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By XE Market Analysis October 8, 2014 3:05 pm
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    XE Market Analysis: Asia - Oct 08, 2014

    The dollar was largely softer in early N.Y. trade on Wednesday, though as Wall Street clawed back opening losses, the greenback firmed up some going into the FOMC minutes release. The dollar was smacked broadly lower at the release, where the Fed voiced concerns over the strength of the dollar, and its impact on the U.S. economy. The FOMC is concerned that a stronger dollar will bring down import prices, and keep inflation lower for a longer period. EUR-USD spiked up to 1.2736 highs from 1.2655, as USD-JPY dove to near 108.08 from 108.75. Wall Street soared on the dovish leaning minutes, as Treasury yields fell to session lows.

    [EUR, USD]
    EUR-USD posted a one-week high of 1.2691 in morning trade, with resistance now seen at the October 2 peak of 1.2698. The soft risk backdrop saw euro short covering continue, and a band of stops was noted just over 1.2700. Option backed sellers were reported at the highs, resulting in a pullback to 1.2680. The FOMC minutes later changed things around, as the dollar was kicked broadly lower. The euro surged through above noted stops at 1.2700, trading toward 1.2750 at the time of this writing.

    [USD, JPY]
    Bottom fishing supported USD-JPY through the morning session, despite the shaky looking risk backdrop. The pairing had been beaten down fairly hard this week, dropping better than 2 yen from Monday's highs, and into territory under 108.00 that apparently encouraged some to step back into long positions. The FOMC minutes washed out weak longs however, as USD-JPY slipped under 108.10 from 108.76. With more BoJ stimulus seen in the coming months though, and the Fed slowly heading for rate lift-off, USD-JPY will likely remain in buy the dip territory for some time.

    [GBP, USD]
    Cable slipped into the 1.6025 level in morning N.Y. trade, though rallied sharply following the FOMC minutes, which took the pairing to near 1.6170 highs. We expect the upside to be curtailed from here, with the interbank and speculation market now running a more neutral net position. Incoming data should show the impact of the stagnating Eurozone economy, which in turn should support BoE MPC member Broadbent's remarks last week that the economy is "not ready" for a rate hike.

    [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 was kept from 1.1200 overnight, while it found support into the 1.1150 region in London trade. Ugliness in the oil market continued to weigh on the CAD, and as the risk backdrop remained twitchy as well through the morning. USD-CAD later touched 1.1210 highs, the timing coinciding with oil's move under $87. Noted offers in place from 1.12 halted the climb however, pushing the pairing back under the figure. The FOMC minutes saw the USD sell off broadly, which took USD-CAD to intra day lows of 1.1132.

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