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By XE Market Analysis October 31, 2013 2:10 pm
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    XE Market Analysis: Asia - Oct 31, 2013

    Month-end backed demand bolstered EUR-USD in N.Y. on Thursday, taking the pairing under 1.3600. Meanwhile, USD-JPY was fairly steady, and well supported over the 98.00 mark. U.S. data helped sentiment to a degree, as jobless claims came in near consensus, and the Chicago PMI headline and components were much firmer than expected. Elsewhere, better Canadian GDP data saw the CAD perk up some, while cable benefited from a sell-off in EUR-GBP. Equities struggled to hold modest gains, as Treasury yields inched higher.

    [EUR, USD]
    EUR-USD flushed out another round of stops through 1.3650 as U.S. accounts responded to the softer than expected Eurozone CPI release, which put an ECB rate cut back on the table ahead of next week's policy meeting. Most of the action came over the Eurozone data, though comments from ECB's Nowotny regarding the ECB's LTRO also offered encouragement for EUR bears. He said ECB must avoid a cliff-effect at the end of the LTRO program, suggesting that ECB is mindful of the consequences of not acting if liquidity became an issue. EUR-USD later found support under 1.3600, with both Asian and European bids seen parked under the figure. The pairing based at 1.3585. The October 21 low of 1.3650 is now seen as interim resistance, with sell stops noted from 1.3580

    [USD, JPY]
    USD-JPY experienced narrow ranges. The BoJ left policy unchanged and there was very little market impact as this met expectations. There was further talk of heavy option expiry congestion for the second consecutive session, which influenced in a relatively quiet session. USD-JPY gains were snuffed out ahead of 98.50, with Japanese exporter offers noted from the level. On the other side of the market, bids from 98.10 supported.

    [GBP, USD]
    GBP benefited from the EUR sell-off. The weaker than expected Eurozone CPI release triggered a rethink amongst the macro community and EUR-GBP headed lower with the dollar headline. EUR had been on an upward trajectory over the week or so, which lifted EUR-GBP to 0.8585 highs on Tuesday. The shift lower has taken the cross back through long-term moving averages, which gave way earlier in the week, and 0.8500 is currently being threatened. Cable is now a moderately higher compared with overnight lows near 1.6000 after it pushed back above 1.6060 on the EUR-GBP meltdown.

    [USD, CHF]
    USD-CHF looks poised for further upside based on a very encouraging technical backdrop. We are now on course for the fourth session of higher levels since it bottomed out a shade under 0.8900 last week. Yesterday's FOMC statement and today's Eurozone CPI does tip the bias in favour of further dollar upside in the short term, particularly with next week's ECB meeting coming into focus. The move up through 0.9050 could see an extended push back through 0.9100 and then 0.9150 if the dollar can gain momentum. The caveat for longs is U.S. data may reflect the period over the U.S. government shutdown in the coming weeks, which will also include the delayed October payrolls report due on November-8.

    [USD, CAD]
    USD-CAD slid to 1.0435 lows from near 1.0460 following the better Canadian GDP outcome. Standing bids at 1.0430-40 put a temporary floor underneath the pairing, with more buyers seen layered down to 1.0400. On the other side, 1.0500 barriers, which came within two pips of being extinguished on Wednesday (for Friday roll-off), looked a bit safer on Thursday. USD-CAD managed lows of 1.0420 before stabilizing.

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