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By XE Market Analysis June 24, 2013 2:52 pm
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    XE Market Analysis: Asia - Jun 24, 2013

    The dollar rallied further in N.Y. morning trade on Monday, taking EUR-USD to 1.3065 lows. Commodities eased back and equities sold off sharply on the back of China liquidity concerns, and as markets continued to adjust to perceptions that policy agendas at the Fed and in China are changing. The greenback was supported by firmer Treasury yields, and safe haven buying. Later, as Wall Street pared losses, the dollar did ease back, with the euro reclaiming the 1.3140 mark. Aside from better Chicago and Dallas Fed indices, there was nothing on the U.S. calendar to drive markets.

    [EUR, USD]
    EUR selling went through for the ECB fix against a variety of currencies. EUR-USD tripped stops at 1.3080 and the 200-dma at 1.3070 to reach 1.3060. EUR-JPY reversed sharply from early N.Y. lows, turning away from 128.85 to reach 127.90 lows as stops fell behind support at 128.20 and 128.00. The EUR-JPY losses also sent USD-JPY from 98.30 back to session lows, along with underlying dollar strength. EUR-USD later ran into a band of offers from 1.3110, which capped upside for a time, though intra day buy stops over 1.3125 eventually became a factor.

    [USD, JPY]
    USD-JPY spiked over 98.30 from 97.95 after BoJ deputy governor Iwata said the BoJ is ready to offer huge amounts of liquidity to markets in the event of a sudden shock. Iwata said the BoJ still has policy options and is ready to act with an eye on the downside. This will raise expectations that BoJ could provide further policy measure if it deemed that any stress in the market was a consequence of liquidity problems. Dollar gains were fleeting however, as Wall Street sold off sharply at the open. USD-JPY later recovered back to 97.80 from lows under 97.25, largely as equities pared losses. USD resistance was seen into 98.00, which put a ceiling on the pairing.

    [GBP, USD]
    Cable benefited from EUR-GBP heaviness. The cross corrected from 0.8540 at the N.Y. open and traded as low as 0.8583 on the general EUR selling for the ECB fix, along with U.S. leverage fund interest. Further EUR-GBP losses were absorbed by very strong bids from 0.8480 to 0.8470, linked to option positions related to Vodafone's EUR 7.7 bln deal for Kabel Deutschland. The EUR-GBP retracement from 0.8540 enabled Cable to steady close to 1.5400 versus earlier intra-day lows of 1.5344. Cable reached a rally high of 1.5464 as the dollar corrected overnight levels.

    [USD, CHF]
    EUR-CHF hit session lows around 1.2220, leaving it briefly just under the June-13 low at 1.2223 and above the 200-dma at 1.2214. The CHF has benefited from a flight to safety, which also capped the USD-CHF upside. However, the dollar pairing should hold up amid underlying dollar strength and positive technical indicators that point to another test on offers into 0.9400. EUR-CHF downside progress may slow due to long standing bids layered into 1.2200 from early May and more than likely being defended by option positions now.

    [USD, CAD]
    USD-CAD held firm through the morning session, finding buyers ahead of 1.0500. The subsequent paring of equity losses however, put pressure on USD-CAD, seeing it fall under 1.0480. In the near term, the October 5, 2011 highs of 1.0572 will be the next target upside target, while the October 4, 2011 peak of 1.0657 is in line next. Offers were seen in place over 1.0550 on Monday, and will likely be replaced with stops at 1.0575.

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