1.0400, and eventually limited gains to 1.0404 highs. The Bank of Canada announcement and MPR loom next week, the first for Stephen Poloz as the new governor of the Bank. Assessment of the Alberta flooding could leave a slight dovish tilt, supportive of recent outperformance by Canadian bonds versus Treasuries and negative for the Canadian dollar.

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