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By XE Market Analysis September 18, 2013 3:28 pm
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    XE Market Analysis: Asia - Sep 18, 2013

    The greenback was quiet into the FOMC announcement on Wednesday, sticking to a narrow range, though with a softer tilt through the morning, where building consensus for a modest $10 bln Fed taper saw the market position to the short USD side of the ledger. However, the Fed threw nearly everyone a change-up, and did not taper at all. The market reaction was swift, and resulted in sharply lower Treasury yields, record equity highs, and a crushed dollar. EUR-USD spiked to highs over 1.3510 from near 1.3380, as USD-JPY collapsed under 98.00 from near 99.00.

    [EUR, USD]
    EUR-USD moved up to 1.3380 highs on the break over 1.3360 ahead of the FOMC, with buyers appearing on the move over the Asian high. Ahead of the FOMC, liquidity was at a premium, which likely explained the 20-point or so pop from what was said to be a one-off order execution. The 1.3380-1.3400 level provided strong resistance this week, with talk of barrier options running off tomorrow, though the FOMC changed the picture in a hurry. EUR-USD touched 1.3510 in late trade, spiking up from near 1.3380, and relegating barriers to the dustbin.

    [USD, JPY]
    USD-JPY hugged the 99.00 level into the N.Y. options cut where expiries at the level were noted. Option related selling and a EUR-JPY sell order knocked USD-JPY from 99.25 to 98.79 during the European morning. Option support from 98.75 put a floor in place and it edged back into the 99.00 area, where over $500 mln is due to roll off at 10:00ET. From there, the pairing was steady on either side of 99.00 into the FOMC, though the shock announcement from the Fed knocked dollar yen to lows under 97.90.

    [GBP, USD]
    Specs positioned for a GBP range break ahead of the Fed. EUR-GBP edged back under 0.8355 as EUR-USD moved through overnight lows at 1.3345 early in the session, while Cable held firm near 1.5970. GBP extinguished near-term barriers during the N.Y. morning. The lack of taper from the Fed, and dovish policy guidance, when taken together with today's less overtly dovish BoE stance, pointed to more Cable upside. Cable sliced through resistance at 1.6025 and 1.605, on its way over 1.6120.

    [USD, CHF]
    USD-CHF maintained a stable tone into the FOMC, still a relatively close distance from Tuesday's highs around 0.9280 and Monday's Asia Pacific opening levels just ahead of 0.9300. The FOMC outcome though, sent the dollar pairing skidding to 0.9130 from 0.91230. EUR-CHF initially ramped up to 1.2365 from 1.2340 after the FOMC on better risk levels, though fell back to pre-Fed levels into the close.

    [USD, CAD]
    USD-CAD inched up to 1.0310 after spending the overnight session in a 15 point range around the figure. Of course, the upcoming FOMC announcement should keep prices in check for now, and a speech from BoC governor Poloz at 10:25 EDT did little to stir things up. The Fed on the other hand, resulted in USD-CAD sliding though 1.0275 support, on its way to lows of 1.0221.

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