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By XE Market Analysis August 6, 2013 2:32 am
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    XE Market Analysis: Europe - Aug 06, 2013

    Movement was isolated to USD-JPY and AUD-USD in Asia. The former was influenced by equity markets moves. Early losses from the Nikkei drove USD-JPY below 98.00, but a late stock rally was the catalyst for a USD-JPY move to 98.40. AUD surged from 0.8920 to 0.8985 as the RBA cut rates by 25 bp as expected, while the accompanying statement was widely deemed to be less dovish than expected. Data releases included the Australia house price index, which rose a much stronger than expected 2.4% q/q. The Australian trade balance widened to an A$ 602 mln surplus in June and ANZ job ads fell 1.1% m/m in July versus -1.6% m/m in June. A potential positive for the region was a PBoC liquidity injection of CNY 12 bln via 7-day reverse repos and overnight money market rates fell for the third session.

    [EUR, USD]
    EUR-USD movement was limited after it failed to sustain a push in either direction on Monday, leaving it close to 1.3250. Yesterday's failure at 1.3300 and the more neutral speculative positioning could encourage increased selling pressure on upticks if Fed policy tapering expectations pick up again. There was some interest via the EUR-crosses. EUR-JPY headed from 130.40 down to 129.80 on equity market weakness and then squeezed back up to 130.40 in late Asia as the Nikkei rebounded. EUR-CHF was weighed by speculative selling after 1.2300 gave way and extended to 1.2267 lows on stop loss selling, but has since recovered the 1.2300 level.

    [USD, JPY]
    USD-JPY came under pressure early on after it started the session underneath 98.30 as stocks fell. The downturn was compounded by a weak technical backdrop. Japanese interest to sell USD-JPY and the crosses triggered stops under 98.00 and it extended towards the 97.80 area. Japanese importers absorbed losses, along with technical support between 97.75 and 97.50, which held in late July. Late on in the session USD-JPY rebounded as the Nikkei benefited from technical buying and conjecture of official support. Expectations of a steady hand from the BoJ this week could leave risk on the downside.

    [GBP, USD]
    GBP consolidated gains. After reaching the 1.5380 area on Monday following the strong U.K. services sector PMI reading it slowly gave back gains. Dollar supportive flows in the N.Y. session left Cable close to 1.5320 at the London close. However, it edged back over the 1.5350 area into the Asia open and reached 1.5369 high after a much stronger than expected outturn from the BRC retail sales indicator, which surged 3.9% m/m. Recent U.K. data continues to reinforce expectations that the U.K. is now experiencing a sustained recovery. The recent upturn in U.K. activity will leave the BoE on hold for the foreseeable future, but it should maintain that easy policy will continue when it provides more details on formal policy guidance on Wednesday.

    [USD, CHF]
    CHF benefited from a move out of risky positions on Monday, which spilled into the Asian market. Fed policy tapering expectations remain alive as more U.S. data justified a reduction in the pace of QE. A downturn in EUR-USD was the catalyst for a EUR-CHF fall from 1.2350 through 1.2300 in N.Y. However, USD-CHF also remained heavy under 0.9300 on stock moves and specs fished for stops lower down in the cross. Once 1.2300 broke thin trading conditions triggered a move as low as 1.2267, which took out rumoured option barriers at 1.2275. Thereafter, EUR-CHF rebounded back over 1.2300.

    [USD, CAD]
    USD-CAD moved within a narrow range on Monday with Canadian markets closed for a public holiday. Friday's price action immediately after the U.S. NFP was a positive indicator for USD-CAD in the near-term. USD-CAD dip buying should persist in the short-term. However, range trading bias has continued overnight after USD-CAD stalled into resistance at 1.0400-05 and reverted to the 1.0340-50 region. When trading returns to normal after the North American open it may have scope for a sustained push back over 1.0400 and could indicate an extended run on the mid-July consolidation zone at 1.0440-50.

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