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By XE Market Analysis November 29, 2013 9:35 am
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    XE Market Analysis: Asia - Nov 29, 2013

    Movement remained choppy amid thin month-end trade after yesterday's U.S. Thanksgiving holiday. USD-JPY and the JPY crosses maintained a bid tone as market participants digested a heavy Japanese data schedule. The numbers broadly reinforced expectations that the economic recovery is intact. EUR and GBP remained supportive, though there was a bout of profit taking, which forced Cable off trend highs near 1.6375 to the 1.6320 region. EUR-USD was static close to 1.3600. The CHF was narrowly mixed despite another cycle high for the KoF leading indicator. Eurozone data included an acceleration in CPI and unemployment improved a notch. USD-CAD dipped briefly after a better than expected Q3 GDP reading, but ended the session close to 1.0600.

    [EUR, USD]
    EUR-USD experienced another rangebound session close to 1.3600. Movement into 1.3620 is being stymied by a decent wall of offers from resistance around 1.3625-30 up to barriers at 1.3650. There are still plenty of EUR bears around that are holding on to the ECB policy view, but a lack of downside progress and persistent commercial demand for EUR is threatening to force a topside break. Today's Eurozone releases hardly reinforced the dovish ECB debate, with October unemployment down a notch to 12.1% from 12.2% previously, while CPI accelerated to 0.9% y/y from 0.7% previously. Yesterday's weak loan growth data suggests ECB will run with dovish policy, but introduce measures to boost loan growth via non-standard measures.

    [USD, JPY]
    USD-JPY ranges have narrowed near 102.30 as profit taking picked up after the overnight run up to 102.61 trend highs. Talk of month-end related yen selling kept USD-JPY elevated above 102.00, along with positive daily studies and the long-term macro outlook. Further topside moves could become more limited over the next few weeks though due to huge exotic option exposure at 103.00-25. There is a range binary structure with a $20 mln payout due next Thursday, but yards of exposure are noted until December-20 and written largely by one U.S. account. This could result in frequent USD-JPY pullbacks on upticks. JPY call demand has also picked up with this risk in mind, along with underweight gamma exposure into and below 100.00 after a series of long-term barriers fell this week.

    [GBP, USD]
    Cable experienced two-way chop in thin trade. In Asia it extended gains to carve out 1.6374 highs, where option related offers put a cap on further gains and it corrected to 1.6320 since the European session opened. Month-end demand for EUR-GBP went through from 0.8320 to 0.8345, which weighed, though the underlying tone has limited the downside and short-term buyers are noted into 1.6300. U.K. mortgage and lending data revealed that mortgage approvals climbed to the highest level since Feb 2008, but lending to non-financial firm slumped by GBP 1.1 bln. This justifies the BoE's shift in emphasis on lending to SMEs rather than housing market support. Elsewhere, non-residential Gilt purchases came in at GBP 0.9 bln in October from GBP 2.5 bln in September.

    [USD, CHF]
    CHF is narrowly mixed still as EUR and USD fluctuations dominated into month-end. EUR-CHF found a good bid under 1.2300 earlier in the week and extended back through 1.2330, though a USD-CHF move under 0.9050 capped gains and it entered the weekend under pressure. The Swiss KoF leading indicator hit a two-and-a-half peak at 1.85, which was above expectations and reflected improving fundamentals. The impact on the CHF was largely muted as a pick up in data should still not shift the SNB's policy stance. Since the ECB turned more dovish the SNB have defended its own stance and also warned markets it will defend the CHF in unlimited amounts and could also consider other options if needed.

    [USD, CAD]
    USD-CAD dipped into 1.0560 after Canada Q3 GDP beat expectations by a notch at 2.7%. Today's release should not influence the underlying trend, which is firmly in favour of a topside push. The data may have knocked some of the froth from the topside following the run over 1.0600 and it is on course to break 2013 highs at 1.0609 into next week's BoC policy announcement. The BoC surprised last month by eliminating any reference to policy tightening, but is now under pressure to adopt a full blown easing bias due to soft inflation data. Earlier this week a leading U.S. house called for a USD-CAD target at 1.1400 next year with these risks in mind.

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