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By XE Market Analysis September 17, 2013 1:46 pm
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    XE Market Analysis: Asia - Sep 17, 2013

    FX Trade was again very quiet in N.Y. on Tuesday, as many hunkered down ahead of Wednesday' FOMC announcement and press conference. EUR-USD was held to a 1.3337 t o1.3369 range, as USD-JPY langusied inside of 99.06 to 99.38. Tame August CPI weighed onthe greenback marginally, while July TIC data, and housing price indicators had little impact. Wall Street added modestly to Monday's Summers-inspired gains, while Trasury yields were largely on hold in front of the Fed. We expect the Fed to start with a baby step -- a $10-15 bln cut in Treasury purchases. MBS levels should remain intact in deference to worrying deterioration in mortgage activity. But there's been sufficient improvement, especially the labor market, to give the Fed the opportunity to finally pull the taper cord on QE3.

    [EUR, USD]
    EUR-USD trade was uninspired in N.Y. dealings, with the pairing touching session highs of 1.3369 just after the U.S. CPI outcome. Barrier options at 1.3400 kept aggressive buyers at bay over 1.3370, with defense of these structures expected to continue, as it did on Monday. The pairing eased back under 1.3335 by mid morning, though after the London close, activity dried up ahead of The FOMC announcement on Wednesday.

    [USD, JPY]
    USD-JPY moved to the top of the intra-day range after 99.00 bids held. Large option expiries between 98.90 and 99.10 added dollar support and there were also smaller maturities at 99.35 and 99.50. The opening bias today was for lower levels, but USD-JPY managed to maintain a stable to firmer tone. There is still some scope for softer levels and upticks are currently being sold into. The lack of sustained upside movement boosted demand for downside strikes. Sources out of London tipped strong demand for three month downside strikes from Middle Eastern names hedging against a correction towards 95.00. USD-JPY and the Nikkei both struggled today despite PM Abe describing Japan as a "buy" at a meeting for investor hosted Merrill Lynch Japan.

    [GBP, USD]
    Cable struggled to sustain higher levels today amid reports of persistent U.K. clearer selling, while a German account propped up EUR-GBP under 0.8400. GBP was overdue a period of corrective action following the recent outsized gains. Overall, Cable is still only a short distance from yesterday's peak over 1.5960, though large barriers at 1.6000 and resistance above could cap in the near-term. EUR-GBP has also met decent support since it bottomed out ahead of 0.8350 barriers last Friday. The BoE MPC minutes are due tomorrow. After last week's neutral sounding comments to the Treasury Select Committee there may be limited scope for surprise.

    [USD, CHF]
    USD-CHF drifted back towards intra-day highs in very quiet trade, though resistance at Asia highs near 0.9280 thwarted further gains. Impetus was lacking with the exception of light intra-day flows. EUR-CHF was close to decent offers that were lowered into 1.2380 after last week's rejection of resistance from 1.2415 and this is restricting USD-CHF's ability to rally.

    [USD, CAD]
    USD-CAD topped out at 1.0335 in Asia, before drifting back to 1.0320 in London. Trade was listless through the overnight session, though domestic name selling was noted at the North American open, resulting in a very modest dip toward 10310. More of the same is likely into Wednesday's FOMC, though we saw some interim reaction from U.S. CPI data, and Canadian manufacturing releases. USD-CAD suffered some later, as light sell stops were tripped under 1.0300. The pairing fell to 1.0275 lows before corporate bidding stepped back in. This level represented the August 9 low, and should provide good support for now.

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