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By XE Market Analysis October 11, 2013 2:04 pm
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    XE Market Analysis: Asia - Oct 11, 2013

    Yet another quiet day in FX Land on Friday, resulting in very familiar and well-worn trading ranges. Aside from a slightly weaker than expected U. of Michigan sentiment survey, there was no data on tap, as retail sales and PPI releases were postponed due to the government shutdown. Market sentiment with regards to the U.S. default issue held up on Friday, as stocks rallied further following Thursday's sharp gains, and Treasury yields were marginally lower. There was little in the way of fresh news from D.C., though based on meetings held on Thursday, it appears something will be worked out to avoid default. EUR-USD moved inside a 1.3525-75 band, with the dollar firming some through the session. USD-JPY edged over 98.55 after opening near 98.30.

    [EUR, USD]
    EUR-USD edged up through offers from 1.3550 in London. Macro funds sold USD tentatively, as some focus shifted to the Fed outlook on increasing expectations that a deal on the U.S. debt ceiling will be reached ahead of next week's deadline. The fiscal wrangling in the U.S., which has seen the government shutdown for ten days, reduces the likelihood of Fed policy tapering and the market also welcomed the nomination of Yellen as the next Fed Chair this week. N.Y. trade saw the euro stumble modestly, as EUR-USD headed back to 1.3525, after peaking at 1.3575.

    [USD, JPY]
    USD-JPY's upside looks more limited based on Japanese order books. After reaching 98.55 during the Asia afternoon it has drifted back towards 98.25 at the N.Y. open. We still anticipate limited movement on the downside due to the broad rally across equity markets. However, both USD-JPY and the JPY crosses travelled a long way on the topside in the last 24 hours and consolidation could set in. USD-JPY settled into a 98.25-50 range through the N.Y. afternoon session.

    [GBP, USD]
    Cable profit taking went through on the way to 1.5925, which was the bottom of the daily range. A very low key N.Y. session weighed ahead of the weekend after Cable was unable to sustain a move over 1.6000. EUR-GBP is still holding on to a bid tone, but has not been able to clear offers at 0.8500. Most of the cross demand today was pinned on corporate flows, while in recent sessions gains were limited by a supranational account. Good size option expiries are rolling off at 0.8460 and 0.8500, which has effectively been the range since the Asia open.

    [USD, CHF]
    CHF added to losses. EUR-CHF moved up toward 1.2350 and USD-CHF cleared 0.9100 on its way to 0.9135. Overall though, fatigue set in as participants await news of a concrete deal from Washington. Both sides are talking, but so far no agreement has been reached. Nevertheless, market optimism on a deal has seen a broad based rally in stocks, which has weighed on funding currencies like the CHF and setbacks in USD-CHF and EUR-CHF have been very shallow. Appetite to buy the EUR-crosses limited the USD-CHF rally, but the downside looks limited now between 0.9100 and 0.9060. EUR-CHF is also is much better shape than the last week or so and support from 1.2300 to 1.2280 should underpin.

    [USD, CAD]
    USD-CAD wiggled up, then down after the slightly softer Canadian employment print, rallying to 1.0406 from 1.0390, before falling back toward 1.0375. Ranges remained intact however, with good support coming in under 1.0370. Good bids were noted at the level, down to 1.0350. The CAD has benefited from the more hopeful U.S. political tone since Thursday, though this was somewhat tempered on Friday by softer oil and gold prices.

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