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By XE Market Analysis August 12, 2013 3:05 am
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    XE Market Analysis: Europe - Aug 12, 2013

    The dollar consolidated in narrowly mixed ranges. Most of the action was dominated by JPY movement as Q2 GDP disappointed expectations and slowed to 2.6% y/y versus a downwardly revised 3.8% outturn in Q1. USD-JPY and the crosses fell with domestic stocks, though they backed up during the afternoon after PM adviser Hamada said conditions show that it is not appropriate for the sales tax hike currently. EUR-USD continued to hold on to levels above the 1.3300, though upward momentum was limited to a degree by fund selling early on. AUD-USD fell early on with the JPY crosses, but later firmed up amid underlying interest to reduce short positions as sentiment in China improved since late last week.

    [EUR, USD]
    EUR-USD consolidated the recent rally. It held on to the 1.3300 level, but experienced limited upside under 1.3350 in quiet overnight trade. Looking ahead there may be a limited window for EUR-USD upside if Fed taper expectations rise into September NFP data and then the FOMC meeting. Very strong resistance is noted at the 200-week MA at 1.3402 and the double top from June 18-19 at 1.3415-20.

    [USD, JPY]
    JPY firmed up after Japan Q2 GDP missed expectations and weighed on the equity market tone. The data raised concern over the economic outlook and the scope for economic reform. USD-JPY dropped from 96.30 to the 95.90 region initially, but then backed up on Japanese importer demand. The Nikkei also pared losses as broader sentiment in the region was supported on China stimulus hope and this lifted USD-JPY back over 96.50. Over the coming sessions there may be flows related to repatriation, which is a potential weight on the downside. However, for now USD-JPY does look as if it has found a modicum of support ahead of the 95.50 area.

    [GBP, USD]
    Cable consolidated the recent rally, leaving it just shy of 1.5500 as the London market opens. The downside should remain limited this week as data is expected to re-affirm the acceleration in the economic recovery. A report from CIPD (Chartered Institute of Personal Development) found that its key net employment balance indicator leapt nine points to +14, the best since 2008; Business adviser BDO, found that that rising confidence is feeding into employment intentions; a Lloyds TSB survey found showing English regions achieving the strongest growth for 12 years; and Barclaycard found a 4.8% jump in spending in stores last month, the highest for 18 months.

    [USD, CHF]
    CHF has struggled of late to sustain easier levels due to USD-CHF heaviness. However, it may have a chance to push higher intra-day as the dollar pairing moved up to the 0.9235 region by the European open, leaving EUR-CHF above 1.2300. SNB's Danthine also gave his commitment to the EUR-CHF floor at 1.2000 on the weekend, reiterating that it will remain as long as necessary. Danthine said the SNB will not abolish the cap until it starts raising interest rates.

    [USD, CAD]
    USD-CAD is on the heavy side. Friday's price action was a very negative development. USD-CAD jumped from 1.0300 to 1.0350 amid a sharp drop in Canada employment and housing starts dipped, but over the course of the session it gave back all of its gains. By the close it had moved under 1.0280 despite a dollar supportive tone elsewhere. Against this backdrop it looks likely that more USD-CAD selling will go through on upticks and July-31 lows at 1.0244 may be threatened in due course.

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