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By XE Market Analysis June 18, 2013 2:46 pm
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    XE Market Analysis: Asia - Jun 18, 2013

    The dollar was mixed in choppy N.Y. trade on Tuesday, as positioning drove prices ahead of Wednesday's FOMC announcement. U.S. data had modest negative impact on the dollar, where May CPI was a touch cooler on the headline, and May housing starts missed the mark. Nevertheless, Wall Street rallied, perhaps as sentiment solidified around better than even odds the Fed won't announce any tapering plans at this meeting. EUR-USD chopped between 1.3340 and 1.3420, squashing barrier options at 1.3400. USD-JPY meanwhile held firm over 95.50 through the morning, before succumbing to position paring selling pressure into the London close.

    [EUR, USD]
    EUR-USD did an abrupt about face, heading under 1.3340, after popping up to just shy of 1.3400 following the U.S. data releases. Solid European sellers were seen into 1.3400, some related to defense of barrier options at the figure, and the move back under 1.3370 resulted in weak intra day longs bailing out of positions quickly. EUR-USD eventually traded over 1.3400, after basing at 1.3338. Price action initially suggested an aggressive seller or two over 1.3390, though bids continued to return. Defense of 1.3400 barriers looked to be in effect, but the break over 1.3400 brought buy stops to bear. Both longs and shorts were harassed through the morning, as light liquidity resulted in serious market chop.

    [USD, JPY]
    USD-JPY consolidated early gains, just below intra-day highs around 95.75, brfore eventually pulling under 95.10 on pre-London close position squaring. Japanese exporters may look to take advantage of any movement towards 96.00 or above for fear of further dollar selling. Japan got approval for its policy stance at the G8, but market reaction was fairly muted. Price action is more orderly since specs were flushed out of the market over the last few weeks. However, it has also limited ambition to re-enter aggressive yen short positions.

    [GBP, USD]
    Cable triggered stops through 1.5600 as prices chopped over the U.S. data releases. EUR-USD's pullback from the 1.3400 region back under 1.3350 emboldened Cable sellers and once 1.5600 gave way it extended through 1.5570. Sell-interest came mainly from interbank names, though IMM accounts were also noted on the downturn. Note, even though Cable has been underpinned for some time, the futures market has seen a persistent build up in speculative GBP short positioning. However, given current economic fundamentals in the U.K. they could lighten up some of these positions if Cable extended its correction towards the 1.5500 region.

    [USD, CHF]
    The CHF traded at firmer levels overall. USD-CHF fell back from 0.9260 and traded into the 0.9175 region on underlying dollar selling. EUR-CHF rallied out of 1.2325 towards the 1.2360 area in London trade, but was unable to sustain higher levels. USD-CHF heaviness weighed, while EUR-CHF came under pressure after the Swiss lower house refused to debate a draft law to settle a tax dispute with the U.S. and the bill will now go back to the upper house. It traded just under 1.2300, though should find support on dips as local names look towards the SNB policy decision later this week. It is expected to maintain the current policy stance.

    [USD, CAD]
    USD-CAD found support at 1.0200 in London morning trade, managing early highs of 1.0214 in light trade. Standing bids were seen into 1.0180, which effectively put a floor under the pairing through the session. More sellers were in place at 1.0220, limiting highs to 1.0217. Uncertainty over U.S. Fed policy appeared to have weighed the CAD down some this week, though upside follow through is seen limited into tomorrow's FOMC announcement.

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