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By XE Market Analysis October 29, 2013 1:45 pm
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    XE Market Analysis: Asia - Oct 29, 2013

    The dollar was choppy in N.Y. trade on Tuesday, with liquidity at a premium into Wednesday's FOMC meeting. U.S. economic data was mixed, with headline PPI a touch cooler, along with softer headline retail sales. Consumer confidence took a hit after the federal government shutdown, though housing prices firmed up per the Case-Shiller index. EUR-USD rallied following comments from ECB's Nowotny, who said the Bank was unlikely to cut rates further. Later though, good selling over 1.3800 prompted a sharp move through sell stops at .13750. Rallying U.S. equities helped dollar sentiment, and the greenback help up broadly. Today's move could have been some pre-FOMC short covering.

    [EUR, USD]
    EUR-USD ramped up over 1.3810, apparently on a Nowotny prompted short squeeze. He apparently said the ECB is unlikely to cut rates further, but policy will remain easy. This was enough to send EUR-USD through London highs of 1.3791, and stops at 1.3800. EUR-USD later slipped to session lows of 1.3730, as once again, the 1.38 handle failed miserably to hold. Asian sovereign sellers were reported near session highs, and relatively thin markets exacerbated the move lower. Sell stops were tripped at 1.3750 on the way down, after buy stops were taken out over 1.3775 on the way up earlier.

    [USD, JPY]
    USD-JPY held on to most of its gainsm and managed to breach the 98.00 level. A dollar dip did not materially impact USD-JPY sentiment, which was supportive since Asia when strong domestic backed interest underpinned under 97.50. Since the N.Y. open, a large Japanese account was a massive buyer and eventually tripped buy stops above 99.00. Meanwhile, a correction in the JPY crosses overnight provided an opportunity for bargain hunting for those positioning for further equity market gains in-light of expectations of unchanged Fed policy that could potentially stretch well into 2014.

    [GBP, USD]
    Cable struggled to sustain 1.6100, leaving the bias on lower levels into the London close. GBP was on the back foot through the remainder od the session. The cross was boosted to 0.8585 after Nowotny's remarks on EUR strength, succumbed to profit taking and option related selling as 0.8600 barriers come into view. Cable hit stop loss orders under1.6050, resulting an a low near 1.6025. The U.K. economic calendar is fairly quiet this week and the emphasis will come from the FOMC outcome and month-end flows.

    [USD, CHF]
    USD-CHF gains have underpinned EUR-CHF. The dollar pairing traded out of 0.8950 in early Europe and pushed up just over 0.9000 in N.Y., which enabled EUR-CHF to trade at its best levels in a week, over 1.2370. Most of the action since late Asia has been symptom of reported month-end dollar demand as stocks provide mixed leads due to earnings season. Asian markets lost ground, but in Europe markets are marginally higher. If USD-CHF decisively breaks 0.9000 in the very short term then this will go some to dampen the underlying dollar bear trend.

    [USD, CAD]
    USD-CAD bucked the overnight trend to a degree, and traded modestly lower through the London session. This said, ranges remained very narrow. The pairing ran into good resistance from the 1.0450 level on Monday, ahead of noted offers from 1.0470, and eased back under 1.0430. As was the case on Monday, domestic sellers (thought to be corporate backed) were seen over 1.0450. Overall however, we look for ranges to hold up into Wednesday's FOMC announcement. The pairing got an afternoon boost from BoC governor Poloz, who reiterated the non-hawkish bias. USD-CAD moved to session highs over 1.0470, and into reported standing offers at the level.

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