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By XE Market Analysis October 7, 2013 1:59 pm
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    XE Market Analysis: Asia - Oct 07, 2013

    The dollar started soft in N.Y. on Monday, though perked up some on rumors of a six-month funding deal in Washington. The talk never amounted to anything, and stocks and the greenback faded once again. The U.S. factory and construction data were postponed due to the shutdown, so there was nothing on the economic front to trade off of. EUR-USD held above Friday's 1.3540 low, but ran out of gas over 1.3580. USD-JPY briefly traded to 97.25 from 96.80 lows, though gave back the figure in light afternoon dealings. Dysfunctional politicians will continue to determine market sentiment, but as of now, there is little hope for an early resolution.

    [EUR, USD]
    The dollar attempted to rally, as equities came off their worst levels. EUR-USD eased under 1.3545, down from N.Y. session highs over 1.3580. The movement came on the back of a clean 6-month U.S. debt deal rumor circulating earlier. The speculation caused some brief wiggles in favor of stocks, the dollar and higher yields, but all quickly reversed lower again. EUR-USD subsequently rallied back over 1.35780, where the rally ran out of steam.

    [USD, JPY]
    USD-JPY was suspended over key support at 96.80 after U.S. names kept the pair offered ahead of 97.00 after the N.Y. open. Japanese names have defended the downside, but the impasse in the D.C. is slowly chipping away at support. Following rumors of a potential U.S. debt deal, USD-JPY touched 98.25 highs, though when the rumor fizzled, so too did USD-JPY again.

    [GBP, USD]
    GBP demand picked up gradually, which lifted Cable back above 1.6080 and EUR-GBP eased into 0.8430. Cable was helped by the softer dollar tone, but there was also direct GBP flows. EUR-GBP met selling pressure into 0.8470 as macro funds were more comfortable playing sterling long positions after Friday's deep correction. Focus will come from the U.S. ahead of more key U.K. data. The BRC retail sales survey is due tomorrow and there is production data on Wednesday. Better than expected U.K. data has tended to boost sterling. However, going forward expectations of a decent Q3 growth outturn is priced in and upside potential may be a bit more limited in the medium term.

    [USD, CHF]
    CHF was supportive as the gloomy equity market backdrop kept safety plays elevated. USD-CHF is trading mid-range on an intra-day basis near 0.9040 after a lack of progress in either direction. Last Friday's dollar rally dampened follow through dollar selling at the start of the week as short term technical studies weakened. However, the lack of progress in D.C. is still a negative and USD-CHF may revisit levels under 0.9000. EUR-CHF pulled back from 1.2300 in early Asia and headed back to 1.2250, though progress around the lows was limited. Last week's pick up in the CHF fuelled speculation of SNB interest and this has deterred funds to a degree today.

    [USD, CAD]
    USD-CAD touched 1.0333, after edging its way up from 1.0300 in Asia. The pairing was supported to a degree by Canadian bond outperformance over U.S., though continued selling interest from 1.0340 to 1.0360 kept gains limited. Bids at 1.0300 were said to be thick, and later provided a floor in light trade. Another narrowly traded range bound day for the CAD.

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