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By XE Market Analysis November 12, 2014 2:24 pm
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    XE Market Analysis: Asia - Nov 12, 2014

    The dollar was mixed in N.Y. trade on Wednesday, lower versus the yen, and CAD, while posting modest gains against the euro and sterling. Aside from wholesale data, which was overlooked by the FX market, there was no data to drive prices. Equities started out poorly, though managed to recover some, which provided a modicum of support to the greenback. Treasury yields helps a bit too, as they recovered marginally from session lows. EUR-USD flirted with the 1.2490 region, before falling back under 1.2440, while USD- while USD-JPY fell briefly below 114.00 before perking up to near opening levels.

    [EUR, USD]
    EUR-USD has bided its time mostly between 1.2400 and 1.2500 this week, as the market appears to be waiting for the ECB to "show me the money". The ECB balance sheet is expected to grow further in the coming months, though we may have to wait to see the mix of asset purchases the Bank has in store before the euro can move lower. On Tuesday, the ECB's Mersch said ABS purchases could come as soon as next week, with perhaps corporate bond buying to follow. Once the ECB ramps up its program, we could then see EUR-USD head toward the October 2012 low of 1.2040. EUR-USD gains again stalled into the 1.2490 region on Wednesday, and has later eased back under 1.2440 in light trade. The partial recovery in stocks and yields weighed some on the pairing, and support seen into 1.2430 gave way, tripping stops and a low under 1.2420.

    [USD, JPY]
    USD-JPY dipped to within a point of overnight 115.03 lows early on, though reported bids at 115.00 did not materialize, allowing the pairing to slip to 114.89 lows. Buyers returned quickly however, perhaps bidding ahead of noted standing orders at 114.80. USD-JPY rebounded to 115.10, and later traded over 115.45, the previous intra day high, bringing focus back to the upside. The pairing peaked near 114.70 in subsequent trade.

    [GBP, USD]
    Cable tumbled on the BoE Inflation Report, which trimmed both GDP and inflation forecasts, noting that CPI is likely to fall below 1% within six months. This saw sterling more than give back gains seen on a generally good employment report, with the October claimant count dipping by a more-than-expected 20.4k. Cable lost over 120 pips into the N.Y. open, to 1.5820, and slowly faded to 1.5783 lows later in N.Y.

    [USD, CHF]
    EUR-CHF edged out a fresh 26-month low at 1.2018 in what is best described as cautious trade given the heightened risk of SNB intervention with the franc's 1.2000 cap in close proximity. The franc hasn't seen the south side of 1.2000, the SNB's cap, since it was implemented in Sept 2011. The central bank hasn't needed to intervene since 2012, and can be expected to be resolute in any new defence of 1.2000 after recently threatening negative interest rates if need be. Euro weakness and bouts of risk aversion have been weighing on EUR-CHF, while the approach of the so-call "gold initiative" referendum (aka "Save Our Swiss Gold") in Switzerland on Nov-30 is seen as potentially bearish for EUR-CHF. A 'yes' outcome would require the SNB to raise the percentage of gold reserves to 20% of the total from 8%, which SNB's Danthine argued "would severely constrain the SNB's room for manoeuvre in a future crisis."

    [USD, CAD]
    USD-CAD put in a 1.1359 high in London trade, and later eased back under 1.1310 lows. WTI crude remained over the $77/bbl level, slightly supportive of the CAD, while the greenback's generally softer tone this morning saw traders test USD-CAD's downside to a degree. The pairing made three attempts under the 1.1300 mark, failing all three times, as reported corporate bids materialized ahead of 1.1280.

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