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By XE Market Analysis November 22, 2013 3:07 pm
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    XE Market Analysis: Asia - Nov 22, 2013

    The dollar stayed lower versus European majors, and maintained a positive bias versus the yen in relatively light pre-weekend trade, with nothing on the U.S. data front to drive prices. Equities and Treasuries stayed fairly steady, and didn't give much impetus to dollar direction. EUR-USD drifted up to highs of 1.3553 from 1.3525 at the open, while USD-JPY bucked the trend, touching 101.30 highs. USD-CAD gave back some gains following stronger domestic retail sales (though cooler CPI reading), while USD-CHF settled in under 0.9100.

    [EUR, USD]
    EUR-USD is consolidating overnight gains above 1.3500. Early N.Y. accounts positioned for further gains and were buying out of 1.3515-20 and forced a 1.3538 intra-day high. Short-term moving averages are keeping prices underpinned, along with a bit of clarification on policy from the ECB since the negative deposit story on Wednesday. Draghi didn't sound keen on this option yesterday and ECB's Asmussen said it has risks. There are still calls for much weaker EUR levels based on the policy outlook, though since ECB cut rates and increased its dovish stance EUR has not sustained lower levels. Theories to explain this range from repatriation by Eurozone banks and demand for peripheral bonds. Note also that big hedge funds will clean books up ahead of next week's Thanksgiving holiday before the year-end liquidity drain kicks in. In prior years this has usually led to dollar buying. The euro drifted over 1.3550 in light afternoon trade.

    [USD, JPY]
    USD-JPY consolidated overnight gains, leaving it close to 101.00 into the N.Y. open. There was more massive expiry congestion that effectively boxed this pair in until the N.Y. options cut. There were $2 bln worth of strikes rolling off at 101.00, $2.7 bln at 100.00 and $2 bln at 102.15. Outstanding barriers at 101.50 should limited upside momentum this side of the options cut, while trend players have raised bids to 100.80 to 100.60, with the latter where another $500 mln strikes are also maturing today. USD-JPY did manage to rally from 101.30 from near 101.05 after the 10:00 EST options cut.

    [GBP, USD]
    Cable is traded a narrow range on either side of 1.6200, managing 1.6185 to 1.6280. There was some upside traction from EUR-USD, which carried it to the 1.6215 region before it moved back across the 1.6200 level. Short term accounts that played the run up from the 1.6100 region and 1.6050-60 earlier in the week are taking profit on 1.6200 or above since the European open and EUR-GBP's move out of 0.8320 to 0.8360 also weighed. However, we still anticipate an eventual move on recent trend highs from October near 1.6250-60 amid positive U.K. fundamentals.

    [USD, CHF]
    EUR-CHF hit two-week lows at 1.2285. A series of stops gave way in USD-CHF under 0.9100 and EUR-CHF through 1.2300 as a strong CHF-JPY bid influenced in thin trade. The weight of yen selling in recent sessions carried CHF-JPY to a new 23-year high today at 111.34 in early N.Y. and follow through demand lifted it to 111.40 on writing. EUR-CHF downside potential should remain limited in our view as specs have been reluctant to push back against SNB, who have reiterated policy guidance on any protracted swissy strength. USD-CHF may have more potential to run now that Wednesday's low has given way at 0.9080. A Swiss referendum is also due on Sunday to vote on the "1:12 initiative" on whether the monthly wage of the best-paid workers at companies should be no higher than the annual pay of the worst-paid worker. Swiss markets will not take kindly to enforced wage rules, which could dampen Switzerland's competitive edge.

    [USD, CAD]
    USD-CAD rallied from 1.0540 to near 1.0560 into the Canadian data, though slipped back to 1.0535 since the releases. CPI was a bit cooler than forecast, though retail sales handily beat forecasts. USD-CAD was bid up in North American trade on Thursday on expectations for soft inflation readings, and for the most part, kept those gains. Offers are now seen from 1.0570, with defense of 1.0600 barriers expected. The trend high is at 1.0609, and large stops are likely above there.USD-CAD later traded under 1.0530, after being weighed from offers earlier into the 1.0570 level. Pre-weekend position squaring kept a lid on the upside following the offsetting CPI and retail sales data early in the session, though support is seen now at 1.0520-10.

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