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By XE Market Analysis September 5, 2013 2:19 pm
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    XE Market Analysis: Asia - Sep 05, 2013

    The dollar reacted positively to better U.S. data in N.Y. on Thursday, while a dovish sounding ECB weighed on the euro. The ADP employment report came in as expected, setting the table for Friday's official NFP result. Q2 productivity was revised higher, while jobless claims were lower than forecast. July factory orders were soft, but better than expected, while non-manufacturing ISM handily beat forecasts. The dollar settled in near session highs across the board in afternoon trade, with EUR-USD holding above 1.3100 on speculation there are barrier options at the figure, and USD-JPY finding support at 100.00. The euro's close under 1.3150 may bring further pressure to bear, though ahead of the jobs report, activity may be subdued.

    [EUR, USD]
    EUR-USD extended losses under 1.3170 early in the session. The EUR dipped over the initial U.S. data and got further traction as Draghi reaffirmed the ECB's easing bias. EUR-USD losses picked up after the better 10:00 EDT data releases, taking the pairing to fresh seven-week lows of 1.3120. Lingering support is expected into 1.3100, though sell stops are building under the figure. Option barrier speculation emerged as the downturn slowed just ahead of 1.3100. Price action in the front end of the vol curve is supporting this view as 1-mth traded over 8% on the spot move into the lows. Volatility would increase further if EUR breached 1.3100. Apart from some light EUR short covering from London names the recovery has been fairly shallow.

    [USD, JPY]
    USD-JPY held firm throughout the session and rallied out of 99.65 in early trade to eventually take out the 100.00 mark. Buyers of USD-JPY came mostly from interbank names and shorter term funds that were positioned for a stop hunt through 100.00. Offers from exporters and option names capped for a time, but corrective action was very shallow and the risk of an extended rally looks higher. The pairing manage 100.17 highs in N.Y., and from there, only briefly slipped under 100.00 before closing on a firmer note.

    [GBP, USD]
    Cable rallied out of 1.5610 to 1.5665 after the BoE left policy unchanged, which was widely expected. GBP is benefiting from improved U.K. fundamentals and the lack of BoE response to higher market rates. A dovish ECB, lower euro, and a generally firmer dollar on the back of better U.S. data though, saw cable slip back under 1.5575 in morning trade.

    [USD, CHF]
    EUR-CHF traded at a three-week high on heavy Swiss order flow, running into resistance at 1.2400. The shift in the CHF came on a plethora of factors, exacerbated by thin trading conditions. Aiding the risk backdrop was the reduced threat of a wider military conflict in Syria as the U.S. look set for limited action. U.S. yields are also on the rise and the rout in emerging markets has eased after fresh measures from the Reserve Bank of India and signs that emerging market countries will discuss coordinated policies at the G20 over the next two days. Against this backdrop USD-CHF cleared 0.9400 on its way to 0.9455 highs.

    [USD, CAD]
    USD-CAD was steady through the morning, trading a 1.0475 to 1.0490 range. The pairing idled between bids at 1.0470 and offers from 1.0520, and further consolidation into Friday's twin U.S/Canada employment reports is likely. The pairing touched 1.0516 highs after the better U.S. data, and settled in just over the figure through the afternoon.

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