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By XE Market Analysis June 20, 2013 10:40 am
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    XE Market Analysis: Asia - Jun 19, 2013

    FX trade was dead sideways into the FOMC on Wednesday, as traders sat on their hands into the announcement. The diminishing downside risks to the economy noted in the FOMC statement, suggested a reduction in QE purchases is a real potential over the second half of the year. That weighed on stocks and bonds, and gave the dollar a boost, as one would have expected. EUR-USD spiked down under 1.3330 from 1.3420 ahead of Bernanke's press conference, while USD-JPY rallied over 96.30 from 95.25. The press conference saw the dollar has climb further, taking EUR-USD to 1.3275, and USD-JPY to just shy of 96.96. Stop loss dollar buying drove momentum since after the FOMC announcement, though Bernanke's comment that bond purchases could be scaled back later in the year, appeared to help the dollar higher, and weigh further on stocks.

    [EUR, USD]
    Option expiries attracted into the N.Y. cut as market participants were mostly sidelined ahead of the FOMC policy outcome. Strikes included outstanding maturities in EUR-USD at 1.3400, which kept ranges very tight through mid morning. The euro moved sideways over 1.3400 into the FOMC, when the bottom fell out. EUR-USD made its way under 1.3270 on prospects of slowing Fed bond purchases later in the year, while stop loss selling kept momentum going.

    [USD, JPY]
    USD-JPY opened the N.Y. session near 95.00, and managed a 94.95 to 95.20 range ahead of the FOMC. The pairing spiked up over 96.30 after the announcement, where firmer Treasury yields helped the dollar pairing. Prospects for Fed tapering in the second half of the year kept momentum going, and the pairing stopped just short of 97.00. From there, reported Japanese sellers pushed the dollar back under 96.40.

    [GBP, USD]
    Cable drifted into 1.5650 following the N.Y. cut, where 1.5670 strikes rolled off. However, downside movement remained limited, with the dollar slightly offered ahead of the Fed outcome. Cable slid from 1.5670 to lows near 1.5480 after the Fed, as the dollar rallied sharply and broadly following the announcement.

    [USD, CHF]
    EUR-CHF spiked up to 1.2365 from 1.2310 after the FOMC, while USD-CHF popped over 0.9320 from 0.9180. The SNB is likely to keep monetary policy unchanged at the Thursday meeting. With the Eurozone still stuck in recession the fundamental outlook has not really changed. The central bank will keep the door open for further moves should the situation worsen again, but with the risk of overheating real estate markets it is likely to stay put for now, especially as Eurozone confidence indicators seem to improve.

    [USD, CAD]
    USD-CAD was steady overnight, ranging between 1.0205 and 1.0225 in London dealings. Today's FOMC announcement kept a lid on things, and more of the same was in effect through the morning. USD-CAD spiked from near 1.0175 to over 1.0285 after the Fed.

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