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By XE Market Analysis October 24, 2013 2:53 pm
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    XE Market Analysis: Asia - Oct 24, 2013

    The dollar firmed versus the commodity bloc, was softer against the euro and pound, and largely unchanged versus the yen in N.Y. trade on Thursday, a slightly wider trade deficit, and higher jobless claims data had little lasting impact. Yields remained relatively soft, as Fed tapering seems to be a long way off still, which will likely continue to be a detriment to the greenback. A U.S. Advisor report that the Fed is rethinking its taper policy did the rounds, not that was really "news" to the markets, which have digested recent analyst reports that a taper could be delayed anywhere from December to indefinitely. Softer EU and U.S. PMI's likely weighed on the likes of the AUD and CAD, while dip-buying remains in vogue for the EUR and GBP.

    [EUR, USD]
    EUR-USD touched new session highs of 1.3825 after the softer flash PMI outcome, which appeared to hit Treasury yields a bit lower as well. Euro gains were stopped by reported offers into 1.3830. Barriers are noted at 1.3850, and will likely be defended in the near term. EUR-USD continued to find support under the 1.3800 mark, though very heavy selling interest is said to be in place up to 1.3850, so weaker longs may decide to book profits should an upside breakout not be forthcoming. On the other hand, with the Fed on track for taper-free policy for the time being, euro dip buying will likely continue.

    [USD, JPY]
    The JPY experienced choppy movement in Europe. The pick up in China manufacturing PMI data fueled early appetite for speculative positioning and a rise in the JPY crosses boosted USD-JPY out of 97.30 to 97.60. Fund names sold into strength, while Japanese banks resurfaced on top of EUR-JPY and it turned away from 134.80 back to 134.00. This weighed on USD-JPY, which nearded an important juncture. USD-JPY has not closed under the 200-dma (97.28) for a year and has persistently probed this level since it fell sharply during yesterday's Asia session.The pairing touched 97.24 lows in N.Y. though managed to close the session above 97.30.

    [GBP, USD]
    Cable struggled to sustain higher levels as EUR-GBP extended gains to carve out fresh trend highs over 0.8550, where another batch of option barriers were knocked out. This is the third consecutive session that GBP has met selling pressure on upticks. The improved conditions in the U.K. economy are now well priced in and GBP longs may begin to show increased sensitivity to more moderate U.K. data like we saw during the European morning. There are still year-end targets near 1.6500 for Cable, but the 1.62 handle seems to be a popular level for rebalancing out of GBP. Indeed, cable reclaimed the 1.6200 handle in late N.Y. trade.

    [USD, CHF]
    USD-CHF demand went through after 0.8900 barriers were flushed out. Demand was related to option rebalancing and a normal phenomenon after long-term barriers give way. The dollar pairing traded as low as 0.8981 and coincided with EUR-USD's leg up to new trend highs. EUR-CHF was largely unchanged as the focus was on dollar flows. It has also been restricted by option exposure today amid 1.2280 and 1.2300 expiries which rolled off. Appetite to put on EUR-CHF long positions is still limited. Equity markets have been mixed and USD-CHF and GBP-CHF liquidation overwhelmed EUR-CHF support. The cross may continue to struggle unless USD-CHF turns.

    [USD, CAD]
    USD-CAD managed to take out the key 1.0400 level in London, extinguishing barrier options at the level in the process. Good volume was reported on the way up, though the dovish BoC statement on Wednesday, and softer U.S. and EU PMI's likely set the tone. Further buy stops were seen at 1.0420, and eventually tripped, while more barriers are in place at 1.0450. The pairing peaked at 1.0437.

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