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By XE Market Analysis March 18, 2014 2:00 pm
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    XE Market Analysis: Asia - Mar 18, 2014

    The dollar was firmer versus the European majors in N.Y. trade on Tuesday, though lost modest ground to the yen. Equities rallied as Putin said he did not want to tangle with the West, and had no ambitions to invade the remainder of the Ukraine. Wall Street appeared to take him at his word, though oil rallied over $1/bbl, even as gold slipped back for the second day. U.S. economic data revealed in-line CPI, and slightly softer housing starts numbers. EUR-USD peaked at 1.3943 at the open, later slipping to 1.3880 lows. USD-JPY bounced to 101.77 on the Putin news, though spend the remainder of the session inching lower, eventually touching 101.28.

    [EUR, USD]
    EUR-USD maintained a fairly narrow trading band through the session, peaking at 1.3943 at the open, before making its way to 1.3880 lows. Uncertainty in the Ukraine could keep the euro fairly tethered for now, and ahead of the FOMC on Wednesday, we suspect few new speculative positions will be entered into. As a result, we look for 1.3880 to 1.3950 to hold overnight.

    [USD, JPY]
    USD-JPY again ran out of steam into the 101.80 level in early trade, with Japanese backed offers noted from 80 up to 102.00. Despite the risk-on conditions today, the pairing's upside remained hampered by China slowdown concerns, and ongoing Ukraine worries. Later, USD-JPY made intra day lows of 101.28. The modest move came as stocks eased off their best levels. Talk of some sort of military skirmish in Crimea may have had some impact, but overall, the markets didn't seem overly concerned with the Ukraine. Gold was down $11 at $1362, posting losses for the second day running, though oil prices rallied over $1/bbl, reportedly on Russia concerns.

    [GBP, USD]
    Sterling is consolidating into the BoE minutes to the March MPC meeting. There are some bank analyst notes in circulation that are recommending a long sterling position into the minutes (due tomorrow), as there is a chance we will see some of the members displaying comparatively upbeat remarks about recovery prospects. We anticipate, however, that these would be offset by concerns about the strength of sterling, an issue touched upon during a press interview by BoE Deputy Governor Bean last week.

    [USD, CHF]
    EUR-CHF has re-established itself under 1.2200 in recent weeks as geopolitical risk remains over the Ukraine and Crimea has returned support to the safe haven franc. China slowdown concerns are another factor. The recent cycle low of 1.2104 and 1.2100 are key support levels. SNB's Jordan said last week that the central bank would defend the 1.2000 limit if concerns about Ukraine drove the franc higher.

    [USD, CAD]
    USD-CAD dipped to intra day lows near 1.1040 following Putin's Duma speech, where he said he did not want to split up Ukraine, and would not seek confrontation with the West. Risk taking immediately turned higher on the comments, taking equities, and the CAD higher. The pairing rallied to intra day highs of 1.1070 following headlines from BoC's Poloz, who said February inflation will be tepid, Q1 growth will be on the "soft side", adding the output gap won't close for "a couple of years". Later, USD-CAD ramped up to 1.1132 highs, taking out stops at 1.1100-10 on the way up. Buyers stepped in in earnest on the move above the prior intra day high of 1.1093. Standing offers are now noted at 1.1140-50.

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