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By XE Market Analysis September 11, 2013 2:31 pm
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    XE Market Analysis: Asia - Sep 11, 2013

    The dollar moved lower versus the euro in N.Y. trade on Wednesday, with the bulk of buying coming into the 10:00 EDT option expiry. Maturities at 1.3300 were noted, and attracted good attention. Option related offers revealed themselves after the expiry, though the pairing eventually made its way to highs over 1.3320. USD-JPY meanwhile, traded on a softer footing, though continued to find support on dips under 100.00. Aside from wholesale data, which was shrugged off, the U.S. calendar was empty. Stocks managed a mixed performance, with Apple's losses weighing on the NASDAQ index. Yields slipped after a good Treasury auction, which put some pressure on USD-JPY.

    [EUR, USD]
    EUR-USD's early pop higher was attributed to interest into the 10:00 EDT N.Y. option cut. The pairing was lifted from 1.3270 to touch 1.3301 into the top of the hour, with stops at 1.3280 helping it higher as well. Sellers knocked the euro back under the figure quickly however, as option houses were parked on the offer. There appeared to be a bit of a rush to even numbers, as EUR-USD touched 1.3300, cable 1.5800, USD-JPY 100.00, and AUD-USD 0.9300, simultaneously. Later, after filling in offers on the way, the pairing made it to 1.3320 highs.

    [USD, JPY]
    USD-JPY slipped through 100.00 as large option strikes rolled off at the N.Y. options cut. The pair was weighed from the 100.15-20 area ahead of the cut and extended to 99.85 on softer than expected U.S. data. The downturn in U.S. yields may have been a factor as debt markets digest heavy supply. There are natural buyers underpinning into 99.80 and more are tipped into the 99.50-60 area. USD-JPY showed better potential to sustain the rally overnight after it broke to 100.60, but there was no follow through due to resistance at 100.65, exporter hedging and option supply. The pairing dipped from 100.05 to near 99.90 after the Treasury auction, which saw yeilds pull back. The dollar had been on a softer footing through the morning session, though has continued to see fresh buyers step in on moves under 100.00. As risk appetite holds up, our bias remains for a slow move higher for USD-JPY.

    [GBP, USD]
    Cable's upside may be limited regardless of what Carney says or doesn't say tomorrow. There are long-term option barriers that are noted from 1.5850 layered up to 1.6000 that led to a good pullback from 1.5825 during the European morning. Sources also tip a market that is now very long of gamma over 1.5800 as the protracted GBP rally led to heavy topside hedging over the last few weeks. Good size 1.5800 strikes rolling off this Friday and option names could use movement over 1.5800 as a hedging opportunity.

    [USD, CHF]
    CHF may have room to rally as recent positioning is cut back ahead of key event risks. The pending FOMC outcome may increase market nervousness in the early part of next week and the situation in Syria is still an unknown as the timeline on Russia's proposed chemical weapons handover is worked out. The SNB is also due to meet next Thursday, where policy should remain unchanged. Appetite to sell the CHF lifted EUR-CHF to 1.2415 overnight and it may raise the risk of profit taking as we move towards resistance at 1.2435 to 1.2450. Market positioning is also overstretched amid bank flow reports that suggest CHF was one of the most heavily sold currencies over the last week as Eurozone data picked up and Middle East tensions eased.

    [USD, CAD]
    USD-CAD's downside came under pressure over the course of the European morning. USD consolidated on the lower side and the commodity bloc currencies were supported by the recent improvement in broader market sentiment. This triggered USD-CAD sell-interest from the 1.0365 area in early Europe and it later took out 1.0330 bids in afternoon trade, on its way to 1.0316 lows. A better risk backdrop could leave USD-CAD vulnerable if support at 1.0315 and 1.0300 gives way. Stop and reverse positions are building through 1.0290, which is just under August-15 lows of 1.0294. Selling into strength is favoured in the short-term.

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