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By XE Market Analysis September 25, 2013 2:54 pm
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    XE Market Analysis: Asia - Sep 25, 2013

    The dollar again meandered around inside of narrow trading bands in N.Y. dealings on Wednesday, and was mostly softer on the session. August durable orders were soft, while new home sales perked up some, both following weak outcomes in July. Equities and yields both moved lower, not helping the greenback at all. EUR-USD reclaimed the 1.3500 handle, peaking at 1.3537, before steadying around 1.3520. USD-JPY firmed up over 98.75 in morning trade, though later sidled into the 98.50 region. Cable was steady over 1.6050, as USD-CHF faded under 0.9100 on softer risk levels. Thursday's U.S. calendar brings initial jobless claims, the third look at Q2 GDP, and pending home sales.

    [EUR, USD]
    EUR-USD struggled to sustain higher levels. It posted a moderate rally out of 1.3460 during the European morning as bids emerged ahead of chart support at 1.3450, while Eurozone confidence data was also a positive lead. However, there is still limited interest to add long positions. The ECB's recent comments on a potential long-term tender later this year is a cap on prices, while Japanese supply in EUR-JPY may also go through in the coming sessions as exporters hedge ahead of the fiscal half-year. The cross is still at attractive hedging levels, less than two figures away from last week's 134.95 top. EUR-USD held the 1.3500 handle through the afternoon, peaking at 1.3537, and stabilizing near 1.3520. Offers noted into 1.3540 held the pairing from running higher, but a failure to take out 1.3550 in the short term, may thwart EUR bulls once again. Intra day stops were noted at 1.3490.

    [USD, JPY]
    USD-JPY attempted to rally in morning trade, reaching 98.81 before running into Japanese exporter offers. The pairing steadied in the 98.60's, before moving to test 98.50. The level held, but the subsequent bounce was shallow. Further downside appears to be in the cards near term. Meanwhile, Japan PM Abe's cabinet is expected to approve the sales tax hike on October 1, according to LDP lawmaker that was cited on Kyodo News. This is widely expected and PM Abe has asked his cabinet to come up with stimulus package in order to offset any negative impact. The BoJ have backed the sales tax move, which is crucial if Japan is to push ahead with fiscal consolidation.

    [GBP, USD]
    GBP remained buoyant after getting a lift on U.K. retail sales strength. Cable beat Monday's 1.6072 top, though progress was hampered by a good offer at 1.6080, where option maturities rolled off. Meanwhile, EUR-GBP carved out 0.8398 sessions lows amid reports of very good interest to sell by model funds. There is also persistent speculation of front running in anticipation of interest related to seasonal hedging activity. However, it's likely that most of these flows have been filled now and EUR-GBP has been supported in recent sessions into 0.8400 and below by corporate names. Further GBP gains are likely to come from the macro backdrop rather than these flows. On Thursday, the final U.K. Q2 GDP reading is due and expected to be confirmed at 0.7% q/q and 1.5% y/y.

    [USD, CHF]
    EUR-CHF traded either side of 1.2300 after it lacked follow through on the downside despite Monday's close under the 200-dma. Specs are reluctant to add short positions given the persistent downside failures under this level since April. On Monday after EUR-CHF broke lower SNB's Jordan took to the wire to offer a verbal defence of the CHF cap. Central bank rhetoric could get louder on further CHF strength and this will deter EUR-CHF sellers. The SNB have a decent track record in defending EUR-CHF, though have been helped out by the stabilisation in the Eurozone and improving fundamentals in the global economy. On an intra-day basis we anticipate buyers between 1.2285 and 1.2275, which were evident in the last 24 hours via macro names and Swiss private banks. USD-CHF gave up the 0.91 handle on reduced risk taking levels, though found some support under the figure.

    [USD, CAD]
    USD-CAD resistance at 1.0300 gave way in early Asian trade, with the level subsequently transforming itself into support. The figure held through the London morning, though the pairing did not exactly run away to the upside, with North American gains limited to 1.0316. An Asian account was seen on the offer in early trade, reportedly related to 1.0300 option expiries at 10:00 EDT. With the market still not in the mood to position aggressively in either direction, range trade may be here for a while.

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