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By XE Market Analysis October 6, 2014 3:02 pm
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    XE Market Analysis: Asia - Oct 06, 2014

    The dollar gave back the bulk of Friday's U.S. jobs report inspired gains in N.Y. trade on Monday, though volumes overall were said to have been relatively light. There was no data to drive the markets, and while Wall Street started out strong, it eventually turned lower, which weighed on the greenback. EUR-USD made its way from 1.2542 lows early in the session, and peaked over 1.2615 into the close. USD-JPY meanwhile, peaked over 109.40, before sliding back under 108.90. Cable traded over 1.6000, while USD-CAD gave back the 1.12 handle, on its way to lows under 1.1150. We suspect today's price action was largely related to profit taking, following the sharp gains the dollar posted last week, and following a period of consolidation, we look for further USD gains.

    [EUR, USD]
    EUR-USD rallied to just under 1.2570 after the open, as North American traders tested the topside. Standing offers were reported into 1.2580, which stopped the modest gains initially. The pairing eased back under 1.2545, though intra day support was seen at 1.2530, and ultimately held. EUR-USD later filled the post-U.S. jobs sell-off gap, touching 1.2617 highs before steadying. Talk of re-loading short position from 1.2600 has been heard, following decent short covering noted overnight and this morning.

    [USD, JPY]
    USD-JPY opened near 109.15, and made its way to 109.47 highs on the back of the stronger Wall Street open, and marginally higher yields. With stocks later turning south however, the pairing slipped to intra day lows of 108.87. The next support region is 108.80, though under there, Friday's 108.35 base may come into view. We continue to see the pairing higher, following comments from BoJ boss Kuroda, who said last Friday that the central bank is aiming to achieve the 2% inflation as "soon as possible," and that a weak currency won't be problematic so long as it reflects fundamentals.

    [GBP, USD]
    Cable spiked up to 1.6078 from 1.6050 late in the session, with stops reported over the level. As was the case with other dollar pairings today, cable moved back above levels seen into Friday's U.S. jobs report. Thin N.Y. conditions likely exacerbated the move, though more stops are seen at 1.6100 now. Aside from the U.S. fundamental story, the drop in the U.K. September composite PMI to a six-month low and remarks last week by BoE's Broadbent that the economy is "not ready" for a rate hike have helped confirm a sea-change in the U.K. economic narrative. We anticipate Cable to establish a lower trading range in the mid-to-upper 1.50s over the coming weeks as incoming U.K. data are likely to reflect the impact of economic stagnation across the Channel.

    [USD, CHF]
    EUR-CHF is back above 1.2100 after SNB's Jorden said last week that there are additional measures that the central bank could use to enforce the EUR-CHF limit peg at 1.2000. This has put the major-trend low of 1.2044 out of the picture for now. The SNB will find defending the 1.2000 cap a tougher proposition in the context of broad, fundamentally-driven euro weakness than it would be in the case of specific franc outperformance.

    [USD, CAD]
    USD-CAD fell to initial intra day lows of 1.1187, down from over 1.1210 after the better Ivey PMI outcome. The pairing had been constrained inside at 1.1206-23 trading band from the North American open, though following the Canadian data, and a modest rebound in oil and gold prices, the CAD continued to gain ground. USD-CAD later posted 1.1154 lows, after grinding through bids at 1.1175. Sell stops were reported at 1.1170, resulting in the move to within a point of Friday's intra day lows. Post-U.S. jobs USD gains came unwound versus most major currencies on Monday, with the CAD included in that group.

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